Retail business owners have a lot to consider––but getting your products to your customers on time is probably your top priority.
Staying on top of your product inventory helps you meet customer demand and remain profitable.
But as your business grows and customer demand fluctuates, managing your inventory can become challenging.
How do you make sure you have enough products in stock without overstocking? How do you run a promotion without selling out? These are all common challenges that retail business owners face.
Here are five key inventory planning challenges and how you can solve them.
Why is Inventory Planning Important?
Effective inventory planning ensures you have enough products in stock to meet customer demand. When done properly, it also helps lower your costs of keeping items in stock.
If inventory planning isn’t done properly, it can cause a business to lose money by stocking too many products that can’t be sold.
Planning systems look different for every business, but at its core, managing inventory helps you buy the correct amount of stock and decide when to reorder.
Benefits of effective inventory planning
1. Prevent dead stock
Dead stock is stock that’s gone out of fashion, out of season, or has become irrelevant. Effective inventory planning helps you avoid this costly problem. You can prevent dead stock by using a system called safety stock, where you hold products in reserve to protect against stockouts or sold-out products.
2. Avoid wasted stock
If you sell perishable products like food or cosmetics, there’s a chance that they will go out of date if you can’t sell them in time. Planning your inventory properly helps you reduce this risk.
3. Manage warehouse storage more efficiently
Warehouse storage costs often depend on how much stock you’re storing. If you store too much product at once and can’t sell it, your warehouse costs will increase. Carefully managing your inventory reduces overhead costs.
4. Improve cash flow
Paying for stock takes cash out of your business. Granted, you’ll get the cash back when you make sales, but while the products are stock, it’s valuable cash you can’t use elsewhere in your business.
Improving your inventory planning results in better cash flow management.
5 inventory planning challenges and how you can solve them
Scaling your inventory planning solution can be one of the biggest challenges of growing your company. Here are five challenges you might encounter along the way and how to solve them.
1. Inaccurate inventory tracking
Small businesses often start out with a manual tracking system for inventory control. You may not think that an automated inventory system is necessary for your stock inventory.
But manual planning processes across different software, spreadsheets, and paper are time-consuming, inefficient, and liable to human error.
Limited visibility in warehouses may mean that your stock is challenging to identify or locate, making it harder to know how much you have.
Inventory tracking across multiple channels also means there’s no way to view real-time data. To stick to lean budgets and remain profitable, you need to know at any given moment during the year how much inventory you have.
Solution: Upgrading to a centralized inventory tracking system that has features for automatic reordering and purchasing. Key metrics will also show you bestsellers and total sales so you can optimize your stock.
Check out:
- QuickBooks Inventory Tracking for consolidated inventory tracking with real-time updates and reports
2. Inefficient processes
When you’re focused on building your customer base and driving sales, it’s easy to fall into following undefined processes.
An inconsistent or undefined inventory management process may not seem like a problem when you have limited stock and just one storage location to manage. But as your business grows, your sales volume will increase and your inventory will expand. These inefficient manual processes then become hard to scale.
Solution: Implement an Internet of Things (IoT) inventory to track each of your item’s individual locations––and say goodbye to guessing how much of each item you have in stock. An IoT inventory automatically monitors the movement of stock to and from your storage locations. That way, you’ll know which products to reorder more frequently.
3. Poor inventory control
Having too much stock can be just as much an issue as having too little. Overstock negatively affects your cash flow and can cause excess inventory problems, like storage and damage. If you sell perishable items like food and cosmetics, it’s even more important to control your inventory effectively.
Alternatively, if you have low stock levels, overselling and running out of inventory is an issue for maintaining customer satisfaction.
Not knowing your exact inventory levels at any given moment makes it hard to plan for how much stock your business needs.
Solution: Regularly auditing your stock reduces human error and helps you stock the right amount of inventory. Accurate and up-to-date inventory data will help you spot seasonal trends so you know when you’ll need the most and least amount of stock. For steady periods of the year, calculate your economic order quantity (EOQ) so you know your optimum stock levels.
