6 common inventory challenges and how to solve them

No matter how big or small your business is, managing inventory is one of the most important and intricate tasks in the retail industry. This responsibility carries a lot of weight because any mismanagement can quickly affect your business operations by impacting customer satisfaction levels. The close relationship between inventory and customer satisfaction is a testament to how important inventory management is to your business’s success and long-term success.

When you consider your retail business as your primary source of consistent revenue, you’ll realize that inventory is the engine that not only drives your business but also keeps it running smoothly and efficiently. Proper inventory management practices make a significant difference in your company’s overall performance and sustainability by optimizing resources and increasing performance levels. In fact, proper inventory management is directly related to your company’s rapid growth and prosperity, as it enables you to overcome obstacles and capitalize on opportunities.

On the other hand, if you don’t manage your inventory properly, you’ll start to see the effects slowly. You’ll see a drop in sales revenue as a result of a lack of stock, a decrease in customer satisfaction due to delayed orders, and a spike in customer turnover. A bad inventory management process has ripple effects that affect every part of your business.

Common challenges faced in inventory

There are many different issues that arise with inventory mismanagement in every business environment. Poor inventory management can lead to a variety of problems that are unique to each company. Here are some of the most common issues that arise from poor inventory management.

Poor demand prediction

Customers’ demands can change over time, so your business should always focus on offering the products that are most in demand. For example, during the colder months, customers may become particularly interested in winter sweaters. If you don’t anticipate what products will be most in demand, you could end up losing revenue and losing customer retention. Furthermore, investing in products that are not in demand can damage your business, resulting in financial losses and damage your reputation among your customers.

Manual or unrecorded purchase entries

The primary reason for many inventory issues is a lack of proper purchase management. Raising an order via phone call or whatsapp, receiving goods with no purchase orders and failing to digitally enter each purchase orders and goods receiving note (grn) will result in bad inventory management. These activities lead to poor supplier delivery and a lot of confusion that leads to customer dissatisfaction.

When you fail to update the stock adjustment entries in the event of theft or damage, and neglect to conduct thorough stock audits, it becomes exceedingly challenging to effectively manage your inventory. This can lead to inaccuracies in stock levels and hindered operational efficiency.

Poor vendor management

Suppliers play a important part in the functioning of your inventory system as they are responsible for providing the essential goods required by your business. The selection of a reliable supplier and efficient management of the supply chain are crucial factors that can significantly impact the operations of your business. If you fail to choose a reputable supplier or if there are inadequacies in managing the relationship, it can lead to adverse outcomes. For instance, a shortage in the supply of stock or delayed deliveries can result in a loss of sales revenue. Conversely, an oversupply of goods can lead to wastage and an increase in maintenance costs. Failure to establish clear lines of communication can give rise to various challenges that can disrupt the efficiency of your inventory processes and hinder the overall performance of your business.

Sales without grn entry

Sometimes, businesses engage in a sales without properly recording the goods in a Goods Receipt Note (GRN) due to concerns about potential sales losses. This lack of documentation can create confusion particularly when dealing with purchase invoices and returns, as there will be no visibility of the items delivered. Furthermore, the absence of a formal review process means that the quality of the received products may not be assessed, resulting in a situation where less quality goods are more likely delivered to the customer as well as stored in the shop.

Poor quality assurance

When the staff completes GRN entry without conducting proper quality checks on received goods, it may lead to financial losses and damage to your brand reputation if the products are of poor quality. Additionally, the process of clearing out these subpar items from your stock can cause confusion and pose a significant challenge for you in managing inventory effectively, potentially affecting your overall business operations.

Purchasing more than required

It is crucial for you to have a clear understanding of the requirements of your store. Failing to stay informed about the inventory levels and sales trends of your business can result in shortages or the accumulation of unnecessary goods on your shelves. When you purchase insufficient stock, you may experience a decline in sales, while overstocking can lead to increased maintenance expenses and wastage.

Solution for common inventory challenge

By implementing the following best practices specifically tailored to address the common challenges encountered in your inventory management process, you will be able to effectively streamline and optimize your inventory system.

Understanding your customer need

With the proper reports in hand, you can gain a deep understanding of your customers’ preferences and behaviours. Armed with this valuable insight, you can develop effective strategies to stock your store with high-demand products. By incorporating accurate entries based on this knowledge, you can boost profits significantly while simultaneously mitigating the risk associated with investing in slow-moving items.

Record and track every activity in your inventory

Digitalize all business processes that include inventory such as Purchase and Sales Orders (P&S Orders), Goods Inward (GRN), Purchase and Sales Returns (P&S Returns), Bills and invoices and others. Record transactions between stores and between warehouses and stores by correctly recording the transfers and assignments. Analyze the transaction reports, centrally track the transactions and monitor accounts on a regular basis to take corrective or corrective action to improve processes and strategies in a timely manner.

Ensure that all inventory transactions, such as generating purchase orders, receiving goods and processing returns, as well as managing sales orders and returns, are meticulously recorded. Additionally, document inter-store and warehouse transactions within the supply chain. Regularly analyze comprehensive reports and diligently monitor the entire process. By closely tracking the status of each step, you can identify areas for improvement and take timely actions to enhance inventory management practices.

Improve relationship with supplier

It is crucial to maintain a positive and strong relationship with your supplier to ensure seamless operations. This involves monitoring various aspects of their performance, such as the quality of the products they supply, their lead times, the margins they offer, and whether they consistently meet the order quantities specified. Keeping a close eye on these factors can help in ensuring smooth and reliable supply chain management, fostering a mutually beneficial partnership with your supplier.

When choosing a supplier for your business, be sure to conduct a thorough review. This involves examining their website in detail to gather information. Additionally, seek feedback from their current customers to gain valuable insights into the supplier’s performance and reliability.

On time GRN entries

Make sure to properly record all received stock in the goods receiving note entry system before transferring it to the selling store. This critical step significantly reduces the amount of unnecessary work and confusion in your operations. It is important to carefully enter all relevant product information, such as the maximum retail price (MRP), cost rate, tax rate, and other details. Neglecting or postponing this key procedure can result in avoidable barriers to efficient inventory management, potentially causing disruptions and inefficiencies that could have been easily avoided.

Monitoring product quality at all stages

To effectively manage your inventory, it’s important to keep track of product quality at every step of your inventory or your supply chain management. You can also conduct regular stock audits inside your store at specific intervals to check the quality of every product and to accurately update the physical quantity in your inventory management system (IMS). By keeping track of product quality and performing stock audits on a regular basis, you’ll gain valuable information and develop a range of strategic approaches to improve product quality and reduce product wastage.

Reorder management

By implementing an effective reorder system within your inventory management practices, you are able to seamlessly streamline the process of creating purchase orders. The reorder system functions as a valuable tool that not only monitors your stock levels but also facilitates the timely replenishment of specific products, ensuring that you consistently meet customer demand without the risk of running out of essential items. Using predefined formulas, this automated system allows you to easily generate purchase orders in quantities that are precisely aligned with your business needs, avoiding waste or shortages.

Final take

A significant number of the challenges and issues related to inventory management arise from overlooking fundamental processes that are essential for maintaining efficient operations. It is crucial to prioritize effectively managing your purchases and providing clear guidance to your staff so they can perform their tasks efficiently. When you incorporate the aforementioned best practices into your operations, you will be able to successfully oversee and control your inventory levels, leading to smoother operations and improved overall productivity within your business.