Why Poor Inventory Management Might Be Killing Your Business 

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inventory

Inventory management is often cited as one of the biggest challenges when it comes to managing and running an ecommerce business. Not only is it a substantial drain on financial resources, but it also requires a large number of working hours. In fact, truly efficient inventory management requires almost constant attention to even the smallest of details. 

For many individuals running ecommerce businesses, their attention is stretched between a variety of different areas, making effective stock management close to impossible. While this might not initially result in problems, it can have a detrimental effect over time. 

The Costs of Poor Inventory Management

Aside from a loyal, talented and dedicated team, inventory is probably the most valuable asset an ecommerce business can have. It isn’t hard to conceptualize why inventory is so important; when stock is misplaced or damaged, money and time have essentially been burnt. When looking at the figures, the actual costs of poor inventory management can be quite startling. 

Inventory budgets represent anything from 45 to 90 percent of an average business’s operational expenses. Businesses that reported spending more on their inventory management were found to be those with the least efficient processes. In fact, Microsoft’s Business Center conducted research that found that increased diligence of inventory management decreases inventory costs by an average of 35 percent!

Since small businesses often have a limited amount of stock, it is probably no surprise that poor inventory management is particularly damaging to SMEs. A study by the U.S. Small Business Administration found that 44 percent of small businesses survive the first 4 years, but when it comes to the end of year five, this figure drops to 31 percent. Although there are a few reasons for this increased rate of failing businesses, poor inventory management was among the top 8 causes of failure.

Signs of Poor Inventory Management 

If a poorly managed inventory is not rectified, over time it will produce effects that become unavoidable. If you are worried about the state of your inventory, here are a few warning signs to look for: 

  • Production shortages 
  • Shipping delays 
  • High return rates 
  • Large end-of-year write-offs 
  • An overstocked warehouse 
  • High rates of stock damages 
  • A large quantity of slow moving stock 

Inventory Management Solutions 

While the consequences of poor inventory management might paint a pretty bleak picture, luckily there are simple ways of avoiding such situations, such as using a product fulfillment company. Services offered by a fulfilment company will include picking, packing, shipping, storage, and product return operations. It will be a customized solution designed to meet the specific needs of your business. 

Partnering with a product fulfilment company allows you to keep all the control and decision-making powers over your inventory, but it relieves any concerns over ineffective management or in-house errors. With multiple warehouses in different locations, shipping rate discounts and same-day fulfilment guarantees, fulfilment services are designed to save you time and money, while also increasing the satisfaction of your customers.