8 Huge Inventory Management Mistakes

Inventory management is way more than taking a tally of boxes in your warehouse every six months. In fact, an updated inventory management system can give you all sorts of insights into your business, from tracking seasonal trends to understanding why certain products aren’t selling. Yet, plenty of companies continue to perform manual counts, making all sorts of egregious mistakes that cost their business vital money and time.

Inventory manager is making inventory management mistakes

Here are some of the worst inventory-related blunders made by more businesses than you might expect.

1. Refusing to Spend Money on Inventory Tools

Among new business owners, there is a rampant misconception that all you need to manage your inventory is paper, a writing utensil, and a strong ability to count, so it seems that spending money on inventory management tools is a massive waste. In reality, at the very least you need a spreadsheet creator, but most businesses have complex inventory needs – balancing raw materials, produced stock, and orders – that they need to devote some of their budget to more advanced inventory tools.

2. Wasting Money on the Wrong Tools

Still, not every inventory tool is appropriate for every business. For example, if you are a distributor that doesn’t touch raw materials, you don’t have the same inventory needs as a manufacturer. You should search for an online inventory management system that addresses your inventory requirements and fulfills your needs. Like other web-based programs, online inventory management tends to be more affordable, more comprehensive, and more scalable than other options.

3. Not Having Enough Inventory

This should be an obvious mistake: If you don’t have any products on hand to sell, you can’t make any sales, and your company loses money. Customers don’t enjoy delays due to inventory issues; most will go to a competitor for immediate service rather than wait around for you to receive more items in stock. Though some businesses intentionally run an inventory deficit to make their products seem in-demand, selling out is a dangerous game that most savvy business leaders avoid.

4. Having Too Much Inventory

On the other hand, it is equally dangerous to overstock. By buying more inventory than you can use, you are tying up funds that could be better applied in other areas of your business. Not only do you have to purchase the excess inventory, but you also have to pay to store it in the warehouse – and if you can’t sell it in time, you have to pay to get rid of it. It might not seem like a major expense ant first, but the dangers of overstocking compound over time. It’s best to walk the line between having too much and not having enough.

Warehouse workers performance evaluation

5. Forgetting to Measure Performance

The movement of your inventory is an almost foolproof way to measure how your business is performing. However, few businesses recognize the opportunity to glean insight from their inventory. By effectively observing past inventory needs, you can accurately forecast how your business will perform in the future. The right inventory management tools can collect the appropriate data and make analyses for you.

6. Measuring Performance Too Narrowly

Unfortunately, many of those businesses that do measure performance with their inventory often make critical mistakes that impact their growth. It isn’t enough to compare past inventory levels with current ones; you should pay attention to customer demand, back orders, fill rates, and inventory turns, as well. Undoubtedly, as one variable changes, the others will follow suit. Tracking these figures will ensure you have enough stock to continue increasing profits and growing your business.

7. Delegating Inventory Tasks to the Wrong Employees

Inventory management is a highly specialized skill – one that people go to school for. Therefore, you shouldn’t assign just anyone to look after your inventory; you need to hire the right inventory employees from the get-go. Those educated in supply chain management and those who have prior experience with managing inventory are ideal. Still, you should have thorough inventory management training for new employees, and you should keep your inventory managers accountable to business goals.

8. Neglecting a Backup Plan

If any aspect of your inventory management breaks down, chaos could reign. To prevent the dissolution of your business’s foundation, you need a series of backup plans to any and all potential inventory-related disasters. You and your inventory staff should frequently consider “What if” scenarios. For example: What if you have a high-selling product that is difficult to keep in stock, and you are planning a promotion that will increase demand? You might never use your backup plans, but it is wise to have them in place.


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