Inventory management is the lifeblood of any business – retail, manufacturing, distribution, and others – that deals with physical products. Efficiency and accuracy are paramount, yet many companies still rely on manual inventory management systems, often unaware of the severe limitations and risks this approach poses. Keeping track of consumables, finished goods, safety stock, and critical spare parts is both mundane and complex. Do it right and your business operates on schedule and at peak productivity. Screw it up, and you risk wasting inventory, driving up costs, and damaging your reputation with customers.
Paying employees or temporary help to manually count, order, and track your inventory may seem like an effortless way to avoid technology costs, but this short-term and short-sighted approach limits your business’s ability to grow, scale, and maximize profitability. Transitioning to automated inventory management solutions is crucial for long-term success.
Manual Inventory Not Worth the Paper It’s Written On
With inventory management, like many business tasks, you get what you pay for. Skimping on inventory management services may save money on the front end, but it sets your operation up for a mighty crash:
- Wasted Time: Workers must physically count stock, record data by hand, enter numbers into a calculator or spreadsheet, and transfer the results to ledgers. This not only takes employees away from more strategic and value-added tasks but also increases the likelihood of delayed shipments, stockouts, and unhappy customers. The time commitment grows exponentially as your business expands.
- Human Error: To err is human, and misreading labels, transposing digits, losing count, and fat-fingering keyboards are part of work life. These mistakes can create significant discrepancies between your recorded inventory and actual stock levels, creating a domino effect throughout your operations. Incorrect data leads to subpar purchasing decisions, inaccurate financial reporting, and devastating stockouts that directly subtract from revenue.
- Data Obscurity: Even when manual processes are accurate, they are slow. In today’s digital age, real-time data is crucial. Every business needs it for making informed decisions. Manual inventory systems provide only periodic, point-in-time, snapshots of your stock levels that are out of date before the ink on handwritten reports dries. When you schedule production, implement sales and promotional strategies, and order replacement inventory based on the analysis of old data, you’re flying blind in a cutthroat marketplace.
- Stockouts and Excess Carrying Costs: Manual inventory management systems often rely on arbitrary reorder points or “gut feelings” to determine when to replenish stock. Without accurate data backing up these decisions, it’s impossible to hit the inventory sweet spot. Inevitably, you will encounter one of two untenable circumstances. You’ll overorder slow-moving items, exposing you to inventory obsolescence and the elevated expense of storing, guarding, and insuring stuff you won’t need for months. Or you’ll run out of hot merchandise, a key machinery component, or critical raw materials, costing you sales and clients.
Automation Is Your Ally
Like time and tide, digital transformation waits for no person. As the pace of business continues to accelerate, automated inventory management is a must for survival and growth. Modern inventory management systems offer real-time visibility, improved accuracy, enhanced scalability, and powerful analytics capabilities that can transform your operations.
In addition to minimizing the manual inventory pitfalls discussed above, companies that automate will enjoy immediate inventory management benefits:
- Reduced Shrinkage: Real-time inventory tracking with an inventory management system shines a spotlight on your stock. When your employees know that you know where everything is supposed to be and how much you have on hand, inventory is less likely to walk away, “fall off the truck,” or simply get lost in the paperwork.
- Faster Turnover: Inventory management solutions help maintain optimal stock levels, leading to faster sales and stock replacement. This translates to better utilization of capital, improved cash flow, and less risk of inventory becoming obsolete.
- Enhanced Supplier Relationships: Professional inventory management services enable accurate demand and sales forecasting that allows businesses to communicate better with their suppliers. Ordering becomes more efficient, deliveries more timely, and contract terms more favorable.
Implementing Automated Inventory Management
Labor shortages, global pandemics, and regional wars highlight the critical nature of reliable inventory management partnerships.
With a dedicated supply chain partner, you could recoup the initial cost of transitioning from manual to automated inventory management through improved efficiency, reduced carrying costs, and increased sales. Partnering with a team of industry insiders equipped with the latest inventory management tools means you no longer have to let manual inventory processes hold your business back.
The experts at SDI can design and implement your inventory management services tailored to your organization’s needs and mission:
- System Selection: The first step is choosing a system that aligns with your business needs and budget. Options range from basic spreadsheets to sophisticated cloud-based solutions with features like real-time data tracking and automated reordering. Consider factors like business size, product complexity, and desired level of automation.
- Data Collection and Formatting: Gather accurate data on your current inventory, including product descriptions, SKUs, historical sales data, lead times for resupply, and optimal stock levels. Categorize your products based on factors like demand patterns, seasonality, and unit cost. Generate a universal taxonomy your inventory management platform can use.
- Demand Forecasting: Parse historical sales data and industry trends to predict future demand for each product or spare part. SDI can evaluate the various forecasting techniques available to find the one most suitable one for your specific needs and the complexity of your product lines.
- Establishing Reorder Points: Determine minimum and maximum stock levels for each product. Minimum stock levels (safety stock) ensure you have enough to meet current needs, while maximum stock levels prevent overstocking. These levels should be reviewed and adjusted periodically based on demand fluctuations.
- Implementing Tracking: Develop a system for tracking inventory movement, including receiving, internal transfers, picking and packing for orders, and returns. Barcode scanners can be used to automate data collection and minimize errors.
- System Integration: For optimal efficiency, inventory management solutions should be interfaced with other business systems like sales platforms, CRM, and accounting software. This eliminates manual data entry and ensures real-time data synchronization across departments.
- Training and Support: Train your employees on the new inventory management platform to achieve buy-in and ensure everyone understands the system’s functionalities and can utilize it effectively. Ongoing support can be invaluable for troubleshooting and maximizing the system’s benefits.
Leveraging the expertise of the inventory management leaders at SDI gives you the peace of mind that comes with cost-effective and fully supported applications. SDI’s supply chain-as-a-service offerings include comprehensive cloud-based and on-premises inventory management solutions.
Investing in a robust inventory management system is a strategic decision that can significantly benefit your business. By automating tasks, reducing errors, and providing valuable data insights, inventory management systems empower businesses to optimize their inventory levels, minimize costs, and maximize profitability. Carefully selecting a system that aligns with your specific needs and budget, along with consistent monitoring and data analysis, can pave the way for a more efficient and financially sound future for your company.
Contact SDI to learn more.
