Managing inventory is one of the most essential parts of any manufacturing operation. But it’s tricky without the right processes.
Keep reading to learn about the most common inventory management challenges and practical solutions for tackling them head-on, or jump to the bottom to learn how Fishbowl simplifies inventory management.
16 common inventory management challenges
Effective inventory management can be difficult to implement. Here are 16 common hurdles businesses face when managing their inventory and how to overcome them.
1. Not properly training employees
When your team isn’t fully trained, it’s no surprise that inventory tracking can go off the rails. Untrained staff might misplace items, fail to follow proper procedures, or incorrectly log data, creating discrepancies. These errors snowball into more significant problems, making it hard to maintain an inventory system.
2. Not forecasting future demand
Inventory management isn’t just about the here and now. Without planning for future demand or company growth, your inventory management system becomes reactive rather than proactive. You may fail to anticipate seasonal shifts, market changes, or new product launches, leading to slowdowns and missed opportunities for business expansion — not to mention stockouts.
3. Not rotating your inventory
When inventory isn’t rotated regularly, products can become outdated or obsolete, especially if they’re perishable or time-sensitive. This increases inventory waste, carrying costs, and tied-up capital. It’s more efficient to use an inventory control method like FIFO (first in, first out) that ensures older stock leaves your shelves sooner.
4. Not looking at the long game
What’s your vision for the company in five years? How about 10? Narrowly focusing on short-term goals can cause you to miss out on bigger opportunities. Look at inventory forecasts, customer preferences, or potential market shifts alongside long-term objectives to optimize inventory and adapt to your business’s growth over time.
5. Failure to address stockouts
Stockouts occur when you run out of stock, often due to poor tracking or inaccurate demand forecasting. They hurt customer satisfaction and sales and can even damage your brand’s reputation if they occur too often. If you frequently experience stockouts, take it as a sign that your inventory management system needs a tune-up.
6. Overstocking
Overstocks occur when you have too much inventory on hand due to inaccurate demand predictions. Unfortunately, excess stock is just as problematic as empty shelves. It ties up capital, takes up valuable warehouse space, and increases the risk of goods becoming unsellable, whether because they’re obsolete or damaged.
7. Poor supplier relationships
If your suppliers aren’t dependable, your inventory will suffer. Late deliveries create inconsistent stock availability, which leads to production or order delays and leaves you scrambling to meet demand. Poor supplier relations can ultimately hurt your business’s ability to maintain a steady flow of goods — the backbone of any profitable manufacturing operation.
8. Neglecting inventory audits
Failing to conduct regular inventory audits can cause you to miss discrepancies in your inventory that affect your bottom line. Whether they’re scheduled or random, regular audits help you catch errors early and keep inventory records accurate. Mistakes like incorrect order counts, misplaced goods, and misentered data compound over time, potentially leading to major operational disruptions. Having procedures to make sure everything is organized and accurate prevents issues down the line.
9. Overcomplicating the process
Inventory management is challenging, but it isn’t rocket science. Overcomplicating it with too many steps or processes makes the job harder than it needs to be. It can also overwhelm your team. Simplifying procedures lets you focus on what matters: keeping accurate counts, streamlining workflows, and making sure products get where they need to be.
10. Not having contingency plans
When unexpected demand spikes, supplier issues, or equipment failures occur, they derail your plans. In these cases, it’s important to have a contingency plan, like an extra supplier to fall back on. Being prepared for disruptions minimizes their impact on your inventory so you can keep things moving forward.
11. Overlooking seasonal changes
Ignoring seasonal variations in demand causes mismatched inventory levels. Products that are in high demand during certain seasons might be understocked, while other goods might pile up as demand wanes. Failing to account for these shifts can lead to missed sales or excess stock, which impacts your profits and storage capacity.
12. Not using data to make decisions
Relying on gut feelings or outdated assumptions rather than solid data can lead to poor inventory decisions. Without analyzing sales trends, inventory levels, and market forecasts, you risk ordering (or producing) too much or too little. In contrast, data-driven decision-making helps ensure that your inventory levels align with actual demand and market conditions.
13. Lack of clear communication
Ineffective communication between teams — such as warehouse staff, managers, and accountants — can lead to misunderstandings and mistakes. When different departments aren’t aligned or fail to share key information, it becomes difficult to maintain accurate tracking and ensure smooth operations.
14. Inefficient warehouse layout and logistics
If your warehouse is a mess, finding and moving inventory becomes a slow, frustrating process. Disorganized shelving, cluttered aisles, or poorly placed inventory can waste valuable time as workers struggle to locate or retrieve items. An inefficient warehouse layout also increases the likelihood of accidents and mistakes, such as picking the wrong products or mishandling goods. And inefficient warehouse logistics can lead to slower order fulfillment and a higher risk of errors.
Take the time to optimize your warehouse layout and implement a strong warehouse management system to reduce storage-related hiccups.
15. Not addressing shrinkage
Inventory shrinkage can occur due to theft, damage, or clerical errors. No matter its cause, it can quickly drain resources and eat into profits. It’s important to address the root causes of shrinkage, such as lax security or faulty procedures, as soon as possible. If you don’t, you may face escalating losses.
16. Overreliance on manual processes
Relying too heavily on manual inventory tracking makes your system more susceptible to human error. Employees may miss important details, input incorrect data, or miscalculate stock levels, leading to discrepancies. Embracing automation wherever possible — for example, by implementing barcode scanning technology — can reduce mistakes and speed up your inventory management processes.
6 top solutions for common inventory management challenges
Effective inventory management doesn’t just happen overnight — it requires the right systems and strategies. Here are six of the top solutions to overcome common challenges and improve your inventory processes.
1. Implement inventory management software
Inventory management software like Fishbowl can help you automate tasks, reduce human error, and access real-time inventory data. As a result, you can make smarter inventory management decisions and avoid the pitfalls of manual tracking, like miscounts and inefficiencies.
Fishbowl also integrates with dozens of other tools, syncing your inventory tracking with broader business processes. In fact, Fishbowl is the #1 choice for QuickBooks users, aligning your inventory tracking with your accounting for maximum visibility.
2. Train your team
Say one of the biggest challenges you face is human error, both in data entry and product damage. What’s the solution to this problem? Invest in regular training to ensure everyone knows their role and how to properly handle stock. This helps your team get familiar with best practices and your company’s specific inventory processes.
The more knowledgeable your team, the fewer errors you’ll see. Training also empowers staff to identify and solve problems as they arise, which reduces downtime that results from time spent problem solving.
3. Perform regular inventory audits
Inventory audits might seem tedious, but they’re essential for maintaining accuracy and avoiding costly errors. Schedule periodic audits to physically count stock and verify records against actual inventory. These audits not only identify problems with stock levels but also ensure that your inventory system is functioning as it should.
4. Think long-term
Successful inventory management goes beyond day-to-day operations. It’s crucial to think about where your business will be in five or 10 years and build an inventory strategy that accounts for long-term growth. By considering future trends and scaling needs, you’ll ensure your inventory processes evolve alongside your business for more resilient operations.
5. Optimize your supply chain management
Your supply chain is at the heart of your inventory management. To avoid stockouts and delays, maintain strong relationships with suppliers and communicate your business needs clearly. Regularly review lead times, delivery schedules, and stock levels to prevent disruptions.
Optimizing your supply chain also involves understanding your suppliers’ capabilities and having backup options in place. When you’re sourcing materials or goods, take the time to find some secondary suppliers, just in case.
6. Streamline your warehouse
An organized warehouse layout makes managing inventory smoother and more efficient. By grouping similar items together and designing clear, easy-to-navigate aisles, you reduce retrieval times and improve stock movement. This helps you optimize space and minimize errors, which ultimately helps you keep track of inventory more accurately.
Ready to simplify your inventory management?
Overcoming inventory management challenges is key to business success. With Fishbowl’s tools and seamless QuickBooks integration, you can streamline operations, gain powerful insights, and tackle challenges with ease.
Let Fishbowl help you optimize your inventory management to keep your business running smoothly — starting today. Schedule a demo to learn more.