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Challenges of Optimal Inventory and Ways to Overcome Them

Read up on the challenges of optimal inventory and ways to overcome them so you can improve your business and the way you approach inventory management!
A messy warehouse, one of the challenges of optimal inventory

Optimising your inventory is a never-ending project. It requires a carefully planned approach and the ability to adapt to new challenges as they appear. We hope that our guide on the challenges of optimal inventory and ways to overcome them will help you take the first necessary steps to ideal inventory management!

Bad warehouse management

The first of the challenges of optimal inventory can be summarised as bad warehouse management, but it manifests in two ways: horrible organization and inventory tracking. That results in many delays when employees struggle to find particular goods. Which, naturally, can also delay shipments if they can’t load things up quickly enough. The second way it manifests is through ineffective management of old, leftover stock. If particular goods are not sold quickly enough, and interest in them dries up, they can take up space, which is horrible for running a warehouse well. After all, if you ignore such stuff and pile up more and more old inventory, you are effectively decreasing the amount of available space in your warehouse. And you don’t need to become a logistics expert to understand how detrimental that is.

Lack of forecasting ability

A huge part of optimising your inventory is proper forecasting. In other words, being able to predict the interest of the market and pandering to it. That means that you will always be chasing after the most popular products and trying to quickly dispose of any whose popularity is waning. However, out of all the challenges of optimal inventory, this is one of the trickiest. It is nearly impossible to perfectly predict the whims of the market, which can leave you floundering after making the wrong investment. Unfortunately, the only natural way to overcome this is by getting enough experience in the field while also learning how to deal effectively with goods whose forecast was wrong. If you can sell them even for a fraction of the predicted price, you can still make up for some of the expenses.

Issues with supplier lead times

Another challenge you might encounter issues with supplier lead times. In simple terms, lead time is when your supplier receives the order and the moment they fulfill it. So, having issues with this means that your supplier takes far too long to deliver your ordered goods. There are, thankfully, several ways to overcome this problem. First, you can prioritize cooperation with local suppliers. That would effectively cut off the need for long transportation and reduce your supplier lead times. Second, you can try to account for lead time and order for a slightly earlier date. The risk is the chance of getting the goods too early. Finally, you can deepen your cooperation with the supplier and work on possible solutions together.

Lack of automation

Automation is your friend, yet plenty of businesses trying to optimise their inventory refuse to use it. Some even insist on manual data entry, billing, and document management. That contributes to considerable decreases in workplace efficiency. And even slow down the operations of your entire business! Not to mention that manual data handling opens up opportunities for human error. Which further increases the difficulty of proper warehouse management. After all, you cannot expect your employees to quickly find some of your inventory if it has been mislabelled. That is why automation is one of the most important supply chain management trends for 2022.

No employee training

One of the fundamental challenges of optimal inventory is the lack of trained employees. It should be readily apparent, but your employees’ competency directly impacts how well your warehouse functions. Without skilled employees, you cannot expect it to run correctly, and the chances of human error skyrocket. As the experts from verifiedmovers.com like to point out, this often means that it costs you less to pay for proper employee training in the long term. Not to mention that trained employees significantly improve the efficiency of your warehouses and your efforts to optimize inventory. In other words, there are only potential benefits in making this investment!

The challenges of ordering frequency and quantity

One thing that will likely tempt you into decisions that are not good for optimal inventory: is order frequency and quantity. Suppliers love to offer incentives for ordering more at once. Such as various discounts and, occasionally, free shipping over certain amounts if the supplier is local. And these incentives can be somewhat helpful for dealing with the effects of inflation on the supply chain! The trouble comes when dealing with your inventory. Ordering too much at once can leave you in the awkward position of being unable to sell everything. Or even not being able to store it all properly. That is why frequent smaller orders are better for you. Even if it’s not the most financially ideal solution, regular smaller orders are better for you.

Decentralised warehousing

The final one of the challenges of optimal inventory is the widespread practice of decentralized warehousing. If the first thing we discussed can be considered micro warehouse management, this falls under macro warehouse management. Having more warehouses throughout a state or city is a good thing. However, practically speaking, this makes it so you require much more effort to properly track and manage your inventory. Not to mention that what could have been a single trip to load up goods on your trucks turns into a complex pickup route that necessitates a visit to several warehouses before the delivery of goods even begins. So, consider consolidating some of your warehouses!

Final comment

Being familiar with the challenges of optimal inventory and ways to overcome them will make things a lot easier for you! Of course, as we state at the start, remember that there are no permanent solutions. You will need to alter your approach depending on what you encounter in the field.

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