Strapped by tight credit and plummeting sales, businesses have overhauled the way they manage supply chains, inventory, production practices, and staffing. ~ Janet Yellen
As this quote suggests, given the limited resources at hand, smaller businesses face inventory management problems more severely than medium-sized or large businesses. However, let’s not forget our mantra:
The small one is beautiful!
According to a study, 20% of small businesses fail in their first year, and 50% of small businesses fail within 5 years of operation. Later on, only 1 out of 3 businesses touch the 10-year mark. This shows there is something terribly wrong.
This being said, smaller businesses are also capable of dealing with inventory problems more effectively and flexibly. Continue reading to know how.
- Inability to track lots
Tracking lots is a cumbersome task for small businesses. Oblivious of economic, technological solutions, it is common for small businesses to resort to a basic spreadsheet to track lots.
You might be tempted to quickly open a worksheet. Remind yourself that it is the most incompetent, inefficient, and ineffective way of dealing with inventory management for small business.
What you can do instead is to find and invest in the right software?
Depending on the industry, lots are assigned complex codes and long numbers to indicate information like expiry date, etc.
Hence, using a simpler software will enable you to get a ready-made report of this plethora of information. Some software will go as far as advising you strategies to deal with certain sections of inventory.
- Misalignment of inventory levels with the manufacturing process
Small manufacturers have a hard time coordinating inventory levels with manufacturing and assembling processes. This problem gets more severe when multiple components, raw materials, and semi-finished goods are involved.
True inventory levels are difficult to calculate manually when assembly lines are continuously running. Taking international trading into account makes the whole equation even more confusing.
To avoid all confusion, whatsoever, calculate the lead time for each component and subcomponent on an individual basis. Lead time is the amount it takes to execute an order. When making your calculations, consider your supplier’s lead time as well.
Don’t forget to build in holidays, seasonal factors, weather conditions, and other delays in your equation.
- Poor coordination between remote workflow units
With geographically removed departments, smaller businesses find it tough to establish seamless workflow processes. Thus, it becomes increasingly difficult to optimize supply chain management and warehouse management system for small businesses. This becomes challenging when inventory managers and supply chain personnel must travel from one shop to another shop, asking about what remained in stock.
Using a multi-location stock management software will help your small business in redistributing inventory according to demand. This is to ensure that you optimally utilize your existing inventory, minimize transaction costs, and manage your limited storage spaces. You will witness the number of purchase orders declining significantly!
- Delayed inventory counts
Managing a small business means changing hats and being a jack of all trades. In such circumstances, inventory inspection comes last. Furthermore, updating inventory sales and purchases often are left as the last priority.
With unknown inventory levels, decision making becomes more difficult with every passing day. Pilferage and exchanges add to the existing uncertainty.
A more doable solution is to categorize different types and sections of inventory. Instead of waiting for an annual inventory inspection, get smaller chunks of inventory counted on a daily basis. This way, your calculated numbers reflect the actual numbers more closely than otherwise possible.
If not on a daily basis, schedule stocks count regularly, and designate staff accordingly. Counting a section a day will keep the mis-reflection away.
Procuring and managing inventory for small business is not a piece of cake. Dealing with these common problems can help your business on many fronts, including reporting, quality controlling, and demand fulfilling. Use these solutions to deal with inventory problems before things get out of hands.