The product that’s stored in your warehouses and fulfillment centers is essential to keeping your business thriving—but this only makes smart financial sense if you have what you need and not much more. Otherwise, your product will go to waste, and you will spend too much on warehousing space.
Inventory management is all about finding the right balance. Inventory management can be the key to juggling your supply and demand and getting what you need from your working capital. Here are some challenges still facing inventory managers and tips for how to manage your stocked items to meet consumer demand while limiting excess stock and preventing stockouts through technology-based tools.
Ongoing Challenges With Inventory Management
As warehouses and fulfillment centers continue to confront widespread supply chain obstacles, many of these create a variety of challenges with inventory management. Some of these include:
1. Inventory Tracking and Accuracy
One of many inventory control issues that persist is smooth tracking combined with inventory accuracy. Tracking inventory in real-time is no easy task, particularly for those businesses with large inventories. Also, inconsistencies between physical stock and inventory records can cause problems.
2. Managing Inventory Levels and Costs
Inventory management issues can revolve around balancing inventory quantities against costs. Understocking or overstocking can either result in lost sales opportunities or higher costs.
3. Keeping Up With Market Trends and Consumer Needs
Inventory management solutions must align with market trends and consumer needs. For example, fast-changing consumer preferences can impact demand levels for current inventory.
4. Integrating Multi-Channel Inventory Solutions
As consumer preferences change and businesses expand across multiple channels, integrating inventory has become a challenge. Cross-channel inventory management (i.e., keeping track of inventory in stores, warehouses, etc.) can be complex.
5. Implementing Sustainable Inventory Practices
More and more consumers want to support businesses with sustainable practices. The challenge for warehouses and distribution centers is reducing waste in the inventory process and finding other ways to minimize environmental damage.
Mastering Effective Inventory Management in 2024
Efficient inventory management is vital for any business that sells products. It offers a variety of benefits that can impact your bottom line, including reduced costs, minimized stockouts, better cash flow management, higher customer satisfaction, and improved decision-making processes. Here are some ways your business can master effective inventory management in 2024 and beyond.
1. Review and Update Inventory Policies
Most warehouses and businesses have inventory policies, which might specify how much stock to hold, how items should be stored, and methods for re-ordering. These policies should be reviewed and updated frequently to stay in step the with ever-changing market so the business can address challenges and take advantage of opportunities.
2. Embrace Technology Solutions
One of the biggest trends in inventory management in 2024 will be the continued implementation of digital transformation in the warehouse. Examples include:
- Warehouse management systems (WMS) — These systems serve as the foundation for running a more data-driven and automated warehouse. A WMS can be used to track inventory, predict demand fluctuations, enhance supply chain visibility, and personalize the customer experience.
- RFID Tags — While many warehouses are still using barcode technology, the use of RFID tags is expanding due to the benefits the solution provides. RFID can reduce errors, lower costs, and improve efficiency in inventory management.
- Robots and Automated Guided Vehicles (AGVs) — These solutions are playing a larger role in warehouse operations, particularly for repetitive tasks like storing and retrieving inventory.
3. Allow for More Data Sharing
One lesson learned from global supply chain challenges over recent years is that having siloed data only creates more confusion and bottlenecks. To improve inventory management efficiency, many companies are now sharing eliminating these siloes internally as well as sharing data with business partners more openly. When you can see what’s happening with a manufacturer and shipping partner, you can make more informed inventory management decisions.
4. Use Distributed Inventory Management
With the pandemic, many businesses discarded the idea of just-in-time inventory management, even though it can be the most cost-effective and efficient when it works as designed. Instead of stockpiling massive amounts of inventory, some businesses are embracing a different strategy — distributed inventory management.
By storing inventory at smaller, distributed local warehouses and some brick-and-mortar stores, sellers can fulfill orders at locations that are closer to their customers. This can reduce inventory management costs and improve the overall customer experience via faster shipping times.
5. Encourage Sustainability Initiatives
With growing environmental concerns and changing consumer preferences, warehouses are beginning to prioritize sustainable practices. In the coming years, expect to see an increase in more energy-efficient solutions, like eco-friendly packaging, solar panels, LED lighting, and waste reduction strategies. Many warehouses and logistics providers will also begin using more EVs to reduce carbon emissions.
6. Measure Key Performance Indicators (KPIs)
Supply chain troubles may not be as severe as they were a few years ago, but there are still challenges related to efficient inventory management. The best way for businesses to manage these issues in 2024 and beyond is to establish and use inventory key performance indicators (KPIs) to properly plan and organize inventory. A few examples include:
- Holding costs — how much it costs to store unsold inventory
- Lead time — how long it takes to receive inventory from your supplier
- Stockouts — products you have that are currently “out of stock”
- Dead stock — inventory on hand that isn’t selling
- Inventory accuracy — how your actual inventory levels match up with your inventory records
- Inventory days on hand — the average time it takes to use up inventory on hand
7. Implement Staff Training
While automation has become increasingly important for warehouses, we’re many years away from robots replacing workers. In fact, automation allows businesses to level up their workforce by increasing their knowledge about various business challenges so they can be empowered to use technology to make the largest impact on overall results.
Effective inventory management is essential to balancing supply and demand and unlocking working capital. Without it, a business will be unable to deliver a positive customer experience, which is essential to business results and success. As we head into 2024, businesses will be seeking more sophisticated inventory management solutions to improve efficiency, transparency, and profitability.
