What Does Poor Inventory Control Look Like for SMEs?
It’s been said that customer experience is the new battleground for 21st-century businesses.
Do you agree with that statement?
Great customer experience is not simply a team of smiling staff or a slick website. In most instances, it’s being able to give the customer what they want, when they want it. It’s likely that you aren’t the only company supplying a particular product or service in your area. Therefore, once you’ve gained a new customer, you don’t want to give them any reason to go elsewhere.
Poor inventory control will do exactly that.
In fact, substandard inventory management has long fingers and is one of the key reasons why small businesses fail.
How can we find the right balance within our inventory management and keep our customers coming back?
What Do You Mean by Inventory Control?
It may appear that inventory control and inventory management are similar since they both deal with the same topic, “How much stock should I order?” Despite being used interchangeably, these two terms actually refer to different aspects of inventory optimisation.
For example, inventory control is the process employed to ensure the right stock levels to meet customer demand, while maintaining optimal costing.
On the other hand, inventory management relates in a broader sense to the process of ordering, storage, use, and sales of your products, including the management of raw materials and warehousing.
Either way, the end result should allow you to hold the right amount of stock at the right time, in the safest place, and at the best price. If this sounds like one of life’s impossible juggling acts then you’re not alone. It’s like searching for the answer to “How long is a piece of string?”
However, there are certain inventory control methods that businesses have used over time, and which you may be employing right now. Many of these solve common inventory control problems.
Inventory Control Methods
You’ll appreciate that there is no one-size-fits-all approach to inventory control, and there’s no single right way of managing this moving target. Several of the more popular inventory control methods have proven useful to some.
These include:
- Economic order quantity (EOQ)
- Minimum order quantity (MOQ)
- Just-in-time (JIT) inventory management
- ABC analysis
- Consignment inventory
- Safety stock inventory
In fact, we’ve touched on this topic in one of our previous articles around the various methods of inventory management which highlights the processes and their advantages.
What Does Poor Inventory Control Look Like?
So, we understand what inventory control is and what it entails, but how do we know if we’re getting it right? Sometimes, a (scary) list of what not to do answers the question better than a host of features and benefits.
We’re unpacking information on how to find the right balance in a constantly shifting landscape and avoid the pitfalls associated with weak systems. (Hint: Goldilocks was certainly onto something when she was searching for not too much, not too little, but that sweet spot in the middle.)
Too Little Inventory
Whether you operate in an online environment or you work from a physical location, stock control matters. Too little inventory results in those dreaded “out of stock” notices on shelves or on the exact item that your once-loyal customer was searching for on your website.
Missed Sales
You can’t fulfil an order because you don’t have stock. Your customer either feels the frustration of a delay on an item that they ordered (and often paid for) or, worse still, they go somewhere else. Perhaps they need the item urgently. As much as they have enjoyed your products in the past, you have given them no choice, and have forced them into the arms of your competitor.
Loss of Customers
What are the chances that a customer who has had their needs satisfied by another business will come back to you? It’s nothing personal, it’s just business, right? What happens if your business gets a reputation in your area for frequently running out of stock? People simply don’t have the time nor the inclination to deal with poor planning.
Finding New Customers
These statistics on customer retention versus gaining new customers are sobering.
- Acquiring a new customer can cost five times more than retaining an existing customer
- Increasing customer retention by 5% can increase profits from 25-95%
- The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%
If we weigh up the investment in time and the cost of correct software for efficient inventory control against these statistics, how do you think your numbers would stack up?
Increased Costs
Expedited orders will always cost you more. If poor inventory control has left you high and dry and unable to fulfil an order from one of your biggest customers, chances are you’ll “make a plan.” Pressing your suppliers or manufacturers for urgent orders lowers your profit margins by increasing your overheads. Yes, it may be necessary at times – after all – we can’t predict every eventuality, but it should be the exception rather than the rule.
Too Much Stock
Surely there’s no such thing as too much stock? Actually, you can have too much of a good thing. You may think that you’re trading a little excess inventory for security, but is that really the case?
Inaccessible Funds
We understand the importance of cash flow, especially for small businesses. However, when that all-important cash is tied up in stock you may encounter some challenges. For example, no matter how valuable your inventory is, and how much security it offers, you will still need to pay rent, salaries, debts and purchases.
Taking advantage of special offers or discounts on bulk purchases from your suppliers may not be possible without compromising your cash flow.
Shelf Life
Nothing lasts forever, and in our consumer-driven society trends that are in this month may be out the next. Damage to products whilst in storage, spoilage of perishables, degradation, or obsolescence are factors that we have almost no control over. These can erode the value of our stock if it’s not moving fast enough.
Storage and Warehousing Costs
Stock storage costs money, and the more space you require the higher the expense. It’s not simply the floor space that you have to concern yourself with though, as an overstocked warehouse is difficult to navigate and things can get lost or broken. If your storage areas are full of redundant items, then you won’t have the space you require for fast-moving goods that keep business ticking over.
Inventory Control Systems that Work for SMEs
Too much or too little inventory has a knock-on effect which impacts customer service, staff efficiency and cash flow. Poor stock control hinders nimble decisions which would ordinarily help us to get ahead in our fickle economy. It costs us time, opportunity, and customers.
We can see how an accurate, real-time inventory management system would benefit all sized businesses and help them find that essential balance.
How much is an efficient inventory control system worth to you? Only you can answer that. But while you do your sums, we’d like to highlight some of the remarkably agile features that Omni’s inventory control systems bring to the table.
Omni’s stock control module helps to:
- Manage your stock efficiently
- Reduce out of stock situations
- Reduce obsolescence
- Reduce overstock situations
- Multiple warehouse and branch capable
- Create additional stock related reports using Omni’s powerful report writer
Claire from Graduate Print & Copy says “We have a busy print shop and chaos was the usual order of the day. Omni was the only accounting software package that could help reign in ALL the facets of our business as we found the software to be flexible as opposed to other generic products that are on the market. The consultants have made themselves available every time we required them, so much so, that for a couple of weeks they were a permanent fixture at our offices to ensure we understood the system and we’re able to use it to its full capacity.”
We’d like to encourage you to call on our friendly and professional team to chat about an inventory control solution that would work best for you. We know our stuff and have been offering practical, affordable solutions for decades.
Contact us today and leave poor inventory control practices behind.
