Home | Blog | Expert advice

October 9, 2018

Inventory management: 4 common mistakes to avoid

Inventory management is a challenge for any growing SMB. The goal is to have enough inventory to meet demand without ordering too much. After all, no business wants to have warehouses filled with idle stock. Striking the right balance can be difficult, and the supply chain is riddled with pitfalls. Here are a few common inventory management mistakes along with our advice on how to avoid them.

1- Ignoring goods receiving

Many SMBs rely on shipping orders to update their inventory rather than having their employees conduct a physical count. Using shipping orders, however, can be both inefficient and inaccurate, since you never really know exactly how many items you have received. Your shipping order could say that there are 100 items when there are really only 95. Although it may mean added labour costs, it’s a good idea to have an employee carefully count the items in every shipment you receive. It’s the easiest way for companies to be sure they receive everything they order.

That said, some shipments are so large that counting each item is virtually impossible. In such cases, a mobile barcode-reading system can be a valuable time-saver. Barcode readers are just one of the tools that can be used with enterprise resource planning (ERP) software.

Whether done manually or with the help of technology, inventory counts give you an accurate picture of your stock levels. That’s a good place to start if you want to keep your customers happy!

2- Using a basic spreadsheet

The moment inventory management starts being the slightest bit complex, spreadsheets become unmanageable. Since the data is entered manually, spreadsheets come with a high margin of error. What’s more, they have no management indicators to help you make decisions and can’t provide real-time inventory numbers.

ERP software offers a variety of tools for optimizing inventory management. For instance, you can set a minimum inventory level—no more drawing water from an empty well if your sales suddenly shoot up or your main supplier is out of stock. An ERP system also allows you to reserve items from inbound shipments so that you can process important clients’ urgent orders.

3- Relying on a single supplier

There’s no denying the advantages of having a solid working relationship with your most trusted supplier. But what if that supplier were suddenly unable to fulfill a request? It’s important to maintain good relationships with secondary distributors; they are the ones who will pick up the slack if your go-to resource can’t deliver the goods. Look for distributors based near your facilities to minimize delays and shipping costs.

All SMBs would stand to gain by working with their suppliers so that products are delivered on an as-needed basis. Some of your partners may be willing to provide just-in-time (JIT) delivery. With a JIT system, new products can be scheduled to arrive just before your inventory runs out.

4- Using a silo approach to inventory management

Silo inventory management is a common mistake among SMBs that have multiple warehouses. For example, one warehouse might have products collecting dust while the very same items are out of stock at another location. Without a shared inventory management tool, separate warehouses can’t help each other out.

Centralized inventory management means no longer losing time and money because of gaps in communication. Keeping all of your locations connected can optimize your inventory system: not only does it become easier to transfer stock from one warehouse to another, but you can also pinpoint the location of products in any area of your business.

Inventory management is an art. Find out more by reading the Business Development Bank of Canada’s (BDC) four steps to improving inventory management.


A complete, user-friendly, flexible web‑based solution

Are you looking for a new management solution for your distribution business? Attend our next webinar to discover all the benefits of a cloud-based ERP software solution.

Sign up