Inventory management is the very definition of a necessary evil. You can't run a business without it, but managing inventory requires resources like good partners, time, space and of course money.
Poor inventory management poses significant dangers to businesses. One of the most immediate risks is financial instability, as overstocked items tie up valuable capital and storage space, while stockouts result in missed sales opportunities and dissatisfied customers. In today's competitive landscape, the perils of neglecting effective inventory management serve as a stark reminder of its vital role in sustaining profitability and fostering long-term success. It's a cost of doing business to keep your manufacturing operation running efficiently.
There is no surprise then that a lack of inventory control has negative effects that reach many parts of the supply chain.
Symptoms of Poor Inventory Control
Not only is this a surefire way to hurt production efficiency, but you also stand a good chance of losing clients and damaging your reputation in the process. Knowing FOR SURE what you need as well as what you have on hand can save you a lot of frustration, especially if you get surprise spikes in demand or rush orders.
2. Higher Shrink
Shrink happens when you have a surplus of inventory. Shrink can come in the form of damaged parts, parts that have become outdated, and employee theft. Having a high shrink is the equivalent of throwing money away and is yet another reason getting your inventory under control is crucial
3. High Lead Times
When your employees have to sort, sift and hunt for the parts and pieces they need, your lead times can start to suffer. Having too much inventory is just as bad as not having enough, and either instance impacts your lead times.
4. Damaged Relations with Suppliers
A quick way to annoy your suppliers is to lose control of your inventory. Extra large or rush orders put a strain on your suppliers, especially when it happens frequently. Losing favor with your suppliers can put you in a bad position, especially when it comes down to crunch time.
5. Decreased Cash Flow
When your inventory is out of control you can also expect a significant decrease in cash flow. Ordering raw materials is best done in bulk as it can cut down on freight and shipping charges as well as lower the price point. Poor inventory also affects your ability to forecast accurately, which can really hurt when it comes to settling on product delivery time for your clients.
The significance of effective inventory management cannot be overstated. Poor inventory management can lead to a cascade of detrimental effects for businesses, ranging from financial losses due to overstocking or stockouts to diminished customer satisfaction and eroded brand reputation. If you notice any one of these, or worse a mix of these symptoms, then your business is suffering from poor inventory control. Investing time and resources into improving inventory management is an investment in the future viability and profitability of any business.
The right 3PL can help you scale your business with stable and reliable inventory management solutions. Get in touch with our warehousing, distribution, and transportation experts to learn more.