Most companies deal with the occasional inventory problem. A late reorder or incorrect item can be frustrating for small business owners operating on tight margins. However, when inventory problems become a systemic issue, it does more than lose a sale.

Chronic inventory problems cause serious damage to your company’s reputation. That’s because, on top of creating internal disorganization and inefficiency, mismanaged inventory has a direct impact on the end consumer. Whether it’s a late shipment, an oversold item, or recurrent stockouts, problems like these erode customer loyalty. Before long, inventory problems could have your small business bleeding customers.

While 73 percent of consumers are willing to give businesses a second chance after disappointing service, businesses that fail to deliver three or more times risk losing 92 percent of their customer base. And not only will those shoppers not return, but they’ll also tell their friends: two out of three people will warn others about a company after bad customer experience.

That’s a hit few small businesses can take, which makes inventory control a top priority.

Identifying Inventory Management Problems

Before you can take control of your inventory problems, you need to understand where they’re coming from. These are common causes of inventory management problems:

  • Disorganized warehouses.
  • Manual data entry.
  • Data silos across locations or sales channels.
  • Poor inventory rotation practices.
  • No or low-quality demand forecasting.

These practices lead to inventory problems such as over and understocking, fulfillment delays, overselling, and shrinkage. With the right tools, they’re also completely avoidable.

Affordable Inventory Management for Small Business

Don’t assume inventory management solutions are out of reach for your small business. There’s a lot that small businesses can do to optimize inventory management without spending a fortune on custom software and expanded warehouse space.

Instead of expensive software, many small businesses can use apps for their inventory management needs. Apps like Sortly, Goods Order Inventory, and Canvas let users scan items in and out, track stock in real-time, and instantly know when an item is running low. You can also download sales reports to see the bigger picture of your business’s inventory. Since apps are mobile-friendly and always connected, they’re a great solution for teams.

In order to maintain accurate data within the app, you need a way to easily track items. Manual picking and data entry is slow and error-prone, but businesses can easily upgrade to a barcode or QR code system that allows staff to scan items using handheld scanners and mobile devices. Barcodes also help your warehouse stay organized by tagging each item with data that corresponds to its warehouse location.

Of course, even an automated system can cause problems when it’s not properly managed. In addition to training staff on proper inventory control practices, managers should adopt proactive inventory management methods including stock rotation and cycle counting.

  • Stock rotation: There are two main stock rotation methods: first-in, first-out (FIFO) and first-expired, first-out (FEFO). Both practices minimize shrinkage, but the best method for your business depends on the type of product you sell. FEFO is best for perishable goods such as food and pharmaceuticals, whereas items like clothes that have a short demand cycle do best with FIFO.
  • Cycle counting: Many small businesses are in the habit of shutting down once a year for a physical inventory count, but what if you could audit inventory without unnecessary downtime? That’s what cycle counting accomplishes by taking stock in small chunks rather than all at once. Cycle counts also make it easier to identify and solve shrinkage problems before they spiral out of control.

Many small business owners shy away from formal inventory management systems for fear that they’re too costly or complicated, but as you can see, it doesn’t take a lot to get started with improved inventory management. With a few small changes, your business can adopt inventory management practices that keep your business profitable and your customers satisfied.

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