12 Inventory management mistakes and how to avoid them

12 Inventory management mistakes and how to avoid them

Often, inventory management mistakes can result from a single process oversight that’s fixable with minor tweaks. However, be aware that minor inventory management mistakes may be symptomatic of more significant organizational issues, so check each error against your foundational processes – the path of least resistance shouldn’t lead to the same mistakes happening repeatedly.

In this article, we’ll identify 12 of the most common inventory management mistakes (in no particular order) and provides tips on avoiding them.

1. Poorly Controlled Product Catalog

The most apparent eCommerce inventory management mistake is also the most common: not having a central database of all products and the necessary details for inventory management.

This means ALL products, including new products that are not yet in inventory and discontinued products for which you still have stock.

The product catalog can be as simple as an Excel file or as complex as specialized database software for inventory management.

At a minimum, the following details should be tracked:

The catalog database is a necessary foundation for efficient eCommerce inventory management. It should be updated regularly after being built – it’s not a “one and done” sort of ordeal.

2. Too Few (or Too Many) Performance Indicators

Performance measurement for your inventory and supply chain management is crucial to progress. If you don’t establish a consistent baseline of progress, how will you know (with confidence) whether your process is improving or degrading until it becomes blatantly obvious?

At a minimum, you should implement at least two supply chain KPIs:

Although you can certainly have more KPIs, it’s easy to wind up juggling more than you need. These two (or four) are the ones that you really must keep up with to help avoid common eCommerce inventory management mistakes.

3. Focusing on Price instead of Cost

Buying inventory at the lowest price possible is always important, but focusing only on the purchase price is another common eCommerce inventory management mistake. You need to consider the entire cost, often called Total Cost of Ownership (TCO).

A product’s TCO could include all of the following:

4. Manual Inventory Management

Several studies have demonstrated that orders placed by people relying on manual inventory controls are nearly always for significantly higher quantities than needed or warranted. It’s simply human nature to fear missing out (FOMO) by not ordering enough.

This inventory management mistake alone should motivate companies to manage inventory orders with an Excel spreadsheet or enterprise resource planning (ERP) software.

5. Inconsistent Employee Training

Many organizations see training as an expense rather than an investment. In addition to lacking knowledge on using company resources properly, untrained employees will eventually lose motivation.

6. Poor Housekeeping

Poor housekeeping – starting with something as simple as regularly sweeping warehouse aisles – can directly impact the accuracy of inventory management and order fulfillment.

7. Too Many Storage Points

The more storage points there are for the same product, the more you risk increasing inventory without an associated improvement in customer service level.

8. Same Stock Coverage on All Product Variations

Pareto Principle

Due to a lack of method and time, inventory management is often averaged. As a result, high-demand product variations often go out of stock even as low-demand variations are in overstock status.

9. New-Product Forecasting Failures

The first order placed with a supplier for a new product (the “implementation order”) often runs 30% to 40% of the annual quantity forecast, up to 80-100% for limited-edition products.

10. Warehouse Space: Too Much and Too Far

Regarding your warehouse operations, you don’t want comfort; you want efficiency.

11. Too Many Inventory Management Tools

One of the most frequent causes of poor inventory management over the last couple of decades is not having too few tools but too many.

12. Failure to Call in an Expert

Nearly all successful eCommerce companies will reach a point where continuing to handle their logistics and fulfillment in-house becomes counter-productive, usually for cost reasons.

Final Thoughts: Inventory Management is an Active Process

Eliminating inventory management mistakes adds value through streamlined warehouse management and enhanced customer order accuracy.