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4 Key Inventory Control Issues to Solve for Increased Margins

Inventory is something many businesses struggle to manage effectively. Not having control over inventory can be a significant problem that can cause a company to close its doors or struggle with debt. That’s why it’s considered one of the top four problems in the manufacturing industry.

When you don’t have good inventory management it hurts your business’s cash flow and profit margins. It can also damage your organization’s reputation if it has to delay shipments because of an inability to meet production schedules.

Let’s look at the most common situations that lead to a loss of control over inventory.

1. Spreadsheet Errors

Many small to midsize businesses rely on spreadsheets to track their inventory. This method works in the early stages of a company, but as the business grows, it quickly becomes a problem. Spreadsheets are maintained through manual entries and as a result, are prone to errors.

Manually inputting data, copying and pasting numbers from row to row and column to column, and writing formulas are actions ripe for human error. Besides the opportunity for mistakes, spreadsheets are also inefficient. It takes time to enter the information, and as inventory moves, it is difficult to keep track of where it is located. Amounts need to be continually validated and that is time-intensive.

Spreadsheets only allow one person to enter information at a time. If more than one person is handling the inventory, the likelihood of errors increases. Since the spreadsheet isn’t updated in real-time, someone looking at it to determine inventory levels could be viewing incorrect amounts. With multiple locations, the situation is even more challenging.

Also, you cannot easily forecast with spreadsheets because you need to look at historical information. That isn’t something you can quickly pull together for analysis using Excel or Google sheets.

2. Manually Counting Inventory

For small businesses getting started, manually counting inventory can work initially, but it isn’t sustainable. If someone misses a section or skips a step, the information won’t be accurate. Manual counts are also time-consuming, tedious, and costly. Today’s employees expect companies to have modern methods for these types of tasks. It also makes sense to have staff spending their time on higher-level tasks rather than manually counting inventory.

3. Excess Inventory

When you have lots of inventory, it can be difficult to manage. Excess inventory ties up capital that could be used in your operations and it takes up space that you could use for other things like new product offerings. Surplus stock can cost you in at least two ways – labor to move it around, and utilities expense for the space where it is stored. It’s important to keep inventory at the lowest possible levels for better business performance.

4. Inability to Forecast

When you can’t forecast customer demand, you could end up with surplus inventory which, as mentioned, costs your business money. Or, you could have too little inventory, which could cause your customers to go elsewhere. Without accurate forecasting, you are prone to extremes in supply purchases, which can affect relationships with your suppliers. You can also end up spending more on rush orders.

As you grow, you need inventory insight to better manage your supplier network. With knowledge of lead times, procurement staff can choose vendors with the best pricing while ensuring orders are placed sufficiently in advance in order to avoid stock-outs.

Resolving Inventory Management Issues

An inventory management system provides real-time visibility of inventory to reduce carrying costs and track the movement of inventory from order to delivery as it happens. However, an inventory management system alone may not solve all of your operational issues. If you are looking to integrate many systems, it may make sense to consider an Enterprise Resource Planning (ERP) system with inventory management. With an ERP system, your inventory will be integrated with all aspects of your business from planning to production to purchasing. It lets you manage your entire operation and optimize your inventory. Instead of connecting several different systems, you use one system and database.

Reduce Errors, Increase Productivity

ERP software automates workflow and integrates departments to coordinate production, sales, financial management, and warehouse management. It automatically tracks the movement of every inventory item. ERP synchronizes material availability data with delivery dates and real-time manufacturing conditions. This can significantly enhance customer satisfaction and cost-efficiency.

With the automation of processes, errors are minimized and production is improved. ERP offers visibility across the organization and into the supply chain to keep inventory optimized.

Drive Growth

With ERP software, you can easily manage your inventory across multiple locations and channels and receive sales orders from multiple sources. Once an order is received it can be instantly put into an automated process.

A modern ERP inventory management system lets you see what is selling well and place orders for the materials before you run out. You can set minimum order levels so you are notified when your inventory is getting low. Having greater control over your inventory ensures you can accept sales orders and know that they will be delivered on time to customers.

Accurate Forecasting

Using ERP inventory management you can utilize technologies powered by Artificial Intelligence (AI) and machine learning to make predictive analytics and demand forecasting more accurate. With this knowledge, you can get better pricing since you’ll know how much and how frequently to order.

You’ll also have access to a dashboard that can be personalized to quickly see what actions should be taken to stay on top of potential issues. You can run scenarios for materials that are considered critical for an expedited order or for materials that have been delayed. And, your procurement schedules are connected to your manufacturing or assembly schedules so you can be lean with Just-in-Time (JIT) inventory to keep stock at only the levels necessary.

Cloud-based ERP Inventory Management

It’s important to get away from bad inventory management that can cut into your company’s profits, adversely affect customer retention, and limit your growth. Inventory management that’s part of an ERP system allows you to have visibility and efficiency across your organization. Cloud-based ERP has a faster implementation time, is lower in cost, provides continuous upgrades for the latest in technology, delivers deeper security, and can scale with your business.


Optimizing stock levels, preventing shrinkage, performing regular cycle counts, utilizing automation, and having access to a 360-degree view of your inventory can only be achieved through a fully integrated inventory management system. When inventory management is part of an ERP system, you achieve insight and connectivity across all departments, eliminating silos and increasing productivity.

The post 4 Key Inventory Control Issues to Solve for Increased Margins appeared first on ERP for Manufacturers | Manufacturing Software | OptiProERP.

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