Startups have a lot to learn in the process of launching their business. It’s not easy to operate one, so you have to back yourself up with as much knowledge as possible. Regardless of the niche your business belongs to, the competition is always stiff. To survive the waters, you’ll want to start by learning from the mistakes of others. Sure, you’ll have information on what to do as a startup, but it’s insightful to have ideas about what you shouldn’t do.
One of those facets where mistakes are usually made is inventory management. Your business can’t thrive and grow if it isn’t able to get products to the customers on time. Or, worse, you can’t keep up with the demand for orders. Without good inventory management practices, eventually, you’ll have one disgruntled customer after another, affecting your business adversely. It isn’t a situation you’ll want to experience, especially not as a startup. For those reasons, a prudent startup entrepreneur like yourself will learn how to manage inventory in the best way possible to avoid committing those mistakes.
This article will give you a look at some of the most common inventory management mistakes startups make, so you can also avoid committing them.
- Focusing Only On The Purchase Price
Newbie entrepreneurs may dwell too much on the purchase price as a deciding factor as to which supplier to order from, and they forget there are other important parameters as well. You can’t just say you’re going for Supplier A because their price is the cheapest. You have to take a holistic approach to it, balancing all the other factors. Only then can you say you’ve found the best supplier to satisfy your inventory needs.
For example, take note of the following:
- Supplier lead time. In other words, the time it takes for the supplier to ship orders from their warehouse to your store. If the lead time is too long, you may risk having little to no supply in your stores, especially during peak season.
- Supplier’s flexibility. It means your supplier is pliant enough to have changes in your inventory levels or demand. For instance, you ordered 100 units of Product A for January. Fortunately, it sold out well; before the month ended, you had to order 300 more. It may not be your agreed initial order quantity of 100 units per month, but your supplier should be flexible enough to meet that change and the rise in demand.
- Supplier reliability. It refers to your supplier’s overall reputation as being professional and of top-notch quality in their service and the quality of products shipped.
- Leaving Inventory Checks For Too Long
No matter how confident you are that your inventory or supply is still fine, you shouldn’t leave the inventory checks too long in between each checking. Doing so will only risk having to rectify even bigger mistakes in the future. Those could’ve started small and would’ve been easier to deal with at that point.
Take it as a good thing when you don’t see any problems during those checks. But don’t make that reason enough for you to skip the next one. The supply chain can sometimes be unpredictable, especially as a startup, so you can’t let your guard down. It takes quite a few years in business before you can finally grasp which months you have the highest demand for certain products, which have the lowest, and so on.
Moreover, pushing all the inventory checks into one big event may overwhelm your team. As a startup, you may not have that many members of your workforce yet, so you also have to be careful not to let tasks pile up. It’s better to break those down into smaller chunks so your operations don’t get stalled.
- Focusing Too Much On Manual Management
As a small business, it’s normal to think you can manage everything manually, on Excel, and through writing. Technically, this may be true, especially for the first few months. Because you’re still making your business known in the market, it’s expected that the flow of products to and from your store and warehouse may not be that fast. There are some days when sales would be little to none at all.
However, don’t wait until it becomes too difficult to handle before you consider switching to an automated inventory management system. Even if you’re still in the startup phase, it’s already worth automating. That way, you can already learn the ropes of the automated system early on. When the need for it comes, the transition period is easier.
Furthermore, automation is the best solution to avoid many human errors early on. Using manual sheets and formulas can be very labor intensive. If you still have a small team, that’s a lot to do on their part. Then, add to all that work the time you now have to spend fixing those. All that would’ve been avoided to a great extent had you started with an automated inventory management system in the first place.
- Having Outdated Or Incomplete Product Catalogue Information
This fourth mistake is probably one of the worse inventory management mistakes that could ever be made: having outdated or incomplete product catalog information. It goes hand-in-hand with the need to have regular checks. During those checks, you can also go through your records and catalog to see if any product information must be updated.
For your inventory management to be thorough, it’s highly recommended to have a product catalog for active products and another for obsolete ones. It is also where automation kicks in, as having a centralized repository of all that information will significantly benefit you.
A product catalog makes all the difference in making your inventory management system more streamlined and efficient. If any changes have to be made, don’t wait until later to input what needs to be done.
If your startup is in the business of selling goods, you’d know that inventory is your lifeblood. Your operations will be negatively affected without a good inventory management system. The list of mistakes above shouldn’t scare you as you start a new business. Rather, it should serve as your guide not to fall into the same trap. Remember that inventory management is more than just stocking the right quantity of products on your shelves. A lot more goes into it, so learn, research, and keep yourself well-informed on the latest inventory management and supply chain as a whole.