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Is Inventory Inefficiency Killing Your Growth?

By fullstro
Updated On 06 Feb, 2024
Is Inventory Inefficiency Killing Your Growth?

Picture your supply chain as a delicate musical composition, where inventory acts as the notes that require perfect timing. But if someone plays the wrong notes or the instruments aren’t tuned properly, the outcome can quickly turn the music you enjoy into something you dread.

Similarly, inventory errors or lack of connection to the rest of your business can turn the business you love into a source of stress. 

For product sellers, efficient inventory management is the unsung conductor required for long-term success. It’s akin to creating a well-orchestrated symphony where every instrument plays its part seamlessly. 

But, let any inefficiency sneak in, and it’ll jeopardize the entire performance. The consequences are far-reaching, too, from excess stock creating financial strain to stockouts resulting in dissatisfied customers — both of which can get in the way of your company’s growth. 

Let’s take a closer look at what inventory inefficiency looks like, how it impacts your business, and how you can orchestrate a seamless inventory experience with Cin7’s Connected Inventory Performance.

What is inventory inefficiency?

Inventory inefficiency refers to inventory management that relies heavily on manual workflows and lacks real-time visibility into stock levels. If you aren’t actively monitoring and managing how inventory flows through your entire business, it’s inefficient. 

Inefficient inventory management can lead to issues like understocking, overstocking, negative customer experiences, and lost sales. For instance, take manual approvals. If someone has to approve an incoming shipment from a supplier and that task sits on their desk for a few days, your shelves will remain empty, and you’ll miss out on potential sales. 

These issues make it difficult to plan ahead and coordinate all the parts of your operations seamlessly. After all, business owners don’t have accurate insights into how much product they have or should have on hand without effective inventory management. 

Inventory inefficiency is the biggest obstacle product sellers face when trying to scale their business. If you can’t streamline inventory, any growth you experience can lead to high operational burdens, increasing expenses, and decreasing cash flow.

Consequences of inventory inefficiency

Inventory mismanagement can impact your business in several ways, making it difficult to keep up with work and focus on growth. If any of these issues resonate with you, it’s a sign that you may be struggling with inventory inefficiency.

Manual overload

As you grow and bring in new customers, managing your inventory becomes a full-time job. Soon, you’re so busy working for your business that you don’t have time to work on it. 

Instead of thinking of ways to take advantage of new growth opportunities, you fill your weekdays, and likely weekends, with manual inventory work. That can look like updating spreadsheets, processing orders manually, and constantly counting inventory to determine how much product you have.

Low visibility

Besides manual overload, inventory inefficiency leads to a severe lack of visibility. Without real-time inventory tracking and accurate data on stock levels, it feels as if you’re driving blind and don’t have the data you need to make better business decisions.

Low visibility can also make it difficult to forecast demand in busy seasons when it’s more volatile and unpredictable, and the stakes of stockouts are higher.

If you want to improve your inventory control and the quality of your reporting, having live and accurate data is essential. Up to 77% of supply chain professionals list real-time visibility as a must-have, and for good reason. 

Without visibility, your reporting is limited and slow, and you don’t have a clear grasp of information on key business operations, including SKU performance, supply, or demand.

Increased error rates

Inventory inefficiency leads to a higher rate of mistakes like understocking, overstocking, and product obsolescence. Besides these, businesses can also experience supply chain issues like long lead times, lost inventory, and erroneous shipments.

Often, these errors are difficult to catch on the spot, meaning that by the time you finally get to identify the errors and address them, you’ve already lost out on sales or turned customers away with a negative experience.

Recurring errors force you to invest time and money into fixing mistakes instead of keeping customers happy and expanding into new growth areas. In other words, all your energy will go toward staying afloat.

Lack of working capital

Lack of inventory control doesn’t just impact your time; it can also lead to unnecessary difficulties with working capital. Early supplier payments, poor inventory turnover, and long customer billing cycles impact cash flow negatively. 

Inaccurate demand forecasts can also cause issues. For instance, by having excess inventory, you’re essentially tying up your capital to unsold products. Conversely, product shortages can result in missed sales, reducing the cash coming into your business. As expense increases due to inflation and supply chain disruptions continue to challenge sellers, product sellers need solutions that let them operate more efficiently and increase working capital. With 79% of supply chain professionals concerned about future rises in supply prices, the margin of error is especially tight, and you don’t want inefficient processes to be the reason you can’t keep the lights on.

Difficulty scaling

Expanding your business can be a painful and complex process when you have poor inventory management. Whether growing through new sales channels, adding SKUs, or expanding to new regions, more growth almost always equals more work.

For example, increases in sales volume won’t propel your business forward. Instead, the additional orders will increase your operational burden, and you’ll feel buried under the work of managing inventory and processing orders. 

Not to mention, without effective inventory management, companies often need to hire more people to keep up with the additional work that comes with sales growth. In contrast, an efficient inventory management system that’s well-connected with the rest of your business lets you automate time-intensive tasks, enabling you to scale without increasing headcount.

Low customer satisfaction

Inaccurate inventory data can lead to incorrect availability information or stockouts, which hurts the buyer experience. The data backs that up, with a study showing that 40% of e-commerce customers have gone to competitors because their preferred brand didn’t have the item they wanted in stock.

Moreover, manual processes can lead to late or missing orders, which makes building trust and earning loyal customers difficult. 

Unfortunately, customers don’t always give brands a second chance. If competitors can provide a better experience than you, winning the people you lost due to poor customer experiences will be challenging.

Avoid the consequences of inventory inefficiency with FullStro

For product sellers, unchecked inventory inefficiency can lead to a domino effect of negative consequences that are hard to come back from. When you don’t have effective inventory processes, you end up falling into the trap of working for your business instead of working on it.

With FullStro’s inventory management system, you can enable Connected Inventory Performance and turn your operations into a competitive advantage that lets you build an agile and streamlined business that can scale without growing pains.

To learn more visit: https://fullstro.com

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