One of the keys to running an efficient business is being able to successfully perform inventory management. While it can sometimes be a laborious and time consuming task, it can prevent your production process from being interrupted and allow you to not miss out on selling products to customers.
However, there may be a few things about inventory management that may surprise you. Below are four surprising truths behind inventory management.
1. Companies Have Too Much in their Inventory and It Affects the Economy
According to Forbes, one of the biggest financial strains on businesses and as a result the economy is overstocked inventories. In fact, how many assets are kept in company inventories can have a significant effect on the gross domestic product of the United States.
One of the biggest threats for companies with too many of their assets tied up in inventory is that inventory doesn’t retain its value forever. Supplies, equipment and products can depreciate in value over time. Products, in particular, can become obsolete quite quickly in our fast paced consumer culture.
2. Nearly Half of Companies Manually Take Inventory or Don’t at All
Another surprising fact is that nearly half of businesses have not taken full advantage of the improvements in inventory management that have resulted from software and apps. In fact, nearly half of all companies still do things the old fashioned way and take inventory with pen and paper. The remainder doesn’t take inventory at all and go by their eye sight or gut feeling in regards to when to restock.
This of course can have serious consequences. It can allow expenses to get out of control from overstock or having to re-stock at in-opportune times. Sales may be lost when products go out of stock without warning. Machines in factories may break down unexpectedly without the parts needed to repair them. There can be many serious consequences. Overall, electronic inventory management generally means a more efficient business.
3. One of the Largest Risks for Businesses Is Unprotected Inventory
According to Bankrate, one of the most significant risks that many businesses take is not having adequate insurance to cover loss of inventory. It is true that inventory can be wiped out under certain circumstances. This includes fire and natural disasters like floods. However, if your stock must be kept at a specific temperature, even a simple power loss can lead to huge losses.
Making sure a company has business insurance that protects against such losses is important. Without it, many companies may be forced to go out of business if they have a lot of assets tied up in inventory.
4. Most Inventory Management Tasks Are Now Automated
Thanks to inventory management software, many inventory management tasks that once required the oversight of a human being are now automated. For example, when an item in a warehouse is moved out of stock, the system can be immediately updated. If inventory gets too low, the software also knows to order new stock. This automation can increase efficiency several times over.