Many small and medium sized businesses (SMBs) continue to use antiquated inventory management systems. As businesses increasingly rely on cloud based data systems to secure and process information, their inventory systems require improvement. Simply put, old school inventory systems aren’t fit for purpose in the age of big data, and can actually cause significant damage and lost sales.
The good news is that with the introduction of cloud-based inventory management software, SMBs are now able to enhance both their inventory efficiency and productivity. In particular, there are three ways inventory management software can have a significant impact on SMBs.
1. Graduating from a Pen-and-Paper System
The pen-and-paper approach to inventory management has glaring flaws and limitations. However, most businesses (especially smaller companies just starting out) are still using this method. According to the State of Small Business Report, 46% of SMBs either use a manual system to track their inventory or do not monitor their inventory at all.
The remaining companies usually combine inventory management and Excel spreadsheets. While spreadsheets and paper-based reporting may seem to be great solutions for SMBs they can cause serious problems in the supply chain and will result in lost sales.
As a company accrues products more changes are made to inventory data. It doesn’t matter how skillful you are with spreadsheets or with your paper-based inventory lists. Mistakes and mishaps are bound to occur with such a system, and they can be costly.
With dedicated inventory management software however entering data into your inventory is easy. Most of the essential yet repetitive and mundane tasks, such as regular backing-up and updating of data, are automated and synchronized across multiple systems and devices. That means whenever you access your inventory for a quick look you get the same information whether you are using your smartphone or your computer.
2. Eliminating Inventory Shrinkage and Theft
Businesses that retain a manual sales and inventory system are more likely to experience inventory shrinkage and lost sales. Inventory shrinkage occurs when your recorded stock count doesn’t reconcile with the number of products you physically have on-hand. This is a common problem, especially in businesses that do inventory management by eye.
There are many factors that contribute to inventory shrinkage, such as unrecorded damaged goods, cashier errors, and misplaced items. However, the most common cause is theft. The National Retail Federation 2018 Retail Security Survey ranks shoplifting or external theft (35.7%) and employee or internal theft (33.2%) as the two leading sources of inventory shrinkage.
Inventory management software for SMBs has provided a means to closely monitor all products in their inventory. It enables business owners and managers to generate real-time views and reports on their stocks. Integration with POS (Point of Sale) systems allows users to monitor inventory status and sales via receipts and scheduled orders.
An inventory management system automatically updates inventory data whenever a product is sold or moved to a different location. Due to the tight monitoring, employees with limited to no access to the software are discouraged from theft. Thise has a side effect of rescuing goods from lost sales, as any previously stolen items will now be sold.
3. Preventing Overselling and Underselling
Overselling happens when you continue to accept orders for a product that is not currently in your inventory. Underselling occurs when you can only sell a limited quantity of items when demand is high.
Both overselling and underselling can cause your business distress and drive your customer satisfaction rating into the ground. They can also lead to out of stock (OOS) orders. When this happens, customers receive that standard and familiar “We’re sorry, but the item you ordered is out of stock” message.
When this happens customers can become frustrated, causing them to shop elsewhere and leave negative reviews. Not only does this damage your reputation, this can naturally result in lost sales.
One of the key steps in inventory management is to find the middle ground where you don’t have to deal with either surplus or empty shelves. Inventory management software helps you monitor and update your inventory status in real-time. It lets you synchronize your inventory and display current stock counts to your sites and other marketplaces, preventing you from overselling and underselling.
SMBs with Reliable Inventory Forecasting Capability
Being able to make an informed estimate of how much stocks you need to order, and when to make the order, is something that requires hours of data analysis, extensive business experience and acumen. Most SMB operators and owners rely on intuition and guesstimates when it comes to restocking their inventory.
However, with the advent of inventory management software for SMBs are now able to predict product demand with pinpoint accuracy. Historical data such as customer trends, sales, sentiments, and even the weather are thoroughly analyzed to make reliable demand projections.
This functionality helps business owners make smart inventory-related decisions, fully optimize their inventory, and increase their revenue while drastically reducing their costs.