The health of your inventory system directly affects the health of your business. You are relying on your inventory to respond quickly to customer orders and to maintain
the smooth operation of your facility.

When the amount of inventory you have doesn’t meet the amount of inventory you need to meet demand, you’re going to lose orders and therefore money – and possibly customers. If you have too much inventory, you’re going to lose money as well because the money that the inventory represents is tied up and therefore unusable in other places; it’s also likely that because items depreciate in value and/or the demand for inventory items wane, you won’t recoup the money spent on the inventory you don’t use.

So how do you make sure that you have just the right amount of parts inventory? Here are four stumbling blocks that you should remember when you take your inventory needs into consideration.

1. Bad Suppliers

Sometimes your suppliers are going to be unreliable. Occasional instances of unreliability are to be expected; when suppliers are consistently unreliable, you’re going to have trouble fulfilling your customer orders without keeping a large supply of inventory to compensate. As we’ve mentioned, having a lot of back stock costs money in more ways than one and therefore bad suppliers are a liability to your business.

2. Incorrect Forecasting

Forecasting is when you try to predict how much product you’ll need based on how much inventory you’ve used in the past, current market trends, and predicted market trends. The problem with forecasting is that it is often based on optimism, which will cause you to believe that you can sell more product than you really can, or pessimism, which will cause you to believe the opposite; the former results in excess inventory while the latter results in not enough inventory. Overreacting to market trends causes similar issues.

3. Inaccurate Records

Keeping track of your inventory accurately is the best way to ensure that your levels will be as close to perfect as possible. If you aren’t aware of how much inventory you currently have or how much has been ordered and is on the way, there’s no way to predict – much less accurately predict – how market trends may affect you; you will also be at a loss about knowing your own past inventory use, which is bad for your business in general.

4. Poorly Trained Employees

Suppliers notwithstanding, if your employees are poorly trained, all of the above stumbling blocks will happen to you. Poorly trained employees won’t know how to keep up-to-date, accurate inventory records; nor will they know how to forecast correctly. Untrained employees lose inventory, or misplace it, or miscount it, etc. Therefore, if your employees are the weak link in your inventory issues, even the best inventory management system won’t help.

So assuming you have or have had these problems and now you’ve gotten rid of your bad suppliers, started keeping more accurate records, and trained your employees, how else can you rectify past inventory issues?

One way is known as back order driven planning. Back order driven planning is actually a reactionary strategy meant to put out already existing fires. Because you’ve had inventory issues in the past, you have probably lost customers to the companies who are able to meet their demands on time. For those who haven’t left you, you must proactively plan to meet the current demand and catch up on your back orders as quickly as possible.

Effective parts inventory control is essential for the health of any business. If you would like to improve your inventory control system and avoid these stumbling blocks, please don’t hesitate to contact us to discuss your needs.