Inventory Inefficiency and How to avoid it?

Inventory Inefficiency and How to avoid it?
Inventory Inefficiency and How to avoid it?

Introduction to Inventory Inefficiency

When it comes to increasing operational effectiveness and reducing expenses, management teams at all companies consistently place a high priority on inventory management. A push to reduce inventory always has outcomes that are evident and return money to the company. Does this suggest that inventory control is ineffective? Both yes and no are acceptable responses.


What is Inventory Inefficiency?

The function of inventory management depends on physical activities involving several sites, organizations, and procedures. Inventory is vulnerable to operational, transactional, and documentation inefficiencies over time due to the interdependence on sequential and parallel activities. 

The system configuration that is utilized to manage the inventory is another potential issue that might reduce the efficiency of the inventory. It’s not uncommon to discover that the system setup and processes are complicated to utilize. An effective system should outline and direct both the physical and documentation processes. The requirements for the business process should then be used to create the system process. In many instances, the activities are tailored to fit the system configuration, which is inefficient for the specific business activity at hand and already exists in some basic form.

Operations are inefficient due to poor system configuration that does not match the warehouse arrangement on the shop floor. Users frequently complain about the lack of capabilities that would allow them to get around processes that are sometimes overly complicated and time-consuming, causing operational delays. The lack of various reports, loops, and problems in the system can frequently force the operations teams to discover workarounds to go around the system’s procedures and continue, which leads to both inefficient operations and inefficient inventories.

The difficulties associated with inventory management multiply in situations when a corporation has contracted out the task to a third-party service provider. On the one hand, you have the company’s ERP or inventory system, and on the other, you have the inventory management or warehousing system of a third-party service provider. Both must always represent the same inventory accuracy and correspond to actual stock that is on the shop floor, although this is not always the case. Inventory in one system cannot mirror that in the other when the systems are interfaced, and it can be difficult and time-consuming to reconcile transactions between the two systems.


How to Improve Inventory Management?

  1. Prioritize your Inventory: You can better identify which things you need to order more frequently and in larger quantities, as well as which items are crucial to your company’s operations but may be more expensive and move more slowly, by classifying your inventory into priority categories. Experts frequently advise categorizing your inventory into groups A, B, and C. The A group consists of more expensive things that you don’t need as many of. The C category includes inexpensive products with high turnover. The B group represents the middle ground: reasonably priced goods that move off the shelves more slowly than C goods but quicker than A goods.

  2. Track all Product Information: Keep track of the product details for the goods in your inventory. SKUs, barcode data, suppliers, countries of origin, and lot numbers should all be included in this data. Consider keeping track of the price of each item over time so you can be aware of elements like scarcity and seasonality that might affect the price.

  3. Audit your Inventory: Some companies conduct a thorough count once a year. Others perform spot inspections on their popular goods on a monthly, weekly, or even daily basis. Many people engage in all of the aforementioned activities. No matter how frequently you do it, make it a point to constantly physically count your inventory to make sure it corresponds with what you believe you have.

  4. Analyze Supplier Performance: Your inventory may have issues if your source is unreliable. It’s time to take action if you have a supplier who consistently makes deliveries late or consistently underdelivers an order. Find out what the issue is by talking about it with your provider. Be ready to change partners or to cope with erratic supply levels and the potential for inventory shortages as a result.

  5. 80/20 Inventory Rule: 80% of your gains typically come from 20% of your stock, on average. Give the handling of this 20% of things a top priority. You should be well aware of these products’ whole sales lifetime, including how many you sell in a week or a month. Make sure you manage these well because they are the things that bring in the greatest money for you.

  6. Consistency in Receiving Stock: Making sure incoming inventory is handled may seem like plain sense, but is there a set procedure that everyone adheres to, or does each employee receive and process new stock in their unique way? When your figures don’t match up with your purchase orders at the end of the month or year, little variations in how new stock is received could leave you perplexed. Assure that all employees that receive inventory follow the same procedures and that all boxes are confirmed, received, and unpacked in a single batch, precisely tallied, and checked for correctness.

  7. Track Sales: Again, this seems obvious, but it involves more than just total revenues at the end of the day. You should regularly update your inventory totals and be aware of what and how many things you sold. However, you’ll also need to examine this data. Do you know when specific things start to sell more slowly or less? Is it the season? Are there particular things that you sell on a given day of the week? Do some products frequently sell in groups? Maintaining control over your inventory requires understanding not just your sales figures but also the bigger picture of how things sell.

  8. Order Restocks Yourself: Some suppliers offer to handle your inventory reorders. On the surface, this appears to be a positive thing — by having someone else manage the process for at least some of your things, you save employees time and money. However, keep in mind that your vendors may not share similar goals. They want to shift their inventory, but you want to stock the products that will bring in the greatest money for your company. Spend some time examining the inventory and ordering replacements for all of your products.

  9. Inventory Management Technology: The first eight items on this list can be managed manually with spreadsheets and notebooks if your company is small enough. However, if your business expands, you’ll have to spend more time managing inventory than running it, or you run the risk of having stock out of control. All of these chores are made simpler by effective inventory management software. Make sure you know what you need, that a software solution offers the metrics that are crucial to your company, and that it is simple to use before making your choice.

  10. Technology that Integrates well: Technology can assist you to manage goods in addition to inventory management software. You can keep on track with the aid of tools like POS systems and mobile scanners. Systems that cooperate should be given priority when making technological investments. It’s not the end of the world to have a POS system that can’t interact with your inventory management software, but it could take longer to move the data from one system to another, which could lead to erroneous inventory counts.



One of the main factors that drive efficiency in inventory management is the choice of the amount of inventory to be carried as well as who owns and transports the inventory in the supply chain. Technology may also speed up business operations like sales and delivery while to some extent reducing the need for human resources and related expenses.

The process of inventory management is dynamic and continual. Active management involvement and continuous improvement in all systems and processes related to inventory management are required to prevent inefficiencies in systems, processes, and physical activities.

Written by Ananya Das

Hi I’m Ananya, currently training to become a lawyer. I am a big reader with a love for writing poetry or any sort of creative writing for that matter. I’m also passionate about photography which usually means that I’m the one behind the camera! Quite basically anything related to art, film, music and literature would pique my interest.

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