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Most Common Inventory Management Problems in 2024 (and Their Solutions)

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Inventory issues in retail are not unusual. Every retailer knows the pressure of making sure their inventory is current and meets, even exceeds customer expectations.

When inventory is not managed properly, however, it leads to a host of inventory management problems that can impact your bottom line.

By acknowledging these challenges and finding innovative ways to address them, retailers can:

    • Better serve customers

    • Optimize operations

    • Stay competitive in an ever-changing marketplace

So, let’s start at the beginning, and dive into the concept of inventory management.

What is inventory management?

Inventory management is a process that tracks a retailer’s products throughout the supply chain. It involves:

    • Tracking inventory levels

    • Monitoring product demand

    • Allocation

    • Replenishment

Additionally, an important part of inventory management is inventory data management. Let’s see how they’re connected.

The supporting role of inventory data management

Inventory data management is the process of tracking and managing inventory-related data, pertaining to:

    • Quantities

    • Locations

    • Values of products held by a retailer

Inventory data management supports inventory management by providing retailers with the necessary information to make better decisions about when to order more products, how much to order, and when to discount or promote products to clear out excess inventory.

As you can see, it’s quite involved, which means a lot can go wrong. Let’s see what problems can arise and how to fix inventory problems. 

Common inventory management problems and solutions

Retailers face inventory issues for any number of reasons; and when the nature of the problems changes, so also must the solutions. 
two employees acknowledging their lack of inventory data management.

Explore: 3 Expert Tips to Master Inventory Management for E-commerce

Inventory issues:

1. Poor demand forecasting

When demand forecasts are not accurate, it becomes challenging to determine the correct levels of inventory to maintain and establish appropriate safety stock levels that would ensure stock availability for customers.

2. Overstock

When retailers order too much of a particular product that is not in high demand, it leads to:

    • Excess inventory
    • Takes up valuable warehouse space
    • Ties up capital
    • Obsolete or expired products
    • Wasted resources.

3. Understock

Failure to order enough inventory means running out of products, leading to lost sales and dissatisfied customers. This can be particularly damaging if the product is a killer product or if the stockout occurs during a peak sales period, such as the holiday season.

4. Poor visibility into inventory

Many large retailers have trouble locating, identifying, and tracking their existing inventory. When they don’t know exactly what they have on hand they can’t ship inventory on time, can’t fulfill orders, or send incorrect orders resulting in lost sales and customers.

5. Inefficient tracking and ordering systems

Progressive retailers should not be relying on manual, paper-based inventory management procedures. This will hinder business growth because as your sales volume grows and your inventory expands, it will also be increasingly difficult to keep track of inventory levels and even archaic.

The inventory problems are significant, but as the old adage goes, for every inventory problem there is a solution.

Let’s see what solutions retailers are using to overcome inventory management problems.

How to fix inventory management problems

While there are a number of ways to fix inventory problems, the reality for large retailers is that most solutions involve the use of inventory management software with advanced inventory analytics.

Three people sitting at a table discussing how to fix inventory problems.

Let’s see how it helps.

Inventory solutions

1. Improve your demand forecasts

Historical data

Look at your historical sales data to identify trends, patterns, and seasonality in demand. This analysis can help you identify the factors that affect demand, like promotions, or holidays. By using this information, you can adjust your forecasts and inventory levels accordingly.

Advanced Analytics 

Consider using AI technology, such as AI-driven analytics. AI and machine learning software solutions can quickly

    • Analyze large amounts of data
    • Identify patterns in sales
    • Makes predictions about future sales right down to the SKU level

This is valuable information you can use to optimize your demand forecast; which can then better inform your inventory purchasing, allocation, and replenishment. Your inventory management decisions will be based on accurate data analysis, which saves you time and money.

2. Say goodbye to overstock

The best way to deal with overstock is to avoid it in the first place.

Effective forecasting tools help with this. Some retailers struggle with spreadsheets to manage data and forecast their inventory needs, but they can’t handle high-volume data and are prone to human input errors.

Instead, AI-driven analytics is a forecasting tool with advanced algorithms to arm you with information to make more accurate inventory planning decisions. It can manage infinite volumes of data and the machine learning algorithms constantly learn new information without being programmed.

3. Stop coming up short

Not having enough inventory can be a thing of the past if you set up automatic reorder points for your products based on historical sales data and forecasting tools; ensuring you always have enough stock on hand to meet demand, without overstocking.

AI algorithms can be used to optimize the restocking process, ensuring that the right products are restocked at the right time and in the right quantities.

4. Let there be sight

To gain more visibility into your inventory management process you start by asking how to reconcile inventory.  You should conduct regular inventory audits to identify discrepancies between actual stock levels, by counting, and what is recorded; as well as to identify issues of theft and damage.

Additionally, AI-driven analytics provides insights into your inventory management process by analyzing data such as:

    • Sales trends
    • Stock levels
    • Product performance SKU-by-SKU

This deep-level visibility helps you see areas for improvement and make data-driven decisions to improve your inventory management process.

5. If you can track it, you can manage it

Replace manual and semi-automatic inventory tracking systems, with modern AI-driven tracking systems. This will give you a real-time inventory tracking system so you can track stock levels moment-by-moment. When stock levels are getting low or if you need to move inventory to other locations you’ll know to do it sooner, rather than later.

You won’t be lagging behind and customers will have products they need when and where they need them.

Apply innovative solutions to overcome inventory management challenges

Effective inventory management is crucial for the success of any retail operation because the goal of every retailer is to meet customer demand and to make a profit doing so.

Modern technology now offers retailers solutions to common inventory management issues through AI-driven analytics; which when implemented allow you to:

    • Increase demand forecasting accuracy and efficiency
    • Reduce inventory carrying costs from overstock
    • Automatically replenish to avoid stockout
    • Gain more visibility into your inventory management process
    • Track inventory in real-time

With these solutions in place, you create satisfied customers by having the right inventory in the right place at the right time, leading to increased sales.

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