Inventory management has become more challenging, especially with the emergence of e-commerce and its subsequent increase in demand. In fact, in the wake of the COVID-19 pandemic, online commerce skyrocketed by 50%!
As a warehouse manager that manages inventory, keeping up with this heightened demand comes with its own unique challenges, and overcoming them will undoubtedly enhance business performance and boost profitability.
As an increasing number of companies transition to an online presence, the demand for efficient inventory management has become crucial. In this blog post, we will explore warehouse managers' setbacks and the solutions they can implement to address these challenges.
Challenges in Inventory Management in the Digital Age
Managing inventory is a complex task with many facets and aspects that a warehouse manager must successfully navigate. In this e-commerce age, more is at stake, and as such, supply chain control now has additional tasks that include:
- Meeting elevated customer demands
- Minimizing product stockouts
- Managing an increasing number of product returns
- Omni channel sales management
- Streamlining intricate supply chains
These extra obligations placed on the warehouse have resulted in a number of unforeseen challenges. Whereas these setbacks are industry-specific, here are the standard issues affecting the vast majority of businesses in inventory management.
Increased Demand and Rapidly Changing Customer Preferences
More than ever, customers are making purchases through e-commerce sites and other online channels like social media. Online shopping has consequently resulted in heightened customer expectations that inventory management must meet. For instance, according to an Insider Intelligence survey, over 60% of internet buyers stated that fast delivery is the most critical element of a fulfilling customer experience.
In addition, e-commerce customers' preferences and tastes can change rapidly due to the increased variety and choice options offered by digital shopping. This has put pressure on warehouse managers to keep up and adapt to the latest trends.
Managing Multiple Sales Channels
The emergence of e-commerce has provided businesses with effective alternative channels to sell their products and services. As per the Harvard Business Review, 73% of buyers utilize various sales channels during their shopping journeys, and such customers are referred to as "omnichannel customers." Among the most popular retail channels used concurrently in today's digital age include:
- Social media platforms like Facebook and Pinterest
- Brick-and-mortar stores
- Mobile commerce for smartphones
- Online marketplaces like Amazon and eBay
- E-commerce websites
- Paid subscription services
Although multi-channel selling is good for business, it results in acute challenges when managing inventory. This is mainly due to increased traffic when shipping products, and warehouse managers have to manage inventory across multiple channels concurrently.
Inventory Accuracy and Visibility
Maintaining accurate and visible inventory, i.e., precisely tracking and monitoring your organization's merchandise and its movement, poses a substantial challenge. Inventory accuracy is key to financial viability, and improving inventory records often shows an increase of 4-8% in sales than less accurate inventory records.
With so many moving parts in an e-commerce business, it's easy for inventory discrepancies to occur. These inventory discrepancies are costly to companies, result in hidden expenses, and are often challenging to detect.
Solutions
With modern technology and automation, many of the hurdles warehouse managers face are easy to cope with. Some of the more ideal solutions to inventory management challenges in this e-commerce age are the following:
- Implementing an Inventory Management System
- Forecasting and Demand Planning
- Regular Cycle Counts and Audits
- Automating Processes
Implementing an Inventory Management System
A sophisticated inventory management system is the proven solution to overstocks and understocks, which result in 3.2% and 4.1% revenue loss, respectively. How beneficial is an inventory management system to warehouse managers? Here are a few ways:
- Automation of inventory tracking, reordering, and order fulfillment
- Provide real-time inventory visibility
- Improved resource management, particularly in terms of space, manpower, and equipment
- Accurate inventory tracking
- Optimized forecasting and planning thanks to crucial data collection
Despite the numerous advantages of inventory management software, 46% of businesses either don't keep track of their inventory or use manual processes that often result in inaccuracies. Investing in a robust inventory management system will enable your organization to make data-driven decisions and monitor stocks precisely across multiple sales channels.
Forecasting and Demand Planning
Maintaining an optimum stock level is critical to inventory management since understocking or overstocking can have major financial implications. Understocks result in the unavailability of products and delays, while overstocks lead to wastage.
Forecasting and demand planning is a key strategy that helps firms to maintain appropriate stock levels. Some essential considerations for this strategy include:
- What has the demand been in the past for our products?
- What outside variables might impact the market?
- What is the average lead time for each of our products?
These are a few factors you should take into account when figuring out how much inventory you'll store in your warehouse.
Regular Cycle Counts and Audits
Inventory managers ought to conduct regular cycle counts and inventory audits to accurately account for stock levels. Cycle counting is a technique for managing inventories where a business performs a physical check on some of its stock and reconciles this newfound data with existing inventory records to uncover possible discrepancies. The three main types of cycle counts are:
- Full cycle count
- Spot cycle count
- Partial cycle count
Inventory auditing is a more comprehensive form of cycle counting where all of a business's inventory is physically counted and matched to accounting records to ensure consistency, accountability, and accuracy. Comprehensive auditing is typically performed on an annual basis.
Automating Processes
Human error can be expensive, especially for Fortune 500 companies with large inventory volumes. Automation is invaluable to such organizations because it's error-free and far more reliable than human labor. A great number of warehouses are beginning to realize the true worth of process automation, and in fact, by 2026, the worldwide automated warehousing industry is expected to surpass $30 billion!
Some warehouse processes you could automate include order fulfillment, inventory tracking, and data entry. Automating these processes can reduce errors and save time, allowing warehouse managers to focus on more strategic tasks.
In conclusion, managing inventory in the e-commerce age can be challenging, but implementing the right solutions can help warehouse managers overcome these challenges. By investing in an inventory management system, forecasting and demand planning, regular cycle counts and audits, and automation, warehouse managers can ensure accurate inventory tracking, maintain optimal inventory levels, and increase efficiency.
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