Common Inventory Management Challenges and How to Solve Them

In Measuring and Managing Inventory: Everything You Need to Know we looked at why inventory is a vital part of any business in the supply chain industry. With this, we also looked at the definition and importance of inventory management – the process of overseeing and controlling the flow of goods, materials, and products within a business.  

But with any sort of management comes the possibility (and often reality) of facing issues. 

Let’s explore some common inventory management challenges, or ‘global supply chain problems’, companies may face and how to solve them.  

What is Causing Inventory Challenges? 

  1. Low Cadence 

When we refer to cadence, we are referring to the tempo or speed in which processes are carried out. So, if your company has low cadence, this likely means you are not operating as efficiently as you could. This may be a result of time-consuming maintenance, manual activity, and natural human errors.  

An example of companies operating with low cadence would be using paper-based systems for tracking inventory and ordering processes. Manually recording incoming and outgoing products through paperwork. Additionally, if companies have an ERP in place, but data is not harmonized, it could also represent manually vetting that data to make sense of it.  

What are the business impacts of low cadence? 

Missed efficiency opportunities due to lack of agility, responsiveness, and accuracy. 

  1. Granularity 

The Cambridge Dictionary definition of granularity is as follows: 

“Small details included in information, making it possible for you to understand very clearly what is happening.” 

Inventory errors connected with granularity could be due to data (not understanding it or not having a grasp on it at all), or data definitions and governance.  

Missed efficiency opportunities due to the lack of effective problem-solving (a generic, high-level, analysis doesn’t lead to proper actions, your company needs to understand the details) is just one of the impacts of granularity issues. 

  1. Unpredictable consumer spending 

COVID-19 and other worldly events have resulted in very unpredictable consumer spending habits over the past couple of years. There have been times when people were spending more than ever (for example, when people were panic buying due to COVID), but there have also been times when spending has been lower (people bought less when lockdown restrictions started lifting). 

The time of year (or season), trends, and economic conditions can all impact consumer spending habits. In short, it has become harder and harder for companies to predict how much inventory they need in stock. 

According to a Merchandising Linkedin article this is also known as demand variability.  

“Demand variability can cause inventory imbalances, such as overstocking or stockouts, which can result in high inventory costs, lost sales, and customer dissatisfaction. To cope with demand variability, you need to forecast demand accurately, use flexible inventory strategies, and collaborate with your suppliers and customers to share information and adjust orders accordingly.” 

  1. Higher consumer expectations 

According to a Shopify article, “The pandemic set a new precedent for next-day delivery. When brick-and-mortar stores closed, a huge surge of shoppers moved online and never went back. Today, more shoppers want their orders to arrive within two days, along with free shipping. This has put pressure on retailers who are up against rising costs while trying to maintain customer loyalty and satisfaction.” 

  1. Lead time uncertainty 

Lead time uncertainty is when a company struggles to predict the time it takes for inventory to move from one point to another in the supply chain. Uncertainty can be caused by transportation delays, quality issues, supplier reliability, or even political instability. 

One way to reduce lead time uncertainty is by diversifying your suppliers so your company is not reliant on one source. 

  1. Inventory visibility 

This refers to company’s ability to track and monitor the location, status, and quantity of inventory across the supply chain. Being able to track these factors is crucial for optimizing inventory levels, reducing inventory costs, improving customer service, and enhancing supply chain responsiveness. However, tracking can be challenging since there are many components to think about.  

“It requires integrating multiple systems, platforms, and data sources, as well as ensuring data accuracy, timeliness, and security.” 

One of the best ways to improve inventory visibility is by having inventory management software such as Owl. 

  1. Inventory risk management 

As the name suggests, risk management refers to your company’s ability to manage risks that may impact your inventory. Managing inventory risk is vital when it comes to protecting inventory from damage, theft, spoilage, etc.  

As the Merchandising LinkedIn article notes: “However, managing inventory risk in a global supply chain can be complex, as it involves dealing with different laws, regulations, cultures, and environments. To manage inventory risk effectively, you need to conduct risk analysis, implement risk prevention and mitigation measures, and purchase insurance or hedging instruments.” 

  1. Inventory sustainability 

When was the last time you analyzed the environmental and social impact of your inventory activities? 

Your inventory sustainability or lack thereof can impact a range of factors including costs, reputation, competitiveness, and sales as a result. One good starting point to ensure your company is taking steps in the right direction is to evaluate your current practices and see where there is room for improvement. 

  1. Inventory optimization 

The right, or optimal, balance between inventory costs and service levels. 

“Inventory optimization enables you to maximize your inventory performance and profitability,” reads the LinkedIn article. “However, achieving inventory optimization in a global supply chain can be challenging, as it requires considering multiple factors, constraints, and trade-offs, such as demand, supply, lead time, inventory visibility, inventory risk, and inventory sustainability. To optimize your inventory in a global supply chain, you need to use advanced inventory models, algorithms, and tools, such as inventory optimization software, that can help you analyze, simulate, and optimize your inventory decisions.” 

Open laptop displaying Owl software and data

Solutions for Inventory Management Challenges 

Some inventory issues, such as sustainability challenges, can be mitigated by evaluating and changing current practices as necessary. However, when it comes to inputting and analyzing data, when done manually there is more room for errors and frustrations making it difficult to resolve and prevent issues from arising.  Every manufacturer, no matter the size faces similar data challenges as seen in our recent webinar with Kraft Heinz.

Our platform at The Owl Solutions can help your company reduce the potential of human errors and data issues, and inventory challenges as a result. 

Additional benefits of our platform include auto-refreshing of metrics, receiving alerts for potential issues early on, ERP connectors, and the use of data dictionaries for governance and alignment, just to name a few. 

What are you waiting for?