Small changes, huge impacts

1. Sales problems

Are you losing sales because you don’t have stock?

“While some customers will be happy to go on back order, there are plenty of occasions when that’s not possible,” says Tim.

Generally, customers won’t wait around and will end up going elsewhere instead. A small change that can make a significant difference, so be sure to begin recording these lost sales.

Tim explains, “If your customer wants 1000 hammers and you only have 200, you need to record the sales loss – otherwise you’ll base your inventory on that 200, and increase the likelihood of a stock-out again. It ends up being a self-fulfilling prophecy.”

If you know what customers want – not just what you end up selling – you can tweak your ordering, and have more chance of getting the right mix of stock next time. Inventory optimisation systems can help manage the recording and ordering process, so your business isn’t running on gut feelings or guesses, but according to the numbers.

2. Over supply

On the other hand, too much stock is an issue. Some companies choose to deal with growth by increasing their inventory, but this has implications because it:

• ties up resources impacting your free cash flow
• potentially increases storage costs
• increases risk of stock being written off

“Too much stock is often as bad as too little stock,” says Tim. “And there are plenty of ways to manage your inventory so you always just have exactly enough.”

3. Ageing stock

Some businesses run into problems with supply planning when they fail to accurately forecast sales. They’re then left with old and outdated stock, which won’t sell and ends up as a loss. This is particularly true of tech products, which don’t tend to stay current for long. This obsolescence was one of the major factors contributing to the demise of tech retailer Dick Smith.

According to a report from administrator McGrathNicol, Dick Smith’s big growth plans "went unchecked" and large inventory purchases "meant Dick Smith was carrying too much stock that was not saleable and was overvalued." 

4. Excessive stock movement

If you have a number of warehouses or locations, shifting stock is inevitable. But if you’re constantly moving product from one place to another, it’s a sign that your supply chain isn’t working effectively.

"If you’re not accurately predicting demand in different centers, paying to move stock around the country just to make a sale can rapidly eat into your profit margin," says Tim. 

5. Getting orders wrong

One wrong order isn’t a huge problem, but a large volume of errors can “be disastrous”. Not only do you have to pay to resend the item, but it impacts customer satisfaction. The returned product may also be unsalable and have to be written off, eating into your profits.

And that’s the best-case scenario. Tim warns that “customers will often shrug, buy the correct item from someone else, and you never see them again.”

Getting orders wrong is a sure sign that your supply chain management (SCM) isn’t working – this could mean your staff need training, your software system isn’t recording stock properly, or your warehouse isn’t set up effectively. 

6. Production problems

For manufacturing companies, having the right parts on hand is essential. If you’re experiencing production delays because parts aren’t coming through when they should, you need to improve your supply chain management processes. Just In Time (JIT) manufacturing was revolutionary for a reason – having the right parts on hand exactly when you need them keeps the manufacturing ticking over, without incurring expensive storage fees. Look no further than Electric Vehicle manufacturer SEA Electric.

7. Going with your gut

Gut feel can be a good way to make decisions, but it’s not the best way to manage inventory. If you’re guessing or making gut decisions on stock orders, you’re probably not forecasting sales very accurately. Using the right supply chain processes and software can improve how information flows to give you access to accurate, detailed sales data, which in turn helps you order what you need, when you need it.

8. Complaining customers

Every business fields complaints now and then – some more valid than others – but if you’re spending a large part of your day placating angry customers, it's a problem. It goes without saying that supply chain issues affect your stock levels. However poor systems and processes impact your order accuracy, the time it takes customers to receive their products, and your teams ability to share updates on orders in transit. If you’re not getting this right the information to your frontline staff it will impact customer satisfaction and in turn future sales revenue and your ability to retain your clients.