Updated: Sep 3, 2020
A misplaced item here and there, a forgotten reorder, an accidental overstock — these types of
inventory missteps don’t seem like a big deal in the moment, but they cost small businesses a
lot of money over time.
Despite the high error rates, many small businesses continue to rely on clunky, outdated
inventory management practices. Is your business one of them? To find out, see if you’re
making these common inventory management mistakes. Then, learn how to solve them.
Inventory Management: Where Small Businesses Go Wrong
Their warehouse is a mess
A disorganized warehouse leads to lost inventory, delayed order fulfillment, and higher costs. It
also makes it all but impossible to automate inventory management.
Adequate shelving and a streamlined organizational system are the foundation of an organized
warehouse, but you also need a way to easily track stock. There are a few options for tracking
stock, including RFID chips, but most small businesses opt for barcodes due to the affordability
of a barcode system. By scanning barcodes to track inventory as it enters and exits the
warehouse, businesses can cut the time it takes to pick and count inventory.
They only do physical inventory once a year
Automating inventory reduces errors, but it can’t eliminate them entirely. Shrinkage due to theft,
damage, and human error can still occur in an automated system. If a business performs
frequent inventory counts, it can catch a problem before it grows. If your small business only
counts once or twice a year, however, you won’t notice unusual shrinkage until the damage is
There’s another problem with only counting inventory once a year: It’s a major undertaking.
Businesses that perform annual inventory counts often have to close for one or more days,
losing money in the process.
Instead of putting off inventory counts, break them up into manageable chunks. By performing
cycle counts throughout the year, businesses can track inventory without disrupting regular
They oversell inventory
Overselling stock is a major customer service misstep, but it’s easy to do when you’re selling
across multiple locations or channels. If inventory data doesn’t sync from warehouse to
warehouse or across e-commerce and brick-and-mortar channels, you might sell an item you no
longer have in stock.
Moving inventory management to the cloud solves this problem by letting small businesses sync
inventory data in real-time so they always know what’s in stock and where. Cloud-based
applications like Zoho Inventory and TradeGecko are a good fit for many businesses, but if your
business has specialized inventory needs, consider custom software instead.
They stock too little (or too much) inventory
Overselling isn’t the only way that poor inventory management affects customer satisfaction.
When stock outs cause bare shelves and shipping delays, it drives customers to competitors.
While a lack of inventory can be a major problem, so can too much. Inventory surpluses add
challenges to warehouse organization and increase the risk of damage, depreciation, and
expiration. While there are strategies for liquidating excess inventory, it’s usually at a loss.
The best way to avoid over- and under-stocking your warehouse is to improve inventory
forecasting. Small business owners can perform basic forecasting by reviewing past sales data,
but for more accurate forecasting, invest in inventory management software that uses
algorithms to predict demand. If you’re having difficulty accurately gauging how much inventory
your business needs, you can hire freelancers through an online staffing agency to find a
capable freelance supply chain or e-commerce consultant. You can also engage and network
with many capable professionals looking for employment opportunities through The Tech
Inventory shouldn’t take up a ton of your business’s time, but it also shouldn’t be an
afterthought. That’s why you need an automated inventory management system that allows
your business’s inventory to run smoothly without a ton of time and labor. Instead of putting up
with the frustrations and wasted funds of outdated inventory management practices, make the
leap into a system that’s scaled to your growing business.