A recent post by Brian Neufeld of Insight Works, a manufacturing and warehouse management supplier of software add-ins for Microsoft Dynamics points out a few of the key areas where companies lose money due to inaccurate inventory – points we think worth passing along today.
One key area of waste involves, of course, the tying up of working capital. Inaccurate counts create situations where purchasers buy more inventory than they need, tying up precious capital. How often is it the case that misplaced inventory, or double-locations, cause confusion and increased costs? Having 100 of something when you only need 50 is simply wasteful – but unless you know just how many you have of an item, and its precise location, it’s a mistake that’s all too easy to make.
Multiplied across enough items, in the end you’re reducing the amount of capital available for more important uses, basically a lost opportunity cost.
And then there’s inventory shrink. According to the National Retail Federation, 1.44% of all sales are lost to inventory shrink. Shrink does not only refer to theft and damage, but can also be a byproduct of bad counts and other tracking inaccuracies.
And then there are labor costs. A lot of time gets lost chasing down items that aren’t there… or aren’t where a system says they are. That lost time is compounded when others have to join the search. And it doesn’t have to happen all the time to add up to a fair amount of lost labor efficiency chasing product.
Then there’s the cost of lost customers due to the inability to fulfill customer orders or meet their time demands, often caused by out-of-stock situations.
All these issues and more can be turned around by embracing the benefits of warehouse and inventory automation. Paper-based systems are error-prone, labor-intensive and time-consuming.
Today’s digital solutions, consisting of software integrated with the company’s inventory, production and sales orders, and coupled with commonly available handheld bar code scanners, can make these mistakes and costly issues a thing of the past.