In most cases one of the most powerful tools a company can utilize when making important decisions is experience. Years and years of practice and observation can often become the backbone to a company’s structure. It can help when hiring people, when making business deals, when creating networks and partnerships and in many other areas of a business. But there is one place in a business where experience can actually do more harm than good. Where? Your inventory. Basing your inventory solely off of experience can actually cause your company to lose money and create wasted, or dead, inventory.
When a business starts, typically the owner or one individual personally oversees every purchasing and inventory related decision. Therefore, that person’s experience becomes critical. But what happens as the purchasing and inventory decisions are delegated and growth of the business requires that individual to increase their workload? This is a recipe for waste and error. Consider, if your company has been ordering 100 units of the same product every month for 15 years. Your experience tells you this will always be the right amount, the reality is you have hundreds of units of that product sitting in your warehouse just eating away at your capital. Unless you see the inventory piling up on the shelf, why would you change? It’s impossible to quickly walk through the warehouse and know what levels are “off” with your many other responsibilities.
Often, we can become too proud of our work and refuse to look beyond our own experience for answers, but the best way for you to manage your inventory and create an efficient process, is by utilizing an inventory management software solution. A tool for your inventory significantly reduces the risk of human error and can give you visibility into your inventory well beyond your memory and spread sheets. This tool will use the ACTUAL business knowledge rather than your memory or prejudiced impressions of the business. Using such a tool you will be able to find that sweet-spot where your inventory is at an optimum level and keep adjusting it properly over time. Some of the other benefits of utilizing an inventory management tool include:
And last but certainly not least…
Simply basing purchasing and stocking levels on personal experience can work for some very small companies, but that is typically the exception to the rule. Going solely off experience has some risks which may cost you vital cash which could and should be used elsewhere in your inventory or other areas of your business.
These are just one person’s thoughts. I would enjoy hearing what you think and what you use to manage your inventory. Please leave your thoughts below.