Too Much Inventory
Afraid of being caught short, it's easy to spend too much on inventory, which can eat up working capital and erode profits. Warehousing isn't free, of course, and inventory that sits on a shelf is subject to damage, depreciation, and even obsolescence. Old inventory can be very hard to move. You may end up marking it down, selling to discounters, or shipping it to overseas liquidators.
To fix it: Start with some decent projections of how much supply you'll need and when you'll need it. The best gauge is what you've sold in the past. If you've sold 100 items per month for the past 12 months, chances are that you'll need 100 this month. Then there's seasonality: Do you usually see a fourth quarter spike with holiday sales? Or, if you're in the home and garden business, do you see more activity in the spring selling season?
Inaccurate Inventory Tracking
Once you know how much you need, you have to make sure you actually have it on hand. Opportunities for miscounts are everywhere: during receiving, during order fulfillment and the all-too-common pilferage. In manufacturing, you've also got to account for yield or scrap during production.
To fix it: Using electronic data interchange and bar code scanning can help eliminate data entry errors. It is suggested implementing a system of so-called "cycle counting." Choose a few items a day and compare the inventory record to the actual count. Best sellers should get counted more often.
It may seem natural to use spreadsheets such as Microsoft Excel to track your inventory. It's easy for spreadsheets to be accidentally deleted or for changes to be lost. In Addition, there's no foolproof way for multiple people working on inventory to synchronize their spreadsheets. Now what happens if there's a fire or your computer is badly damaged or stolen?
To Fix it: you can use inventory management system software. It can provide you with various efficient features such as: recording and counting all the products inside your inventory in limited time, creating detailed reports, making periodical backups of your database. For higher level of security, the software allows you to define the privileges for users and track every action has been taken by them.