Inventory IS Important

According to Brightpearl, a business management software company, keeping track of accurate inventory is not only essential for great customer service, but also for keeping accurate accounting records and having an efficiently running business. For certain business inventory may be as simple as office supplies for the employees, or as important as goods that are being sold to customers. Brightpearl has emphasized 10 main reasons for why keeping accurate track of inventory is important.

  1. Loss of sales due to out of stock items
  2. Loss of cash in overstock of inventory
  3. Improve accounting and profit reporting
  4. Identifying issues early on
  5. Customer Service
  6. Efficient Re-ordering
  7. Minimizing theft and losses
  8. Trust in your information systems
  9. Minimize warehouse costs
  10. Efficient stock take and end-of-year process

All ten of these reasons are great motivators to implement a more accurate inventory count within a business. I have witnessed firsthand what happens to a business that has no inventory tracking structure. I previously worked at a fitness club that had a section dedicated to nutrition and athletic clothing sales, and in the two years that I worked for that company I never saw a productive account of inventory. Every so often we would have a group of corporate representatives that came in to take count of our inventory. I was not surprised that they would report a huge loss for us; the thing that did shock me was they acknowledged the loss as if it was completely normal and acceptable. When looking at the ten reasons as to why taking inventory is crucial, I can definitely point out several things that took a hit by not being proactive with it.

In regards to customer service and losing sales, there were multiple instances where customers decided to opt out of a purchase because we didn’t have the products that they wanted. As customer service and sales representatives we had two options to help them; we could either try to transfer a certain product that they wanted from another location, or we could ask our manager to check if it will be on our next purchasing order.  The problem with those solutions was that we weren’t able to close that sale, since nobody would want to pre-pay for a product they were not receiving.

Another huge issue was that our inventory would consistently cause inaccuracies with our purchasing orders. Since there was no theft or loss reported, purchasing managers thought that we still had certain products and wouldn’t place an order for them. The fact that we were not aware of the losses as they were happening, would carry over for when corporate would come in and result in a huge sum of money that was being lost.

In our case, upper management was not interfering with the fact that their investment was being accounted for as a loss. In order to make other people want to be responsible, they had to implement it at the top.

From a managerial standpoint, would you rather invest money into keeping an accurate inventory, or save your time and money and focus on making sales, accepting the loss as a natural aspect of business?

 

https://www.brightpearl.com/sites/default/files/10-Reasons-Why-Accurate-Inventory-is-Important_0.pdf

10 thoughts on “Inventory IS Important

  1. I think as a manager I would definitely rather invest money into maintaining an accurate inventory count. The many reasons Bright Pearl gave are very accurate and interesting to think about. It seems that in today’s society, customer service has changed from many years ago. It has become so common for restaurants to not have a food item you want or for department stores to be out of stock. As customers, we buy their inventory because it is something we have a desire for. If we do not receive it, it forever puts a bad impression on that location for us. It is more important for businesses to maintain their clientele because they are the reasons profit is being made so the cost of implementing an inventory system is not as high. This was great because it also made me think of our forecasting activity and how businesses don’t just forecast about profits, but also inventory; which is equally as important.

  2. Great post! I would definitely invest money into an accurate inventory. By maintaining accuracy you have a smooth flowing business. I could relate to your situation because one of my past jobs had the same issue. I used to work at a tanning salon and I recall numerous instances where a customer was looking for a product we did not have in stock. By not keeping track of inventory information is inaccurate and unorganized. These types of situations are unacceptable and extremely unprofessional. Not only do you look bad as a company and lose a sale, but that customer is probably not coming back a second time. For a business to succeed it must flow.

  3. This was a great example of how crucial inventory management is. From a managerial standpoint, it would always be important for me to invest in a system which can track inventory. As I have learned in other classes and seen out in the real world as well, companies must focus their attention on the customer and what their needs are. By focusing on the customer and being able to accommodate their needs, profit will follow. By focusing mainly on profit the needs of the customers may sometimes be overlooked and corners could be cut where they shouldn’t be, resulting in less profit or possibly even loss.

  4. I agree that inventory is important to run a business. That being said from a managerial standpoint, I would rather invest money into keeping an accurate inventory. I have experienced working at the store where we ran out of small bags, so when a customer made a purchase when had to give them huge bags even if they didn’t buy many items. This made the customers complain and disappointed. Also I experienced at time when the store ran out of some jerseys that was requested at a high demand, therefore losing profit from the sales that could of been made. The manager in that department is in charge of getting the product allocated to the store making sure we have the inventory to provide the customers demands.

  5. I completely agree with your blog post. I’m honestly shocked at how managers and owners don’t place importance into inventory management. I worked at a small restaurant as a waiter where almost every day I had to tell a customer we didn’t have an item that was on the menu. Not only was it embarrassing to me but the customers would complain it would ruin there experience. The restaurant was barely hanging on and I think one of the reasons it wasn’t successful was become of inventory management. We would have a lot of first time customers but they wouldn’t come back. The customers that would come back would joke about wether we had something that they ordered the last time they came but we didn’t have. Although they were joking I think that a bad reputation to have. Something I will always take away from that job is that inventory management is crucial!

  6. I would definitely spend the extra money to keep an accurate account of the inventory. I have witnessed bad accounts of inventory, major losses and the uncertainty of the normalcy of it all in my first retail job. My current job has losses as well with their inventory but it is the systems that we can’t fully count on that you described of. We will have clients come in asking for a certain piece of jewelry we would physically check our inventory and not find anything but our system would say that we do have it in stock. It doesn’t look good to the owner because it taints the image of the store and has our clients feel as though we never have their items in stock.

  7. I completely agree with your post! I have worked in retail before and there were so many times when the cutover would leave the store angry because they couldn’t find what they were looking for or the store didn’t have what the customer wanted in stock. Currently we all live in a fast moving era. We all need everything fast and at the moment and from a customer standpoint it is frustrating to walk in to a store and not find what you were looking for. I think that by taking care of inventory the company can not only make profits, but can also minimize losses.

  8. Inventory is an important aspect of any good business model because it can account for large profits or losses if not monitored carefully. Companies can lose hundreds of dollars due to errors in ordering, shipping and stocking merchandise, that is why I think it would be important to invest money into keeping an accurate inventory. One specific success story is Walgreen’s, who have been expanding due in part to the their Strategic Inventory Management Systems (SIMS) technology system. If a company can better track its inventory they can not only make sure the correct numbers of products are at the store, but can look for trends in the purchasing of certain items and modifying their marketing scheme to take advantage.

  9. As usual, as an accounting student I believe that efficient monitoring of inventory is of the up most importance in order to run a successful business. I agree that a company has to invest in a foundation before they begin to spend elsewhere. Without the control systems in place to account for the goods waiting to be sold, the new found demand may cause the business to take on more than they can responsibly handle. I believe creating demand is extremely essential but there are oversights within the company that may be malignant in nature that must be accounted for.

  10. As usual, as an accounting student I believe that efficient monitoring of inventory is of the up most importance in order to run a successful business. I agree that a company has to invest in a foundation before they begin to spend elsewhere. Without the control systems in place to account for the goods waiting to be sold, the new found demand may cause the business to take on more than they can responsibly handle. I believe creating demand is extremely essential but there are oversights within the company that may be malignant in nature that must be accounted for.

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