Inventory management is part of every tangible product selling business. Inventory management is really complex given the dynamic nature of the market. A good accounting software can help you solve various problems like inventory re-order limit, excess inventory storage charges, and many more which we shall be discussing in depth further.
One important reason Inventory must be efficiently managed is, the success of all product based businesses highly depends on how well their inventory is managed.
Here are the top challenges faced during Inventory management .
Overstocking
Money spent of stock is recovered when the stock is put to use and the final product is sold. Overstocking is a situation wherein the stock remains unused and its value depreciates over time. Thus, the decision to purchase inventory must be calculated depending on the market demand. And often this market demand is wrongly calculated due to inaccurate data or complex market requirements that need to be simplified. A company’s well-being highly depends on inventory management and how well the inventory moves from suppliers to godowns to factories and to the final customer.
Solution -
Overstocking can be avoided by proper inventory forecasting. This inventory forecasting can be easily be done using the stock reports in Tally. They allow you to deeply study your business trends and take appropriate decisions to avoid problems like over stocking and under stocking.
Inefficiency
Managing stock, keeping a check on its availability, re-ordering, etc needs to be automated to maintain maximum efficiency. Manually it may lead to errors that can cost the business. Especially growing businesses which may have managed manually but due to the growing inventory levels, it becomes necessary to increase the efficiency of working.
Solution -
Many businesses have solved the problem of inefficiency in their inventory management by simply introducing smart management software like Tally. Tally not only tracks your inventory but it also provides real time reports for you to take timely and accurate decisions.
Visibility problem
Retrieving inventory when needed saves time but when large inventory is involved, lot of time can be wasted over searching an Inventory item. This is called lack of visibility. Visibility problems in Godowns or any storage set-up is a very common and significant problem. This problem may not only waste your time but also decrease your overall work efficiency. Lack of proper visibility of inventory can lead to delayed manufacturing process. Similarly, when the inventory item is required for shipping, and a delay occurs due to visibility problem, the shipment can be delayed or even worse, wrong shipment can be delivered to the wrong recipient. An ideal example would be of a Pharmacist having to search drawers to locate a medicine, it creates a wrong impression on the customer who may be in a hurry.
Solution -
Management software like Tally, gives you the access to search and locate your stock items whenever needed. You can get the complete detailed summary of the stock from its Tally ledger.
Lack of centralization
The need for centralization arises when a business has multiple inventory stations. Most businesses that operate throughout a country have multiple warehouses to save on the shipping charges. Having multiple warehouses, requires businesses to centralize the information regarding the stock availability, real-time reports, etc. This cannot be maintained manually. If this centralized information is not readily available on real-time basis, it may lead to delays as well as huge losses to the business.
Solution -
You can centralise all your inventory data in Tally. You can get real-time status of the inventory thus making your work easier.
Under stocking
Another inventory management problem is understocking. Understocking occurs when there is a demand for a product but due to unavailability of stock, the demand cannot be fulfilled. This is another serious problem for every manufacturer as this may lead to direct loss to your business. Warehouses are purchased as per the space needed to store stock. If inventory is under stocked, this may lead to wastage of storage space as well.
Solution -
Under stocking can be avoided in the same way overstocking is solved i.e. by proper inventory forecasting. This inventory forecasting can be easily be done using the stock reports in Tally. They allow you to deeply study your business trends and take appropriate decisions to avoid problems like over stocking and under stocking.
Lack of trend forecasting
Previous sales, purchases, etc are called historical business data. On the basis of this historical data, a business can study the trends which may help them further forecast their business trends. Forecasting helps to avoid wastage of resources and allows to plan all parts of business strategically. It also helps to avoid both under stocking as well as overstocking. Manual systems are slow and can sometimes also show wrong forecasts which can reduce the efficiency of a business.
Solution -
Trend forecasting is very easy when done with the help of management software like Tally. It provides you with all the data in summarized way for you to decide the forecasts.
Lack of real-time detailed reports
Decisions are accurate only when there are proper detailed reports. A calculated decision involves the support of data in a summarized format. Manually this type of a reporting is impossible. Detailed auto-generated reports are necessary to take calculated decisions.
Solution -
The stock query report in Tally provides you the most detailed report about the stock in your business. You can change the period as well as use different filters to view reports from different perspectives.
These are the top 7 problems faced during Inventory Management. All these problems can be solved with Tally software. Tally is aimed at simplifying business processes and solving complex problems.
