In its most basic terms, inventory management is the supervision of the flow of goods from a manufacturer to a warehouse, and then finally to the final point of sale. However, that simple definition doesn’t really cover the whole story — particularly when it applies to your current inventory management software. We’ll break that down further in a second, but first, let’s look at why inventory management is important
The Importance of Inventory Management — Examples
For businesses looking to grow, inventory management is a huge part of their success. But, it’s not just small businesses who sometimes struggle with proper inventory management.
In 2011, Target announced that it would be expanding into Canada. At first glance, it seemed like a smart move — and, if it had been handled better, perhaps they’d still be in Canada today.
However, that was not the case. Less than four years later after the initial announcement, Target pulled out of Canada after two disastrous years of having actual shops up and running in the neighbors to their north.
So, what exactly went wrong?
Well, first off they had a very misguided pricing strategy — perhaps stemming from improper market research and not fully understanding their new consumers in Canada.
The other mistake was poor supply chain management — stemming from a failure to implement proper inventory management strategies for their new stores.
This U.S. Today article outlines the fatal flaws that lead to Target’s demise in Canada:
“Early fatal flaws in Target’s Canadian expansion were too big to overcome as the chain struggled to gain traction in the country, industry analysts say. The company lacked the distribution network it needed to supply stores, leaving shelves inconsistently stocked and disappointing shoppers. And Canadian shoppers who had previously frequented Target’s U.S. stores were confused by the pricing disparity between the two countries.”
A good example of this is their infamous pink Barbie SUV blunder in 2015.
A Reuters article describes what happened, stating that there were barcodes on the Barbie toys that didn’t match up with the numbers laid out in their computer systems.
When it was all said and done, and Target officially got out of Canada, the entire move ended up costing them $2 billion. Proper inventory management and understanding their capacity for growth at the time would have helped save Target from this costly mistake.
Target is far from the only company to have a lack of concrete inventory management processes that negatively impact them.
In 2011, Best Buy “Stole Christmas” when they were unable to fulfill a large number of online orders — some dating back to November — in time for the holiday season.
However, the orders weren’t delayed — they were canceled altogether, which lead people to believe that they simply ran out of stock — which is an issue that should have been easily avoided.
The early 2000s were a tough time for athletic apparel giant Nike, who ended up losing roughly $100 million in sales due to a failure to keep their inventory under control and have since upgraded their inventory management software.
Target’s rival, Walmart, even has seen their own inventory mishaps cost them money. In 2013, misplaced goods costs the company $3 billion in inventory loss.
Now that we’ve established how important inventory management is, let’s talk about how your inventory management system should actually function, as well as a more in-depth definition of what true inventory management entails.
Inventory Management – The Real Definition
Many small, medium, and even large businesses rely on platforms like Shopify and Etsy as their main inventory management platform.
However, the true definition of inventory management should involve these four verbs: receiving, picking, packing, and shipping.
Receiving – An administrative function that involves checking the quality, quantity, and condition of the incoming goods followed by their proper storage.
Picking – The process of pulling items from inventory to fill a customer order — typically considered the most labor-intensive activity within a warehouse.
Packing – Physically placing goods purchased by consumers into their package and prepare them for shipping.
Shipping – Placing the items in a mode of transportation to be sent to their intended destination.
These four pieces of the inventory management process are extremely important for ensuring that items are delivered on time and that your customers are happy. They are particularly crucial for businesses operating in the e-commerce sphere.
So, whereas platforms like Shopify will keep track of your products, an actual inventory management software should help you accurately receive, pick, pack, and ship all of your items. Businesses are confusing their e-commerce platform as the only form of inventory management they need, but as you grow and expand, you need to have more in-depth, well-rounded, and versatile software to help your business succeed.
If you’re worried that your current inventory management solution isn’t helping you cover all your bases, then it may be time to check out Scout’s topShelf cloud-based inventory management software.
Upgrade Your Inventory Management With topShelf Today
topShelf integrates with platforms like Shopify, Skubana, Stitch Labs, Channel Advisor, and many, many more. So, you don’t have to get rid of your current accounting, CRM, and e-Commerce applications if you like it.
And, if you don’t see your application on that list, Scout’s universal integration tool, SNAP, delivers fast data connections.
Other benefits of using topShelf for your business:
Transparency – When you switch over to topShelf, you’ll get a much better understanding of your inventory through a detailed reporting function (like lot recall, asset summaries, and cycle counts).
Verification – Easily validate and verify receiving, picking, packing, and shipping transactions — as well as save time by printing detailed product and bin barcodes.
Cost Savings and Confidence – topShelf will help you see higher profits by reducing shipping errors and gain better control over your products. Gain confidence in your inventory process and save money with an actual inventory management system
To get started on integrating topShelf into your business, contact us today!
We look forward to hearing from you!