Inventory management challenges and the tools that can help

November 9, 2022
Kaily Hirsch

Inventory is at the beating heart of your business. By definition, inventory is the goods and materials you hold in your storage locations for production or sale. One of the biggest challenges that many businesses face is keeping track of their inventory at all stages of their operations. Many companies try and fail to manage their inventory manually or by using basic systems. Not having a solid inventory management process in place can have huge consequences for your business.This article covers common inventory challenges and techniques you can use to overcome them. 



Stock-outs happen when demand for a product exceeds supply. These events are incredibly frustrating - customers want your product, but you can't give it to them. Stock-outs are detrimental to business because they cost money. You lose out on sales and the potential of gaining new customers, as stock-outs can leave a poor impression on customers. In addition, if you've promised to fulfill stock-out orders by creating a back order, you may spend money rush-ordering items to mitigate the stock-out. Some common reasons for stock-outs are:

Incorrect inventory counts

It's vital to have accurate numbers when you are conducting business. Unfortunately, many companies don’t use automated inventory systems and instead rely on humans to count and record inventory changes. This leaves room for error as even the most minor discrepancies can cause a stock-out. You also risk stock-outs if you don’t use a system that gives you live inventory data and transfers that data quickly and accurately to your order, warehouse, and procurement modules. 

Supplier and manufacturer delays

The supply chain has been under stress for a while now. The availability of products, tools and materials is constantly changing. As a result, it's likely some of your suppliers, no matter how reliable, have had to ship your products later than anticipated. This issue is exasperated by congested delivery channels and overwhelmed customs agencies. Keeping track of historical lead times is imperative to help estimate and forecast for the future to help mitigate delays.

Unexpected demand

It's exciting to have a popular product! But if you weren't ready for the surge in orders, it can leave you feeling overwhelmed and lead to a stock-out. In addition, businesses without automated tracking and reporting systems will find it difficult to analyze trends and implement practices that help them better prepare for changes in demand. 


Carrying costs are one of the highest costs associated with inventory. Having too much stock is costly and bad for business. The cost of storing a large number of goods that you can't move is a waste of valuable resources. You could be taking valuable space away from newer, better-selling products. If you sell non-perishable goods, you'll likely have to heavily discount products or continue paying for storage until they are popular again. Having perishable items could result in even more waste and loss. Many businesses choose to overstock due to supply chain delays, but this doesn't change the high cost associated with extra storage space. 

Changing consumer demands

The only constant in life is change. People shop differently now compared to in the past. Trends cycles have sped up, and products are constantly improving. Therefore, companies must deeply understand what their customers want and continuously adapt. Without a solid inventory management system, you will lack clarity about what products are popular with consumers and what is not. You'll also have challenges knowing what goods you have available to sell and when to order more of the products customers love most. This is a problem, as customers now expect next-day delivery. Without the right stuff on hand, it's impossible to give it to them. Speaking of next-day delivery, mismanaged inventory makes it hard for your warehouse staff to quickly pick, pack, and ship orders, seriously impeding your ability to fulfill orders at the expected rate. 

Human error

Human error is unavoidable. For years, companies had no choice but to track inventory manually. But as demand has grown and regulations have become more strict, it's crucial to use systems that more accurately track your operations. Some potential headaches that can arise from manual inventory tracking are:

Wasted resources

Time is money, which means that lots of valuable time can be wasted when your employees spend hours on manual data entry, DIY tracking, and coordinating internal communications. In addition, repetitive data entry tasks are time-consuming and take staff away from more valuable activities. 

Data inconsistencies

Manual inventory management results in inconsistencies across the board. Incorrect inventory counts and valuations can have a detrimental ricochet effect. At best, this is a frustrating money waste; at worst, it can have serious financial or legal consequences.  

Missed opportunities

When your data is flawed, and employees spend too much time on menial tasks, you will feel as if you are always playing catchup. So much time and effort will be dedicated to cleaning up messes that you will lose time to focus on more important, strategic tasks. If you are using a manual or simple software system, you are also missing out on many critical reporting and BI data findings that could help to improve operational efficiency.  

Techniques to help:

Integrated systems 

When your inventory management system is connected to your ecommerce platforms, order management, and accounting, it makes it much easier to ensure accurate and up-to-date information. Integrated systems will also help you to avoid human error as data exchanges will be automatic. Another bonus to integrated systems is the ability to locate your inventory quickly. This means your orders will be easy to pick, pack, and ship quickly, as warehouse employees will have no trouble finding well-organized, controlled inventory. They won't be surprised by missing stock or stock that is unexpectedly in an unknown location. And, when your inventory systems are integrated, you can clearly understand what is going on in your business. You'll be able to understand which inventory practices are working and which are not. 

Live data

Business happens quickly. It is crucial to have an inventory system that can give your real-time prices, stock numbers, and location information. Some benefits of live data include: 

Manage stock levels

You can avoid stock-outs and overstocking when you know exactly how much inventory you have and where it is. You can efficiently monitor stock levels by getting up-to-the-minute order and procurement data. 

Always know inventory value 

One of your greatest business assets is likely the value of your stock. As you ship out orders and receive new stock, the value of your inventory will be automatically updated. Live inventory valuation is an excellent asset for accounting teams. Real-time data helps you to catch numerical errors quickly and avoid disaster. 

Juggle numerous locations

If you run a large business, you likely have several warehouse locations. Live data lets you know product quantity across sites so you can know where more stock is needed. You'll be able to direct inventory to the best location. You'll also be able to easily organize inventory transfers as the location of products will be continually updated while in movement. 

Improve customer satisfaction 

Knowing how much inventory you have and where it is located will help you improve the overall customer experience. It is easy to avoid mishaps, such as stock-outs, when inventory data is continuously pulled from warehouses. All of this information is easily accessible, so you can keep customers in the loop and give them realistic time frames for when they can expect their orders. 


Your inventory holds highly valuable data that you can use to improve your business. It's difficult to gain insights through reporting if you manually enter data and have disconnected systems. But it is far more robust, accurate, and easy to have an integrated inventory system with  live business intelligence reporting. Having up-to-date and easy-to-read reports is a game changer for business. You can compare current and historical data to make the right purchase decisions moving forward. Customizable reports make inventory data easy to digest and allow you to see patterns and trends in your inventory.

Automated processes 

Save time and money with automated processes. Integrated systems let you draw data from various sources, and automated processes help to bridge the gap and take action quickly. When you apply automated processes to your inventory management, there is no limit to ways it can improve business performance, including:

Live dynamic costing

Live dynamic costing allows inventory values to update automatically based on fluctuating unit prices and your preferred inventory valuation method. Your inventory unit value will adjust to how much it costs to procure the product without manually entering data. Live dynamic costing can better pivot your business to meet changing consumer demands while remaining profitable.

Inventory status

When inventory status is automatically updated in your records, you will always be able to see the total stock you have on hand, where inventory is going, inbound products, returns, and more. This will allow your software to automatically calculate your available-to-sell inventory. You can even set up automatic procurement so your system reorders products once inventory hits a certain level. 

Too many businesses fall into the trap of believing that inventory management is simple and can be done manually using spreadsheets. This is not the case. Inventory management is a highly complex business process that is becoming more sophisticated. Basic, unilateral inventory management systems can no longer serve even small and medium-sized businesses. Having robust, integrated, automatic inventory tools that use your data to create valuable reports is a must-have in today's ever-changing landscape. Using sophisticated tools to manage inventory lets you make decisions that will improve profitability. 

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