Inventory management is a key component of a distributor's own operations, not simply using a generic system for purchase, sales, and inventory or stocktaking. What is inventory management? Simply put, it is the distributor maintaining a reasonable inventory level of agency products, reducing the occurrence of short-dated and expired products, and maintaining reasonable purchase quantities based on product flow speed and inventory levels. Distributors/Manufacturers: Warehouse Management Drawbacks

  1. Inaccurate inventory control, with large discrepancies during stocktakes;
  2. No basis for product stocking, leading to stockouts of fast-moving items and high inventory of slow-moving items, failing to reasonably control warehouse turnover rate;
  3. Poor coordination between warehouse, finance, and business operations;
  4. Inability to deliver customer orders promptly and poor vehicle scheduling;
  5. No evidence to trace when inventory discrepancies occur;
  6. Poor shelf-life management, resulting in many expired and short-dated products in the warehouse;
  7. Damaged goods mixed with normal products;
  8. Wrong, missing, or duplicate shipments during dispatch. Main Reasons for Poor Warehouse Management
  9. No rules and regulations for warehouse management; the warehouse is like a vegetable garden, with all personnel entering and exiting freely, and even many employees smoking inside the warehouse;
  10. Management lacks awareness of warehouse management, leading by example in violating company warehouse rules and ignoring fire safety awareness;
  11. Shipping without orders, meaning the warehouse dispatches goods arbitrarily without a company-issued delivery order;
  12. Good and bad goods are not separated, causing chaos inside the warehouse;
  13. Short-dated and normal products are not properly separated;
  14. Returns are not handled promptly, and products that should be written off are not written off in time;
  15. Infrequent stocktakes, making it impossible to trace the cause of discrepancies due to long intervals between counts;
  16. Safety stock levels are not reasonably controlled, leading to shortages of needed items and excess of unnecessary ones;
  17. No professional reports or analytical data; everything relies on the warehouse manager's experience;
  18. Lax receiving procedures, unnecessarily increasing short-dated products;
  19. Unclear warehouse management responsibilities and lack of rewards and penalties, leading to a lack of ownership among employees;
  20. Weak sense of responsibility in shipping, with wrong, missing, or duplicate shipments occurring frequently, often not detected in time, and even unsupervised. Awakening Sleeping 'Money' Through Inventory Management Know Current Inventory Levels: When accepting orders or manufacturing and selling products, companies must understand current inventory levels and decide production and operation policies based on inventory status to avoid failing to deliver on time. Reduce Inventory-Related Costs: By managing the inventory process, keep inventory costs within a reasonable range and reduce costs arising from inventory. Accurately Reflect Inventory Value: During year-end settlement, companies must accurately calculate the value of inventory; otherwise, it can cause financial confusion and affect budget preparation. Of course, different industries have different inventory priorities and need to be treated differently. The last step is learning inventory management. Large enterprises often build their own warehouses to serve branches, but for small and medium-sized enterprises, this is obviously not cost-effective. Here are five methods suitable for small and medium-sized enterprises: Product-Oriented Customer Approach: Communicate with customers to fully understand the types and quantities of goods they need, and through comparative analysis, develop accurate and detailed sales forecasts, and manufacture accordingly. Build Good Relationships with Suppliers: Cultivate long-term trusted suppliers to gain priority access to materials and ensure delivery times. This way, companies do not need to hoard large quantities of goods to prevent shortages. Don't Fear Stockouts: Stockouts are not scary; they at least prove that the company is not incurring costs from excessive inventory. A company that never runs out of stock may simply be because it has piled up too much inventory. Sell Excess Inventory: Companies cannot guarantee that all purchased materials are in exact quantities. When there is a large surplus of materials that will not be used soon, consider selling them to other companies. Order at Critical Inventory Points: Continuously check the warehouse and only order when you cannot afford to run out, rather than ordering on a fixed schedule. This prevents the warehouse from accumulating large amounts of materials. Beware of Four Major Pitfalls in Warehouse Management Pitfall 1: Binge and Purge, Leading to Inventory Overstock Just as eating too much at once can cause indigestion and affect overall health, overstocking often occurs in inventory management due to company sales pressure, purchasers' lack of understanding of inventory and sales, impulsive buying, or buying large quantities of slow-moving products for small discounts, leading to poor turnover. Just as indigestion affects other organs, overstocking leads to a series of problems: first, increased capital occupation costs, as the money could have been earning interest in the bank; second, increased storage pressure, with warehouse managers complaining about space and requesting external warehouses; third, increased warehouse management costs, with slower picking and lower accuracy; and fourth, risk of expiration for products with shelf life. To avoid overeating, you need to know your appetite. For inventory management, avoiding overstock requires knowing how much you can sell; sales forecasting is the most basic requirement. We should carefully analyze and forecast historical sales data rather than relying on rough impressions. Just as we cannot combine three meals into one, we cannot place one huge order to 'solve it once and for all.' Therefore, setting an appropriate order frequency is essential. Of course, exceptions exist, such as holiday stocking, bulk purchasing to reduce costs, or grabbing goods when suppliers have short-term shortages. Moreover, we often think, 'If I overstock, the supplier can take returns.' In reality, this helps to some extent, but it is only a remedial measure and should be used sparingly. It's like trying to 'vomit' after overeating—it's unpleasant and harmful to the body. Pitfall 2: Choking on a Bone, Entering a 'Starvation State' Sometimes people swing to the opposite extreme after bingeing: 'choking on a bone.' After being forced or voluntarily taking on excess stock and suffering the consequences, purchasers become overly cautious, wary of manufacturer temptations and promises, and hesitant to make decisions based on market demand. Many naturally assume that reducing overstock means reducing orders and inventory, which often leads to stockouts. Just as prolonged hunger leads to malnutrition and reduced physical capacity, insufficient supply leads to lost sales opportunities, reduced customer satisfaction, and inevitably declining sales performance. How to avoid stockouts? I think it's still about forecasting sales, then ordering regular products using the '1.5 times principle,' and for holiday promotions in stores, maintaining close contact with key accounts (KA) and stocking up two months in advance. Establish KA reserve inventory, with purchasers and in-store promoters proposing a reasonable purchase target based on historical data and relevant manufacturer information. Pitfall 3: Picky Eating, Leading to 'Hidden Hunger' Eating should not just satisfy hunger but also be nutritious, avoiding picky eating. For example, excessive animal fat intake, low and overly refined grain consumption, and insufficient intake of micronutrients like calcium, iron, and vitamins A and C can lead to obesity and indirectly cause hypertension, hyperlipidemia, and diabetes. Inventory management also requires 'balanced diet and nutrition,' which is the issue of inventory structure rationality, mainly the fine management of purchased products. This requires more detailed category management in inventory management. Sales forecasting should not just predict overall sales but also break it down further. If you are responsible for many SKUs, you can plan inventory structure by sub-category; if the number of SKUs is small, you can even break it down to individual SKUs. Currently, the advanced method is the ABC inventory management method, which is the application of the 80:20 rule in warehouse management, allocating 80% of funds to the 20% of categories that sell best. The ABC classification method divides inventory items into three levels based on variety and capital occupation: particularly important (A), generally important (B), and unimportant (C), then manages and controls each level differently. It identifies the critical few and the trivial many. A items: 10% of variety, 70% of annual consumption value, requiring key management. B items: 20% of variety, 20% of annual consumption value, requiring routine management. C items: 70% of variety, 10% of annual consumption value, requiring simplified and general management. Pitfall 4: Not 'Detoxifying' in Time In inventory management, we often encounter unsalable, damaged, or sub-healthy products. These are the garbage of inventory management and often become dead stock that accumulates in the warehouse. The biggest factor affecting inventory turnover is often this dead stock. Ancient Chinese health practices emphasize 'detoxification.' If the body does not eliminate waste, toxins accumulate, leading to acne at best and uremia or rectal cancer at worst! Similarly, if dead stock is not handled promptly, it becomes a 'cancer' for the company's operations. To detoxify, you must understand the concept of 'shelf age.' People have age, and inventory products have shelf age. The longer they sit in the warehouse, the more their value depreciates. Warehouse management typically follows the 'first-in, first-out' principle, and different product categories have different shelf ages from the date of entry. Therefore, a regular shelf-age warning mechanism is essential. Warehouse staff should regularly issue a table of products exceeding their shelf age. If a product exceeds its shelf age, immediately activate the product disposal mechanism, which requires coordination with management and finance. Properly handle product depreciation. The above four pitfalls are common warehouse management issues. Different industries may have slight variations in management methods, but the key to avoiding these pitfalls is only one: making scientific sales forecasts. Source: Distributor Micro Journal -END-