Managing inventory in today’s fast-paced business environment presents a myriad of challenges. One of the primary hurdles businesses face is overstocking. While it may seem minor, overstocking can spiral into a major impediment, draining financial resources and stalling business growth.
What is overstocking in business?
Overstocking, as the term suggests, is when a business has more stock or inventory than what is needed to meet its current or projected demand. It’s when the supply surpasses the actual sales or the anticipated sales rate of specific products. This surplus of inventory can be a result of various factors, including:
- Inaccurate demand forecasting: If a business overestimates the demand for certain products and procures more than what’s actually needed, it can lead to overstock.
- Bulk purchasing discounts: Sometimes, suppliers offer discounts for bulk purchases, tempting businesses to buy more than they require.
- Seasonal demand variations: Some products might have seasonal demand, and businesses might overstock during off-seasons.
- Change in market trends: Rapid shifts in market trends or consumer preferences can render certain products less popular, leading to unsold stock.
- Inadequate inventory management: Without a proper inventory management system in place, businesses might not have clear visibility into their stock levels, leading to unnecessary replenishments.
Why is overstocking a problem?
The immediate question one might ask is, “Isn’t it better to be over-prepared than under-prepared?” While it’s a logical presumption, the reality of business operations paints a different picture.
The financial burden of excess stock
For starters, every item stocked in excess represents tied-up capital – money that remains stagnant. Instead of these funds facilitating business expansion, innovation, or diversification, they’re immobilised in products that might never see the light of day in the market. This goes beyond the initial cost of the product; it also extends to the continual expenses associated with storage.
The silent risk of product obsolescence
Apart from the immediate financial implications, overstocking carries a longer-term risk: product obsolescence. In industries driven by rapid technological advancements or fast-changing consumer trends – think electronics or fashion – products can become outdated in the blink of an eye. A surplus of such items not only represents lost capital but could also tarnish the brand’s image, positioning it as outdated or out of touch.
Warehousing challenges
Additionally, the longer products sit idle in warehouses, the greater the chance of them experiencing depreciation, damage, or even expiration in the case of perishable items. This further escalates the hidden costs of overstocking.
How to improve inventory management
For many businesses, especially for small to medium enterprises, effective inventory management can become the backbone of their success. So, how does one improve their inventory management process?
Begin by improving demand forecasting, using historical data to anticipate future sales trends. Concurrently, periodic stock audits are crucial to ensure the physical stock aligns with recorded inventory, quickly pinpointing any discrepancies. Utilising techniques like the ABC analysis can further categorise items based on their importance and turnover rate.
If, after implementing these measures, inventory issues persist, it’s a clear sign that it might be time to tap into the latest inventory management tools for smoother business operations. Inventory management software not only helps small businesses keep track of their stock levels but also provides insights into sales patterns, allowing for better forecasting. The result? Reduced instances of overstocking, increased cash flow, optimised storage costs, and significant time savings in managing inventory processes.
Ingenious’ Access UBS: A Game-Changer for Inventory Management
For businesses keen on enhancing their inventory management processes, Access UBS by Ingenious is worth considering. Widely adopted by enterprises in Singapore, Malaysia, and Brunei, this inventory management software is finely tuned to meet the unique demands of businesses in the ASEAN region.
So, what makes Access UBS stand out?
- User-friendly design: Designed with small businesses in mind, it’s a simple inventory management software that offers a robust set of features without overwhelming the user.
- Comprehensive features: From the handy Wizard Setup for quick start-ups to Task flows that provide an easy reference, Access UBS ensures you’re always in control. The system’s ability to send SMS alerts to customers upon the generation of delivery orders and sales invoices enhances real-time communication.
- Integration capabilities: Looking for an end-to-end solution? The software can seamlessly integrate with Point of Sales (POS) systems, making it a holistic inventory management tool.
- Inventory control: With four types of stock valuation methods – Fixed Cost, Monthly Average, First in; First out (FIFO), and Moving Average – you’re equipped to handle any inventory challenge that comes your way.
Take control and drive business growth
For businesses looking to gain an edge in the competitive ASEAN market, the solution is clear: Invest in reliable inventory management software like Access UBS. With over 500,000 installations in Malaysia alone, it’s evident that Access UBS is a trusted name among businesses. Take that step today – connect with our team today and set your business on a trajectory of sustained growth and achievement.
