Importance of Inventory Management: Top 5 Challenges

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Inventory Management Importance

Running an efficient retail operation, maintaining proper inventory, and optimizing warehouse operations are just a few things that prove the importance of inventory management. There is no shortage of challenges when it comes to managing your inventory.

We’ve put together the top 5 list of inventory challenges along with some solutions to make things run more smoothly.

What Is the Importance of Inventory Management?

Effective inventory management affects every facet of your business and makes a significant difference in your bottom line. From your warehousing costs to labor costs to the ability to accurately fill order on-time, mistakes cost time and money.

Inventory management goes well beyond just maintaining stock counts. Modern inventory management systems, such as SkuVault, manage every phase of the product life cycle. It includes modules for sales forecasting, supply chain management, product ordering, warehouse management, and customer fulfillment.

It can help you manage your inventory levels, alert you when it’s time to reorder, and identify the most cost-efficient methods for ordering and storing products. It can generate paperless picklists, optimize warehouse traffic, and provide safeguards to avoid mis-ships. SkuVault can keep inventory levels accurate across all sales channels and platforms and analyze sales patterns to provide forecasting to track turnover to avoid out-of-stocks.

SkuVault manages the whole process from start to finish and integrates with all the most popular eCommerce sales platforms, shipping software, and business and accounting software.

What Are the Top 5 Challenges in Managing Your Inventory?

Mis-picks, oversells, and out-of-stocks are significant challenges in managing inventory. Each of these items either costs you money or ties up capital that could be spent elsewhere. Tracking every SKU throughout the entire warehouse process from intake to shipping is crucial to preventing errors. These are just a few of the top inventory challenges.

Here are the top five inventory challenges we hear regularly from warehouse operators – especially those relying on spreadsheets, outdated software, or homemade inventory management systems.

Top 5 Challenges in Managing Your Inventory

    1. Eliminating Mis-picks

    1. Reducing Oversells

    1. Turn “Out of Stock” into “In Stock”

    1. Maintaining an Excellent Warehouse Team

    1. Avoiding Lost Inventory


How to Overcome the Top 5 Challenges in Managing Your Inventory

You know the importance of inventory management and the impact it makes in your operation. Still, there are challenges and problems that you have to battle constantly. What if we could show you there are solutions?

Take a deep breath. Close your eyes. Think about how much easier your life could be if you could eliminate these 5 inventory challenges. It’s a nice dream, isn’t it?  It doesn’t have to be just a dream, however, there are ways to overcome these inventory challenges.

Eliminating Mis-picks in Your Warehouse

Mistakes in order picking are more costly than you might than at first glance. There’s the cost of the item and shipping costs if it somehow gets sent out. If it’s returned, you’ve got the handling cost and possible damage to the item. If it’s caught before shipping, there’s the time it takes to put it back into the inventory, grab the correct item, and record it all. There are also hidden costs, including unhappy customers and the potential for damage to your reputation.

Inventory management software, such as SkuVault, can help to reduce the frequency of mis-picks. Its error-prevention features remind workers to double check their picks. In addition, its smart-picking technology generates an efficient pick list, so workers spend less time picking overall.

Of course, mis-picks aren’t always the fault of outdated software. It helps to have motivated workers who genuinely care about picking correct products the first time. In this case, warehouse managers can benefit from SkuVault’s accountability features, which track who does what.

Reducing Oversells in Your Store

Oversells are a revenue killer. An oversell occurs when you’ve sold more products than what’s currently in inventory. This usually happens when inventory counts are inaccurate and you show that the warehouse has more products than it truly does.

It’s a double whammy when you’re in an oversell situation. You have customers that want to buy your products and you’re unable to fulfill them. In the best-case scenario, frustrated customers may find other items to buy. In the worst case, they may be tempted to go directly to your competitor and buy the product you don’t have on hand to sell. If they have a positive experience, you may lose future sales.

When you are overselling, you risk losing a sale or delaying product delivery, which can damage your relationship with your customer.

In today’s multi-platform, multichannel sales environment, you must have a solid system to track inventory and continuously update counts across every sales channel. Avoid inventory management software that doesn’t constantly update counts as sales occur.

A rigid process, aided by a robust inventory management system, can help reduce oversells by accurately tracking inventory levels. Cycle counts should be conducted regularly with higher frequency for the items that make up the bulk of your revenue.

Turn “Out of Stock” into “In Stock”

Your inventory management system should allow you to set restock levels, maintain enough safety stock, and automate ordering when the stock levels reach preset counts.

SkuVault’s replenishment report is a vital tool for avoiding out-of-stocks and oversells.

A good inventory management system knows when you’re getting low on a product and alerts you to take action. At the same time, it will help you avoid overstock. Setting reorder points helps you walk the thin line between having enough inventory to meet demand and tying up funds in unnecessary stock. It establishes the bottom line for how much product you want to have on your shelves at any one time. When stock levels hit this bottom line, it’s time to reorder.

At its most basic, the reorder point formula will show you the right time to order more inventory or material from your vendors or suppliers. This helps eliminate avoidable interruptions to your supply chain.

Your reorder point should include every item in your inventory, including kits and product combinations that you sell. If you manufacture or assemble products, it needs to track the raw materials you need to create products. If you use multiple vendors for items or materials, it must also track lead times across suppliers to make sure you have the pieces you need when you need them.

SkuVault can automate reorder points using Smart Reports. Schedule a demo with SkuVault to learn how.

Paying attention to any disruptions in your supply chain is also important. Most all eCommerce sellers experienced significant supply chain problems during the coronavirus (COVID-19) pandemic. Lead times for orders doubled or tripled in some cases as nearly 90% of businesses reported difficulty getting the goods they needed.

Dual sourcing has become more important than ever, but it can also add to the complexity of managing supply chains and ordering. SkuVault can track multiple suppliers and automatically populate the right vendor information into purchase orders.

Maintaining an Excellent Warehouse Team

If your warehouse is always a mess despite having a top-rated IMS, it’s time to reevaluate your warehouse team.

Some people adapt well to warehouse life. They love the day-to-day upkeep and have the know-how to run it efficiently. Thanks to a wide range of accountability features, software like SkuVault can help identify people who don’t love their jobs and might be better suited elsewhere.

Efficient systems can also keep workers motivated. By generating paperless picklist and recording inventory movement by scanning, teams can work more efficiently. Optimized pick routes can save time and wear and tear on team members by reducing travel time in the warehouse. Accurate inventory counts can ease frustrations when pickers are unable to locate needed items.

Reducing the stress and allowing team members to work efficiently can help retain top performers. That’s key in today’s labor market. Even with the COVID-19 leading to skyrocketing unemployment numbers, finding, training, and retaining warehouse workers remains a challenge. If you have the right team members on board already and you can keep them happy – and intact – you’ll be ahead of the game.

Avoiding Lost Inventory

There’s nothing worse than realizing you have inventory to fulfill orders, but you’re unable to locate it. It’s maddening for everyone involved. You’ve spent the money to buy the items, but you’re unable to sell them or even find them!

Think about it this way: Let’s say you lose a pallet with 100 items that cost you $50 apiece to buy and ship to your warehouse. Right away, you’re out $5,000. Add to that the average gross margin you make on selling these items. In this example, let’s assume your gross margin is 20%. That adds another $1,000 in revenue you’ve lost. Also, you’ll probably end up replacing that same inventory, so add another $5,000. We’re now up to $11,000 in inventory costs and lost revenue before you can even think about recovering any of the costs. Lost inventory is expensive.

You can avoid lost inventory by exercising proper planning. Warehouses should be plotted deliberately with a standard system with designated spaces for everything. Tracking all inventory with barcodes on items, pallets, shelves, and bins in a well-designed space can help minimize lost stock.

Use your space’s full capacity to optimize the layout. Appropriate use of warehouse space allows your staff to get jobs done faster and complete more jobs in a day. Not only do you allow employees to work smarter, but you also save on the overhead costs by not expanding unnecessarily.

In most warehouses, there’s a budget to account for a minimal level of lost or damaged stock. Poor planning or human error will inevitably lead to some loss or damage. However, abnormal costs – such as lost inventory – must be written off as a loss.

The right inventory management software and warehouse management system can help prevent lost inventory by providing accurate counts and managing locations. Inventory planning can be optimized for workflow to minimize travel time for pickers.

Common Questions about Inventory Challenges

Here are some of the common questions being asked about the importance of inventory management and how to deal with these inventory challenges.

How Do I Maintain Accurate Inventory?

Even with an inventory management system in place, it’s important to physically count inventory on a regular basis to make sure human error hasn’t snuck its way into your system.

Physically counting every item in your warehouse may be extremely difficult in a working environment. Most companies use cycle counts.

Instead of counting the entire inventory at one time, businesses count a number of items in the warehouse. Cycling counting is a statistical sampling technique. The counting of certain items is used as a reference for the rest of the warehouse. If your inventory is off in the cycle counts, you will likely find the same inaccuracies in other areas. Likewise, if the cycle counts show your inventory is accurate, you are more likely to have accurate counts throughout the warehouse.

Is There a Way to Connect Inventory Management Software with other Systems?

SkuVault’s inventory management system (IMS) integrates with all your favorite eCommerce solutions:

    • Marketplaces, such as Amazon, eBay, Etsy, Jet, Newegg, Rakuten, Reverb, and Walmart

    • Accounting, such as Quickbooks, Xero, or Zudello

    • Channel Management, including Channel Advisor, Channel Sales, Feedonomics, Geek Seller, Sell Brite, Seller Active, Sellware, Solid Commerce, SureDone, and Zentail

    • Shipping, such as Ready Cloud, Ship Rush, Ship Station, Ship Works, or Temando

    • Point of Sale, including Lightspeed, Retail Pro, Shopify POS, or Square

    • Customer Relationship Management (CRM), such as Salesforce, Cloud Conversion, or Oracle

    • Drop Shipping, such as Duoplane, Logic Broker, or Spark Shipping

    • Analytics, including Lokad or Anvizent

    • Electronic Data Interchange (EDI), such as Infocon, Logic Broker, or SPS Commerce

    • Enterprise Resource Planning (ERP), such as Oracle Netsuite or Microsoft Dynamics

    • eCommerce Platforms, such as 3D Cart, Big Commerce, Ecomitze, Magento, Mozu, Open Car, Shopify, Volusion, Woo Commerce, XCart, or Yahoo.

SkuVault allows complete visibility across all channels and systems by keeping everything in sync. This is critically important so you never have out-of-date listings or incorrect quantities.

Will SkuVault Work with Amazon FBA?

Absolutely. Easily see all of the quantities of your SKUs and the stages of your inventory throughout Amazon’s shipping and receiving process. Having this information at your fingertips allows the visibility needed for reorder points so you never have listings without quantities. The bottom line is the ability to see your Amazon quantities in your system enables you to plan your shipments more efficiently.

SkuVault utilizes an open API with Amazon’s Seller Central API to return the data customers need to make purchasing decisions. You won’t have to leave SkuVault and bounce back and forth between Amazon to replenish shipments. We send the information to Amazon for what users want to ship, and Amazon sends back the order and pick list information. Additionally, you can easily scan to verify the correct quantities are in each shipment for each individual FBA warehouse.

How Much Does Inventory Management Software Cost?

With everything SkuVault can do, you may be pleasantly surprised at how affordable it is – especially when you compare it to the cost of dealing with inventory challenges. You can check pricing options here.


Overcoming the top five challenges in inventory management is a process that’s always ongoing. Every warehouse operation should be constantly on the lookout for ways to improve productivity and efficiency. If you’re still doing things by hand, using spreadsheets, or have an outdated inventory management system, it’s going to be difficult to achieve significant gains.

At SkuVault, we are dedicated to making inventory management as easy as possible for you. We understand the need for an efficient inventory system. As a retailer, you need to focus your efforts on marketing, increasing sales, and growing your company.

In 2020, cloud-based systems to manage inventory, logistics, and warehouse operations are the top areas of investment for eCommerce retailers. More than 45% of eCommerce sellers and warehouse operators report plans to invest or upgrade their technology to remain competitive. If you’re among those looking to improve your operation and overcome inventory challenges, SkuVault is here to help.

Customers implementing SkuVault report 87% faster fulfillment, 90% fewer out of stocks, and 83% fewer mis-ships. Just imagine what that could do for your business and your bottom line. Contact SkuVault to schedule a demo today and let us show you how we can help grow your business.