Here is the example of inefficient inventory result to loss in profit and customers.
Afraid of being caught short, it's easy to spend too much on inventory, which can eat up working capital and erode profits. Warehousing isn't free, of course, and inventory that sits on a shelf is subject to damage, depreciation, and even obsolescence. Old inventory can be very hard to move. Your options aren't great, says Paul Huppertz, a logistics expert with The Progress Group, a supply chain consulting company based in Atlanta. "You may end up marking it down, selling to discounters, or shipping it to overseas liquidators."
Once you know how much you need, you have to make sure you actually have it on hand. Opportunities for miscounts are everywhere: during receiving, during order fulfillment and the all-too-common pilferage. In manufacturing, says Huppertz, you've also got to account for yield or scrap during production.
It can take an outsized amount of time and resources to keep track of all the details for each inventory item. Some triage is in order.
It may seem natural to use spreadsheets such as Microsoft Excel or Lotus 123 to track your inventory. But Sid Helms, director of IT at Martinsville, Va.-based Diversified Distribution, which provides third-party logistics services, says you're asking for trouble if you use spreadsheets that way. He says it's easy for spreadsheets to be accidentally deleted or for changes to be lost. And he says there's no foolproof way for multiple people working on inventory to synchronize their spreadsheets.
Congratulations! You're happily bar-coding away, and you've got your inventory in Quickbooks or Peachtree. Now what happens if there's a fire or your computer is badly damaged or stolen?
Inventory is the lifeblood of the supply chain. It’s what flows from node to node. And at each node it’s critical to figure out that perfect balance of supply and demand, or else suffer dire consequences.Properly managed inventory not only increase the efficency of supply chain, and create competitive advantage for the company, it also raise the confidence of customers towards the company as efficient and trustworthy partner.