January 22, 2023
min read
Written by: 
Nikolaus Hilgenfeldt
Online Retail

8 Inventory Management Mistakes & Tips To Avoid Them

Did you know that only 43% of small businesses track and manage their inventory properly? Still, a sound inventory management system is key to a business's success. 

When used correctly, it gives you accurate information about your product needs, requirements, and possessions. 

Still, many businesses are having real problems with it, wasting their potential, and leading their businesses to huge losses.

But don’t worry.

Keep reading to learn about some common inventory management mistakes and how to avoid them.

Let's start!

Why Is Effective Inventory Management So Important?

Everything in your company is affected by inventory management, from business expenditures to on-time order fulfillment. 

Because of this, you should use a system that makes inventory management more straightforward and effective.

These are strong reasons to strengthen this part of your business activities:

1. It can reduce the overall costs of running a business.

2. The profit can increase.

3. Helps you have better stock availability.

4. Enables you to process orders faster and smoother.

5. It can lead to more satisfied customers and improve customer service.

6. It will lead to the more clever use of storage space.


 8 Inventory Management Mistakes & Tips To Avoid Them

We all make errors – it's just part of being human. But, in truth, failures teach us valuable lessons because they allow us to learn from the past and apply it to the present.

So, let's see what the most common inventory management mistakes are and what we can learn from them.

1. Unorganized Product Catalog

For years, spreadsheets were widely recognized as the best way to manage inventories. They were dependable, adjustable, and easy to use. Nowadays, inventory management software has generally surpassed them. 

But having software without the correct input won't change things considerably.

Think about the following criteria:

  • Product tree with product type, category, and family
  • Reference Number
  • Product Name/Title
  • Product Status (new or discounted)
  • Purchase Price
  • Supplier Lead Time
  • Minimum Order Quantity 
  • Catalog Selling Price
  • Actual Selling Price
  • Margin
  • Product End Date
  • Sales History by Quantity and Value (1 Year, 1 Month, 1 Week)
  • Current Stock by Quantity and Value
  • Average Stock Coverage
  • Product End-of-Life Date
  • Future Sales Forecasts
  • Average Stock History
  • Reference Product (Older, Similar Product)
  • Product Photo
  • Minimum Order Quantity (MOQ)
  • Current stock in quantity and value
  • Average stock coverage
  • End of life date of the product
  • Average past stock

Although it may seem a lot to track, keeping your database in order will ensure that you always know your best-selling items or what should go into sale.

2. Not Properly Measuring Supply Chain Metrics

If you want your business to evolve, performance measurement is a step you should pay attention to. 

For example, how would you know whether your inventory management process is improving or degrading until it becomes glaringly evident? 

Well, you need to create a constant baseline of progress.

You should implement a minimum of two supply chain KPIs:

  • Customer Availability Rate
  • Stock Life Expectancy

Add a few more, such as inventory turnover and on-time delivery, if you work with large orders. 

Ensuring enough product availability for customers and minimizing carrying costs are two of inventory management's most crucial objectives.

Keep an eye on and track supplier information, such as incorrect shipments, faulty or damaged goods, and missed delivery dates. 

To reduce complexity and streamline logistics, assess the performance of your suppliers to identify and fix supply chain issues.

3. Not Accurately Gauging Products In Demand 

Inaccurate forecasting will decrease customer satisfaction by making it more difficult to meet their needs. 

You can make proactive plans and find out what products are in stock and what demand is by keeping an eye on your inventory. 

Through forecasting, it can determine what products consumers want and which products are less well-liked. 

Knowing what's not selling can help you avoid spending money on producing items you don't need and having excessive inventory. 

4. Failing To Plan For Future Needs 

The implementation order, also known as a "new product order," is the initial order you make with your supplier for a new product. 

It typically accounts for 30–40% of the annual supply, but it can reach 80% or even 100% for limited editions. 

But this amount of implantation estimate is far too frequently overlooked.

A practical implementation order lies on the:

  • Sales figures for comparable models
  • Supplier delay
  • Minimum quantity for orders (MOQ)
  • In addition to supplier delay, stock coverage
  • A win/loss risk percentage based on stock price and margin

5. Inventory Being Overstocked or Understocked 

One of the most important things in inventory management is to have enough of the product in stock – but the right kind.

Let's say you sell women's shoes. Your first thought may be to order the same quantity of each size in every color available to stock up for winter.

But, in reality, the most common women's shoe sizes are 38 and 39, which means that you will quickly run out of stock for those articles. 

And consequently, have a large inventory of 36 and 42 shoes that will probably go on sale or end as a deadstock.

You must be completely aware of the colors, sizes, styles, etc., that sell quickly.

To avoid these inventory management mistakes, conduct an ABC analysis at the most basic level.

Determine which references are risky and profitable by using the margin level. And use that data to determine how you cover stocks.

5.1. Overstock Inventory Management Mistakes

In addition to needing to be more efficient and taking up valuable shelf space, excess stock ties up money. It prevents you from investing it back into your company. 

One of the most common inventory management mistakes is ordering too much, especially if you buy bulk from vendors.

5.2. Understocking Inventory Management Mistakes 

Order fulfillment issues will hurt sales as well as consumer loyalty and trust. Therefore, businesses should match inventory levels to demand effectively with accurate forecasting. You may define safe levels for each of your stock products using the majority of inventory management software. 

These acceptable levels will guarantee that reordering software apps inform your company when and how many items it needs to reorder to meet demand.

Back-ordering tools will also enable your business to allocate stock to back-ordered items as soon as goods are received from your suppliers. As a result, your business may easily see its backorder needs with a straightforward backorder system, and it can issue speedy purchase orders to meet demand precisely. 

Therefore, existing stock is reassigned to more urgent requests, and you maintain the ideal stock level.

What can you do to fix these inventory management mistakes regarding overstocking/understocking issues?

For example, Myos offers an effective solution for keeping your inventory balanced. 

In this case, you can use your current stock of products that sell slowly (shoe sizes 36 and 42) and use them to get new growth capital quickly.

Then, you can further use this capital to buy products in demand or other products according to your needs.

6. Irregular Inventory Check-Ups

Inventory checks and stock takes are complex tasks, and not doing them regularly is one of the biggest inventory management mistakes you can make. Instead of having yearly inventory checkups, you can make the difference by spending a few hours setting up a few misplaced stock items biweekly.

Uncoordinated inventory counts result in inaccurate order fulfillment, a lack of knowledge about stock availability, and poor stock availability. 

Instead, use an inventory system with barcode scanning capabilities to save time and money. In this manner, digital inventory counts can be completed more quickly.

Perpetual inventory (PI) and routine stock checks are the secret to successful inventory management.

PI keeps track of changes in real-time without needing physical inventory inspections.

In contrast to how frequently they are used, PI systems will flag up fast-moving stock locations for counting depending on when products were most recently tallied. 

Also, it is a good idea to do preventive checkups. In addition, implement stock control systems to manage problematic inventory, such as perishable goods, delicate machinery, or outdated supplies.

If the manufacturer specifies it, do routine preventative maintenance on the machinery and equipment stock kept in storage. 

To track shelf life and reduce waste, catalog data on issue stock location, cost, and the amount available.

This method is adequate, primarily if you sell your products using multiple platforms.

7. Having Multiple Storage Locations

The more storage places you employ for the same product, such as reserves, stores, and warehouses, the greater your inventory will be.

In addition to shelf stock, having stock reserves can boost your overall inventory.

It occurs due to the following:

  • The total stock is not shown.
  • Incorrect stock distribution at times of scarcity
  • Storage units are typically made up of multiple pieces, automatically increasing stock coverage at every storage spot.
  • Due to the difficulty of handling inventory across numerous storage locations, there is a greater potential for error.

To avoid these inventory management mistakes, centralize your stock as much as possible, especially stock that moves slowly.  

For example, suppose you have products with extremely long lead times, unpredictable sales volumes, or high transit costs (big, bulky, or heavy items). 

In that case, you can keep them at different locations. 

8. Unorganized Storage Site

Inventory errors can be significantly reduced in a clean, well-organized warehouse. 

Items are more likely to become lost or misplaced if arranged unsystematically throughout your warehouse.

Here are some pointers for maintaining order in your warehouse:

  • Check your warehouse frequently to ensure everything is operating at its best.
  • You should place the best-selling items near the shipping area. 
  • Conduct periodic inventories over the year to identify minor issues before they become more prominent.

Also, to minimize the possibility of errors, label every product.

You should put name and location info on every label, so in case your product gets misplaced, you will know exactly where to put it.

Automate order picking, packaging, and shipping procedures, and categorize inventory storage down to the shelf, bin, and compartment levels.

To address warehouse inefficiencies, track and report warehouse performance indicators like inventory turnover, customer satisfaction, and order processing time.


Suppose you hope to make the most of your inventory management strategy. In that case, the most sensible approach is constructing a cyclical, self-enhancing system.

However, even the most experienced inventory organizers cannot build a system from the ground up that can reach maximum productivity and maintain it permanently.

Get inventory financing with Myos

Now that you know how to overcome the most common inventory management mistakes, why not elevate your business to a higher level?

Myos is a trusted partner that supports businesses that want to grow. And our inventory financing is a great way to ensure you meet the high demand for products and keep customers close to you.

You can increase the orders, launch new products, and ramp up your marketing initiatives to increase sales and profits.

These features make us stand out from the rest:

  • You won't be asked to sign a guarantee and won't be in danger of losing money. The loan is secured by the goods you're financing.
  • You have total control over deciding when and how you make repayments, whether through selling the financed items or other ways of getting funds.
  • We take a lower risk since if the financing isn't repaid, the collateralized goods are sold to pay off the debt.
  • Your supplier won't be involved, and your company's confidential details are kept hidden from us.

What does Myos offer?

  • Evaluation of your products using AI.
  • Purchase, stock, and cross-finance as types of funding options.
  • Loan range £10,000-£2,500,000
  • An easy 3-step application process.
  • Fast financing (24h-72h).

Are you curious to find out more?

Sign up to Myos, send a free quote today, and set your business apart from the competition.

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