Like it or not, people make mistakes. Until we are able to shift the entire inventory management process to machines, the human element will remain to some degree, which means there will always be room for some type of error. As with anything else, some inventory mistakes are more costly and impactful than others. Understanding how these types of errors can affect your business’ bottom line is the first step toward preparing ahead to mitigate potential damages.
First, let’s examine the various elements that can lead to mistakes in the inventory management process. There are a number of factors that could contribute, but generally speaking, the ones that are universally responsible include:
Environment – If the workplace is particularly chaotic, noisy or fraught with distractions, it can lead to greater risk of employee error. This is especially true for inventory management tasks that require a good deal of concentration, such as conducting cycle counts.
Lack of Staff – Are you employing enough people to handle the amount of inventory being managed? If not, your overworked team may be more likely to commit blunders due to too many hours, not enough support and perhaps even lower morale.
Fatigue – Tired employees will almost always make more errors than those who are well rested. Make sure your company has adequate policies on things like overtime and time off so that your inventory team is able to get the rest they need to perform at their very best.
Multitasking – Being pulled in too many directions can also lead to increased chance of error. If you’re expecting too much from those who are tasked with inventory management, even if they’re willing participants, chances are you’re going to end up dealing with mistakes, miscalculations and more.
Stress – Emotions can also play a key role in the quality and accuracy of one’s work. Maybe your employee had an argument with his or her spouse prior to arriving at work, or recently got off the phone with a particularly disgruntled customer. Be sensitive to these things and allow adequate time away to regroup, recharge and de-stress.
Some of these things you can control, others are more challenging and some may be completely out of your hands. One thing you can do is train leadership to be able to better manage things like staffing, scheduling and the emotional wellbeing of their employees. You can also make sure your team is supplied with the tools and technology they need to do their jobs best, such as inventory management software.
So, just how much could an inventory error cost your company? Well, just ask banking giant JP Morgan. A few years ago, their Chief Investment Officer was tasked with putting together a report that involved their credit portfolio inventory. Instead of using a program designed for such a task, the employee created multiple spreadsheets between which data was shared and transferred. Unfortunately, thanks to one erroneous equation, the company lost several billion dollars.
Obviously this loss is on a much larger scale than what might occur in a smaller business or when handling inventory that isn’t financially related, but the example still serves as a warning for how risky and dangerous human errors can be to a company’s bottom line.
Are you confident your inventory management strategy is up to par? Could you use some professional guidance to prevent your company from ending up on the wrong end of a costly inventory mistake? Contact us today and let’s discuss how we can help!