Inventory management problems

1. Difficulties in inventory
management

2. Major problems
• Warehouses overflowing with inventories no more
needed leads to consumption of space, and loss of
capital.
• Not having inventory of right products at right place
and at right time leads to dissatisfaction of demand.
• There is over-dependency on mathematical ways to
deal with inventories, which often leads to losses and
decisions are quite convoluted.
• Misunderstanding of mathematical models leads to
wrong decisions or lesser accurate decisions.

3. Errors in forecast
• Unprecedented events and other factors lead to
error in demand of goods for inventory.
• Thus, more goods and less demand leads to waste of
inventory and loss of capital.
• However, less goods and more demand lead to
customer dissatisfaction and causes loss of growth
opportunity.
• Thus, inaccurate forecast is an important factor
contributing towards difficulty in inventory
management.

4. Demand fluctuation
• Product life cycle is less and demand is always
varying.
• Thus, it leads to dilemma of having inventory of
goods and errors in the decision lead to stalling the
growth.

5. Magnitude of orders
• Production department often has to deal and decide
between large orders with less frequency and small
orders with high frequency.
• Large orders bring high profits but due to irregularity
in time of getting such order, they conflict with
existing schedules of machines and workers along
with the stock of raw materials and their
replenishment time.

6. Magnitude of orders
• Small orders bring less profit but consistent business
helps to push their orders in pipeline, which impacts
delivering sudden requirement of bulk demand.
• The two opposite nature of orders impacts costs,
EOQs, and time re-order and volume re-order, due to
which overall supply chain faces the implications.
• Often, companies handling both scenarios deals with
double edge swords with margin of error being very
low.

7. Thank you