• cost of poor inventory management

As a wholesaler and distributor, the inventory you sell flows through a vast network of businesses before getting to your warehouse and ultimately your customer.  The movement of inventory is a constant activity that requires input from multiple sources throughout the supply chain.  Once you receive inventory into your warehouse, the movement continues as you store, pick, pack and ship the product as part of your daily operations.  It is during these stages of movement that an error may occur which can delay the process of getting product to your customers, and ultimately result in returned items.  To address these issues and determine an optimal process for managing inventory, it is important to first understand why errors occur by evaluating some key metrics around the percentage of product returns.  Understanding the percentage of product that gets returned and then evaluating your processes for shipping product will help identify any internal issues with order management. Let’s explore further.

Product Returns (RMAs) 

If you have a high percentage of customer returns, it is important to identify why product is being returned. Common reasons include:

  • Defective or damaged product
  • The customer ordered too many items
  • The customer ordered the wrong item
  • The customer ordered the right item, but your company shipped the wrong item

Taking a closer look at each of the above scenarios will help you determine ways to improve processes and decrease the percentage of returns. Automation through the implementation of proper software will also help better manage orders and inventory. ERP software is designed to manage not only inventory and accounting but also order entry and processing, invoicing, contact management, warehouse management and more.  An all-in-one solution ensures you have access to data across all departments from within one database and in real-time.

Defective or Damaged Product: If the product shipped is defective or damaged, is that a result of something happening during the picking and packing process, or in-transit? If it is happening during the pick and pack process, identify whether there are certain products that are fragile and therefore need to be handled with more care.  Implement a process for tracking this information both at the shelf level and in your inventory management system so that notes appear on necessary paperwork and reports, such as pick slips and packing slips. Also consider re-arranging your warehouse in a way that puts fragile product somewhere that it won’t get damaged as easily. 

The Customer Ordered the Wrong Product: The order entry process is among one of the most important aspects of customer service. If the customer ordered the wrong product, is it because your order process is complicated?  It is important to make it as easy as possible for your customers to place orders with you.  If you have a team of employees in-house managing orders, it is important that your order management system is synced with all sales channels so that you know the true count of available inventory. An ERP solution will allow you to manage sales orders and inventory across a variety of different sales channels – including eCommerce, tradeshows, sales reps in the field, and phone and email orders. With ERP, inventory is automatically updated across every channel so you never have to worry about selling product you don’t actually have. Another option is to consider implementing an ERP solution with a fully-integrated online order portal so that your customers can place orders themselves. This gives your customers the power to view product with images online, and see past sales orders to help make sure they are choosing the right items. 

Your Company Shipped the Wrong Product: If your company shipped the wrong product, how can you ensure employees pick the right item in the future? Mobile picking applications allow employees to scan items while picking, to ensure that any mistakes are caught and dealt with at the source and as soon as possible. This acts as a secondary check against the pick slip – 1 check while picking product from the warehouse floor, and a second check when packing orders. Alternatively, you can choose to pack items while you pick using wireless barcode scanning to speed up the process. 

The Costs of Too Many Returns

It goes without saying that too many product returns will cost your business a lot of money – and it could also cost you customers. Without proper inventory management tools in place, your business is at risk of losing money from poor processes. If a customer is sent the wrong item, there are monetary costs to fix the error in terms of labor costs and shipping costs to receive the item back into your warehouse, find a replacement, and then ship that replacement back to the customer. There are also costs in terms of the time it takes to work with the customer, make an adjustment by issuing a credit, refund, correcting invoice etc., issue a new order and then pick, pack and ship the correct item. In addition, there are costs associated with potential lost sales if customers are not confident in your ability to ship the right product on time. 

As part of your inventory management processes, make sure you’re measuring data such as order entry and warehouse pick accuracy, as well as items delivered on time, shipped without damage and invoiced correctly. This will help you identify the most common issues related to product returns and make decisions to address them.

Inventory Management Software for Wholesale and Distribution