The Failure of Lack of Inventory Management and Storage Solutions

Many retailers around the world have warned us about the problem of poor inventory storage and management. One of the reasons directly impacts the finances, operations and apparatus of the business.

Currently, under the strong development of e-commerce along with the unstable situation in some regions of the world, large businesses have been focusing on stable storage and control of goods. for a long time.

It can be said that we need more “Case Studies” of large corporations that failed when they could not control inventory and warehouse storage. This will help SMEs or small business owners accumulate more experience.

Besides, finding a quality warehouse system in the current context is not too easy. However, as a business providing logistics services in more than 50 countries and territories, Mega A will bring you the most practical solution. Continue to follow!

1. Effects of Inefficiencies in Inventory Management

If problems arise in the process of managing inventory and storing goods, businesses will face many consequences. Here are some examples of poor inventory management:

1.1 Businesses Use Outdated Goods Tracking Methods

Manual inventory tracking becomes time-consuming and error-prone. A business will always be one step behind its actual inventory levels, which will cause ordering problems.

Excel spreadsheets/electronic software are also susceptible to serious errors. According to a study of errors in 25 sample worksheets, the Tuck School of Business at Dartmouth College found that 15 workbooks contained 117 errors.

According to researchers’ estimates, 40% of errors had little impact on the businesses studied, but there were still 7 errors that caused major losses ranging from 4 million to 110 million USD.

1.2 The amount of inventory exceeds the prescribed level

Reports show that most businesses have 20-40% of their working capital tied up in inventory. If there is a larger quantity of product than demand, the business will not be able to fulfill orders optimally.

Large inventory levels not only create more headaches for management, they can also cut into profits and make it difficult to manage inventory levels.

1.3 Inadequate Reporting, Data Entry and Inventory Forecasting

When companies do not use or do not have access to accurate information such as sales trends, best-selling products, customer behavior… –

they will fall into the trap of ordering too much inventory. When this happens, companies run into the problem of having too many finished products, ordering too few finished products, experiencing shortages, and losing customers.

With accurate real-time reporting accessible 24/7, companies can predict future customer behavior and place orders accordingly to meet buyer needs without going over budget. their.

2. 4 Examples of Poor Inventory Management

In the world, many businesses have encountered many mistakes in the process of calculating inventory storage methods and importing input materials.

The following examples are more than just lessons learned

2.1 Nike’s Inventory Problem

Nike is probably one of the most famous sports brands in the world and there is no doubt that the amount of goods they stock and supply globally is no small amount.

This means that if Nike’s supply chain management department does not ensure the process is secure, they will encounter problems related to Transportation & Supply Chain Management.

However, the year 2000 is also considered a turning point in Nike’s supply chain and merchandise management system, when they applied inventory management software and moved to a large warehouse. 2 times more than the old area.

This was done because Nike went through a crisis where it lost nearly $100 million in revenue related to tracking and storage issues.

The Nike case shows the importance of accurately managing inventory and an inventory management system.

When choosing an inventory management solution, it is important to ensure the quality of the vendor’s software is accurate, flexible and customized for the specific business, meaning it has the ability to grow and change. change as your business and customer base change.

Around 2016, Nike also encountered some difficulties with inventory. This is the period when profit margins show signs of decline because of higher discount sales rates as well as logistics management issues that are not systematized properly.

Immediately after that, Nike began to technologize its entire warehouse system around the world. All technology is upgraded and almost turns a new page.

Artificial intelligence, machine learning, CRM, warehouse and storage management software, current QR Code system,… All together create a micro-tech revolution of the leading sports brand world.

2.2 Best Buy Faces the “Nightmare” of Christmas Eve

In December 2011 – right in the middle of the holiday season – Best Buy issued a statement:

“Due to the overwhelming demand for attractive products on BestBuy.com during the November and December period, we encountered a situation that affected the redemption of some of our customers’ online orders. row.

We are very sorry for the inconvenience this has caused and we have notified affected customers.”

Customers were furious at Best Buy’s decision to cancel orders instead of delaying deliveries, most likely because the company was out of stock.

It is known that Best Buy sold many recalled items on Black Friday. Essentially, the retailer casts a wide net, collecting as many orders as possible, even though it may have realized that it won’t be able to fulfill them all.

The case of Best Buy shows that buying online as an alternative to buying in-store still poses risks.

Consumers do not know for sure whether they will be able to receive their products, especially during peak periods. It’s not hard to imagine that Best Buy may have lost many customers to Amazon after that 2011 debacle.

2.3 Supply chain disruptions severely affected 900 KFC branches in the UK

In February 2018, Kentucky Fried Chicken (KFC) was forced to close many of its 900 branches in the UK due to supply chain disruptions.

In a press release, the fast food giant said: “We partnered with a new supplier, but they encountered some problems from the start – delivering fresh chicken to 900 homes. shopping around the country is quite complicated!”.

Just because of a change in delivery partner, around 750 KFC stores across the UK have faced delays in receiving fresh chicken daily, meaning their restaurants are unable to deliver fried chicken to customers. store and eventually had to close. At that time, many people thought that the giant could lose up to 1 million pounds a day.

Another problem is that their supplier only has one distribution point instead of many. It is believed that KFC could have cooperated with more suppliers to avoid the burden on the supply chain.

2.4 Target’s failed expansion into Canada

Target is a beloved brand in America, so it’s only natural that the brand would be well-received when it expanded north to Canada. However, when it arrived in Canada, Target needed a way to track inventory and chose to work with a completely new, never-before-tested system.

In 2013, the company had difficulty moving products from its major distribution centers to store shelves, leaving Target stores short of stock. It didn’t take long for Target to figure out the underlying cause of the problem: Data in the company’s supply chain software, which manages the movement of inventory, was riddled with errors; The payment system malfunctioned and did not process transactions properly. Worse still, the sales and inventory management technology was new to the organization and no one seemed to fully understand how it worked.

In addition to technology issues, Target’s ordering and inventory problems are also very complicated. Items are delayed with long delivery times from overseas, products don’t fit into shipping boxes as expected, tax codes are missing or incomplete… Or finished goods are shipped to a hub. distribution center but cannot fulfill orders for shipping to stores. Other items could not fit on the store shelves… What seemed like isolated fires quickly became a raging inferno that threatened the company’s supply chain.

Target’s distribution centers are overflowing with products and inventory. Target Canada ordered more goods than they could sell. The company purchased a complex forecasting and replenishment system that proved unprofitable from the start, requiring years of historical data to produce meaningful sales forecasts. When preparing to open a store, they relied solely on subjective predictions made at their US headquarters.

About two years after its launch, Target Canada applied for a debt rescheduling, marking the end of its first international foray and one of the most troubling crises in Canadian corporate history. This incident cost the parent company billions of dollars, affected the company’s reputation and caused about 17,600 employees to lose their jobs.

3. Lessons and Solutions Learned from Warehouse Problems of Big Brands

Through the examples of the above brands, we can see the importance of storage and goods management systems throughout the supply chain operation process.

In particular, in the context of the booming e-commerce industry and the rapidly increasing trend of online shopping, this has brought considerable pressure to e-commerce businesses, SMEs or small businesses. The business has been doing business online.

Let’s look at Best Buy’s lesson in controlling order volume during peak times.

Businesses must ensure all elements from the warehouse system, management software, inventory quantity and operating staff.

Every part of the supply chain needs to coordinate, from obtaining raw materials to distributing finished products.

In particular, technology is an indispensable part of the modern Transportation and Supply Chain Management service industry. All data information needs to be optimized and fully updated on the server so that managers can control, evaluate and give reasonable direction.

In addition, business owners need to prepare for themselves a standard warehouse system with a large enough area as well as ensuring full ISO standards so that the process of storing and importing goods is convenient.

Mega A Logistics Company is here to help you solve that problem:

• The warehouse system has gone through the inspection process and meets ISO standards
• All warehouses are fully equipped with fire protection equipment, ventilation systems with high ceilings, large storage areas and are allocated appropriately to the number of businesses.
• Mega A Logistics’s warehouse ensures full electricity, water, and lighting systems with the best capacity
• Warehouse system of 10,000m2 in Hanoi and Ho Chi Minh City
• LESS THAN 1% of Revenue you can experience our hosting services
• In the process of developing a bonded warehouse, creating favorable conditions for cross-border logistics export and import.
• Diversify services – Cost savings – Easy payment.

Please continue to follow and accompany Mega A Logistics in the upcoming journeys!The Failure of Lack of Inventory Management and Storage Solutions

Currently, under the strong development of e-commerce along with the unstable situation in some regions of the world, large businesses have been focusing on stable storage and control of goods for a long time.