From a 3PL’s perspective, one of the most common struggles we see small to medium-sized enterprises (SMEs) grapple with is inventory management. While increased sales bring exhilaration, they also come with the complexities of managing burgeoning inventory requirements and customer expectations. This article delves into the unique inventory challenges faced by SMEs and offers solutions to help them flourish.
What Is A Small To Medium-Sized Enterprise (SME)?
An SME is an organization with fewer than 250 employees and annual revenues of less than $1 billion. Because of their size and revenue, these organizations encounter many of the same inventory management challenges, including lack of warehouse space, flexibility in warehousing operations, and automation-driven efficiencies—all things that typically aren’t a worry for larger businesses.
What Is Inventory Management?
Inventory management is a critical component of the supply chain and encompasses the oversight of the ordering, storage, and utilization of parts, materials, and finished products within an organization. For a 3PL, this is not just about managing the inventory; it’s about optimizing it. We ensure that stock levels are maintained to meet customer demands without tying up excessive capital or storage space.
Inventory Management Challenges SMEs Face
As SMEs continue to evolve and grow, the complexities of managing their inventory follow suit. This growth, while being an indicator of business success, also brings along unique challenges that, if not addressed in time, can hinder further expansion and overall operational efficiency.
The Dilemma Of Warehouse Space
Challenges With Limited Capacity
SMEs often start with modest warehousing facilities, and as their product range and customer base grow, these facilities can quickly become inadequate. This inadequacy is not solely about running out of physical space; it also encompasses the challenges of efficiently locating products, managing stock rotations, and preventing product damages.
Understanding Cost Implications
Moving to a larger facility or opening an additional warehouse might seem like the logical next step for growing SMEs. However, the financial implications can be overwhelming. Apart from the obvious costs of rent and utilities, there are also transition costs, potential downtime, the necessity of training staff for the new facility, and possible longer lead times during the changeover.
The Need For Adaptive Warehousing Operations
Addressing Geographical Limitations
Relying on a single warehouse can geographically limit an SME’s reach. As they spread their wings to cater to a broader customer base, longer shipping times and higher shipping costs can present challenges, especially if the existing warehouse isn’t centrally located.
Strategies for Adapting to Market Changes
Consumer behavior is dynamic. An SME might discover that a previously popular product in one region is now in demand elsewhere. Without the ability to adjust warehousing operations to such shifts, they risk missing out on these fresh market opportunities.
Automation-Driven Efficiencies
Tackling Manual Errors
Even the most diligent teams can make mistakes in manual processes. Issues such as misplaced products, incorrect stock counts, or shipping mishaps can result in customer dissatisfaction, increased return rates, and potential revenue losses.
Addressing Scalability Concerns
While manual systems might suffice when handling a smaller volume of orders, as an SME grows, these systems can become bottlenecks. Delays in manually processing a larger volume of orders can lead to delivery lags and missed sales opportunities.
Embracing Real-Time Insights
Relying on manual or outdated systems often means that business decisions are made without up-to-the-minute data. This lack of real-time information can cause stockouts, overstocking, and a delayed response to market fluctuations.
How Can SMEs Overcome Inventory Management Challenges?
The simplest, most cost-effective way for SMEs to overcome inventory management challenges is to partner with a third-party logistics company (3PL), such as Customized Distribution Services (CDS). A 3PL is a partner that manages your logistics for you so you don’t have to. They are dedicated to uncovering and implementing efficiencies to streamline your supply chain. A best-in-class 3PL can offer SMEs distribution centers all over the U.S., scalable technology that’s customized to your business, and a team of logistics experts dedicated to helping you succeed.
1) Have a Multi-Location Warehouse Strategy
Customers have come to expect fast shipping. To stay competitive, it’s crucial to have a multi-location warehouse strategy in place. As an SME, this likely means partnering with a 3PL so you can gain access to multiple distribution centers without having to take on the financial burden yourself. CDS distribution center locations have been chosen based on highway access and major market proximity to optimize your product storage and shipment. Knowing you have the ability to quickly ship your products anywhere in the U.S. grants you the freedom to grow in the markets that will have the biggest impact on your business.
2) Incorporate Automation Into Operations
Warehouse automation technology has come a long way, and you’re passing up cost-saving opportunities if you aren’t incorporating it into your operations. Autonomous mobile robots can maneuver through warehouses and assist employees in fulfilling orders. In addition, drones can be used to take inventory, traditionally a tedious, manual task. Not only do these automation technologies increase your productivity, but they can also help when labor shortages are a concern. While not meant to fully replace employees, they can help fill the inevitable gaps . If you’re constrained by time or resources to integrate warehouse automation technologies directly, partnering with a top-tier 3PL that already utilizes them can ensure you benefit from enhanced productivity, streamlined inventory management, and timely order delivery, fostering a mutually advantageous collaboration.These technologies scale their productivity which in turn scales your inventory and order delivery, providing a mutually beneficial partnership.
3) Prioritize Technology
3PL technology solutions can have a remarkable impact on SMEs. It’s important to note that implementing such technology is a crucial first step, but making it a priority and knowing how to best utilize it will be key to your business’ success.
A warehouse management system (WMS) tracks your inventory from receiving to storage to shipment. It provides a central location for inventory management and data and at CDS, it includes:
- Product labeling
- Order allocation
- E-commerce integrations
- Hardware automation
- Labor management
- Standard and customized reports
Possibly one of the most highly valued services we offer clients is our customized Warehouse Management System (WMS) primarily for its real-time inventory visibility feature.
This snapshot gives our customers access to their inventory levels at any time. It tracks items as they’re scanned into inventory, identifies where they’re placed in the warehouse, and notes when they’re shipped out. As an SME who is used to manually managing these processes on their own, this is a huge benefit to using a WMS.
Standard and customized reports give SMEs valuable insight that customers aren’t used to having at their fingertips. For example, Customized Distribution Services offers a report that lets customers know if a product has been sitting in a warehouse for a certain number of days without movement. Bringing this to their attention allows the customer to make a data-driven decision about how to move forward with the product.
In addition, monthly reports and scorecards keep both CDS and its customers abreast of the key performance indicators that determine success, including order accuracy, truckload time, fill rates, carryover, and other metrics. A reputable 3PL will be committed to investing in the latest inventory management technology and keeping you informed about how you can use it to optimize your logistics operation.
Why CDS?
Growing SMEs should be focusing on just that—growing. And business leaders can’t do that if they’re spending their time worrying about inventory management. That’s where CDS comes in. We’re a trusted 3PL that believes in transparency and accountability. We hold ourselves accountable and have our customers’ best interests in mind at all times. Our customers have access to the key employees at CDS and we’re committed to building relationships with them. If you’re ready to start a meaningful 3PL relationship, contact us today.