20 Most Common Inventory Management Challenges (& the Solution)

Here at CAI, we work with many small businesses to help them overcome their inventory challenges. Small businesses often do not have the necessary resources or manpower to fully allocate to inventory control. This can make managing inventory difficult.

Over the years, we’ve helped many companies utilize technology to gain better control of their inventory and supply chain processes. Before we start implementing a solution, we spend a lot of time with some of the employees at each business to learn the specific inventory challenges they’ve struggled with in order to figure out the best way to help them overcome these challenges.

Regardless of the industry the businesses are in, we notice many small businesses have some of the same struggles when it comes to inventory.

Here are the most common small business inventory challenges that we see companies typically struggle with.

20 Inventory Management Challenges

1. Knowing True Inventory Levels

Without an integrated inventory system, managing small business inventory can prove difficult. This is because inventory may be sold, purchased, or held without accurately updating inventory levels to reflect the transaction. Because inventory levels aren’t accurately reflected, a business’ employees won’t know how much inventory is truly available, causing confusion.

Inventory systems where maintaining true inventory levels become unreliable include:

• Memory
• Pen and paper
• Spreadsheets
• Separate, non-integrated systems for inventory/sales/purchasing

2. Having Too Many Spreadsheets

As mentioned above, the use of spreadsheets for inventory can be difficult to manage. This is because many versions of the same spreadsheet may exist, even among the same user. This causes discrepancies in the inventory levels, and spreadsheets can become disorganized very quickly. Many businesses use spreadsheets in order to keep track of inventory because of its availability and ease. However, this can become problematic as the business starts to grow.

3. Disconnected Workflow Processes

We’ve seen many small businesses not have clearly outlined workflow processes established. In some instances, this is due to the fact that they do not have the right resources to efficiently manage their workflow, thus affecting their inventory and supply chain optimization.

4. Having Accurate Inventory with Manufacturing Processes

For small business manufacturers, inventory can be especially hard to manage. Some of the manufacturers we’ve worked with struggled with keeping track of their inventory as their products went through the process of being manufactured or assembled. So not only do manufacturers keep track of individual components and goods, they also have to keep track of items that are in-progress, as well as finished goods.

5. No Lot Control

Having lot control is important for many businesses for a variety of reasons including:

• Government regulations
• Quality assurance
• Consumer satisfaction

Businesses in a variety of industries may use lot numbers to identify inventory. Even though it may be required by law, some businesses are unaware of the technology available to them to help keep track of lot numbers and inventory. 

6. Stockouts & Overstocking

Balancing inventory levels is a challenge for many small businesses. Without proper forecasting, businesses can run out of stock, leading to lost sales and unhappy customers. On the flip side, overstocking ties up capital and storage space, making operations less efficient.

7. Inefficient Order Management

Manually managing purchase orders can lead to errors, miscommunication with suppliers, and delayed restocking. Without an automated system, small businesses often struggle with ensuring orders are placed at the right time and in the correct quantities.

8. Poor Demand Forecasting

Many businesses struggle with predicting customer demand. Relying on guesswork or outdated data can lead to excessive inventory or frequent shortages. Seasonal fluctuations and market trends further complicate forecasting efforts.

9. Slow Inventory Turnover

Holding onto slow-moving inventory ties up capital and storage space. If businesses don’t monitor inventory turnover rates, they may end up with obsolete products that are difficult to sell, leading to financial losses.

10. Lack of Real-Time Inventory Tracking

Without real-time tracking, businesses rely on outdated inventory counts that may not reflect recent sales, returns, or restocking. This lack of visibility often results in inaccurate stock levels and misinformed purchasing decisions.

11. Difficulty Managing Multiple Locations

For businesses operating across multiple locations or warehouses, keeping inventory in sync can be a major challenge. Without a centralized inventory system, stock levels may be misrepresented, causing inefficiencies in transferring products where they’re needed most.

12. Inventory Shrinkage

Theft, miscounts, and supplier discrepancies can lead to inventory shrinkage. If businesses don’t have proper tracking measures in place, they may not even realize how much inventory is disappearing until it significantly impacts their bottom line.

13. Ineffective Returns Management

Handling returns can be complex, especially without a clear process in place. Returned items may not be properly inspected, restocked, or documented, leading to discrepancies in inventory records and potential losses.

14. Managing Perishable Inventory

Businesses dealing with perishable goods (such as food) must carefully track expiration dates. Without proper inventory rotation practices, businesses risk losses due to spoilage or expired products.

15. Supplier Reliability Issues

Unreliable suppliers can disrupt inventory flow, causing delays in restocking. If businesses don’t have backup suppliers or effective communication channels in place, they may struggle to keep inventory levels stable.

16. Lack of Barcoding

Relying on manual data entry for tracking inventory increases the risk of human error. Businesses without barcode scanning technology may find it difficult to maintain accurate stock records and efficient inventory movement.

17. Difficulty Handling Bulk Inventory

Businesses that purchase in bulk to save costs may struggle with storage limitations and tracking large quantities effectively. Without proper inventory systems, keeping up with bulk orders can become overwhelming.

18. Complicated Kitting & Assembly

For businesses that sell bundled products or kits, tracking inventory at both the component and final product level can be complex. Mismanagement in this area can lead to missing parts, delays, or overproduction.

19. Lack of Standardized Inventory Procedures

Without consistent inventory procedures, employees may follow different methods for counting, storing, and updating inventory. This lack of standardization often leads to errors and inefficiencies in inventory management.

20. Struggles with Compliance & Reporting

Certain industries require strict inventory tracking for regulatory compliance. Without the right system in place, businesses may struggle to generate accurate reports, track lot numbers, or meet compliance standards, leading to potential fines or legal issues.

The Solution to Inventory Management Challenges: Acctivate

Small business inventory doesn’t have to be difficult. With the right technology such as Acctivate, small businesses can find success with managing and controlling their inventory. Regardless of the inventory challenges your company is struggling with, the right technology exists to achieve success with inventory. 

It’s extremely rewarding for us to help small businesses get a better grasp of their inventory by implementing Acctivate. It’s truly astonishing to see the growth in capabilities and improvement in workflow for these companies from when we first meet them to when they are done implementing Acctivate as their inventory system. And we look forward to helping your business with its inventory, too.

Learn more about Acctivate or contact CAI Software today!