Family / Partnership Issues in Business
August 4, 2020

Issues In Inventory Management With SMEs

What are the issues with Inventory Management in SME’s ?

• Inventory not reconciled with books   

• Different software for accounting & inventory               

• No period physical verification

• No system of recording of Work-in-Progress

• No ERP or ERP not implemented effectively    

• Unplanned procurement and production

Why Inventory Management & Control is most critical for SME’s ?

Real profitability is always unknown

Product costing is always assumption based – without actual data of yield & scrap

blockage of working capital – Inefficiency leads storage / interest / cash flow impact

Who is responsible for poor Inventory Management in SME’s ?

MANAGEMENT is responsible – Since Inventory controller / process owner: not define

• Business Development team is responsible for inaccurate forecasting & production planning

• Purchase team is responsible for unplanned/ excess purchasing

When does problem starts and becomes critical ?

• In the initial stage the inventory is closely controlled by the promoters

• In growth phase – stock level starts multiplying, various departments start evolving and responsibilities are delegated to different people – Inefficiency and control issues crop up

Where are the control gaps ?

• Re-order levels, base stocks not defined             

• Lack of maker checker system – SOD’s             

• ERP’s implemented with no process studies       

• UoM for Inputs & Outputs are different

• BOM (material & Processes) not defined

• Slow/ Non-moving items – no ageing process

Stay tuned for How to Improve inventory management

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