Inventory Health — Common Mistakes and How to Avoid Them

When people talk about problems with Inventory Health, several recurring mistakes show up across businesses of all sizes. Understanding these pitfalls is a friendly and practical way for beginners to avoid wasting time and money. Below are common mistakes, why they hurt Inventory Health, and straightforward fixes you can apply.

Mistake 1: Over-reliance on spreadsheets and manual processes

Why it happens: Small teams often start with spreadsheets because they’re cheap and familiar. Over time, spreadsheets become sprawling, error-prone foundations for critical decisions.

Impact: Data errors, missed reorder alerts, duplicate SKUs, and slow reaction times degrade Inventory Health.

How to avoid: Use structured inventory management tools or cloud spreadsheets with strict version control and validation rules. Move toward a basic inventory system that supports real-time stock levels and simple alerts.

Mistake 2: Ignoring slow-moving and obsolete stock

Why it happens: It’s easier to ignore unsold items than decide what to do with them. Businesses may hope slow SKUs will recover.

Impact: Obsolete stock ties up cash and consumes warehouse space, increasing carrying costs.

How to avoid: Set a clear policy (e.g., items with no sales in 12 months) and create a playbook: discount, bundle, return to supplier, donate, or scrap. Regularly review and act on it.

Mistake 3: No segmentation — treating all SKUs the same

Why it happens: Simplicity can feel fair, so teams apply one rule for every item.

Impact: High-value fast movers can be under-protected, while low-value items get excessive attention, leading to stockouts or excess inventory.

How to avoid: Implement ABC/XYZ segmentation so you can prioritize processes (e.g., tighter controls for A items, simpler rules for C items).

Mistake 4: Poor forecasting and failing to account for seasonality

Why it happens: Forecasting can seem complex, so teams default to last month’s numbers or gut feel.

Impact: Stockouts during peaks and excess stock during troughs harm sales and cash flow.

How to avoid: Use simple forecasts that include seasonality adjustments. For example, calculate a moving average and scale it by historical seasonal factors. Track forecast accuracy and refine over time.

Mistake 5: Neglecting supplier lead times and performance

Why it happens: Teams assume supplier lead times are fixed and reliable.

Impact: Unexpected supplier delays cause stockouts, rush orders, and higher freight costs.

How to avoid: Track actual supplier lead times, measure on-time delivery, and build realistic safety stock. Communicate forecasts with key suppliers to reduce variability.

Mistake 6: Infrequent or inconsistent counting

Why it happens: Full physical counts are disruptive, so some teams postpone them frequently.

Impact: Inventory discrepancies grow, leading to fulfillment errors and misinformed purchasing decisions.

How to avoid: Adopt cycle counting focused on high-impact SKUs and use a consistent schedule. Keep counts simple and document adjustments clearly.

Mistake 7: Siloed teams and misaligned incentives

Why it happens: Purchasing, sales, warehouse, and finance often have different KPIs that conflict (e.g., purchasing aims to maximize discounts while finance wants lower inventory).

Impact: Conflicting goals produce poor inventory decisions and inconsistent practices.

How to avoid: Align around common Inventory Health metrics and use cross-functional reviews. Create shared goals such as reducing DOH while maintaining a target fill rate.

Mistake 8: Ignoring returns, damage, and quality in inventory counts

Why it happens: Returns and damaged goods can be messy and time-consuming to process.

Impact: Unprocessed returns inflate available stock or mask losses, distorting Inventory Health measures.

How to avoid: Create a clear returns and quarantine workflow. Track disposition outcomes (restock, refurbishment, scrap) and account for them in metrics.

Mistake 9: Chasing perfection rather than progress

Why it happens: Teams may delay improvements until they can invest in perfect systems or processes.

Impact: Business continues to suffer from avoidable inventory problems that could be fixed incrementally.

How to avoid: Prioritize high-impact, low-effort changes first (e.g., fix top 20 SKUs, implement cycle counts for A items) and iterate from there.

Summary checklist to avoid common mistakes

• Move from ad-hoc spreadsheets to structured systems with validation.
• Segment inventory and set different policies per segment.
• Schedule cycle counts and reconcile discrepancies promptly.
• Track supplier performance and adjust safety stock accordingly.
• Implement a weekly or monthly review of slow-moving items with action plans.
• Align cross-functional KPIs around simple Inventory Health metrics.

Fixing Inventory Health problems is rarely about a single silver bullet. Instead, focus on repeatable processes, clean data, and small experiments that prove value. With steady attention and practical habits, businesses of any size can avoid common pitfalls and keep inventory working for them rather than against them.