Inventory Management Challenges for Small Businesses

13 min read

Starting a new production or retail business is exciting. But along with all the new challenges, inventory management is the most important and daunting task. Moreover, if inventory happens to be the business’s key asset, there are always huge expenses, including material, labor, warehousing and maintenance, and other overhead costs. Many small businesses don’t have the luxury of a full-time inventory manager. As a result, newly minted business owners often wear many hats, which can be very challenging and stressful. We’ve compiled a list of tips to help you overcome some of the most common inventory management challenges.

Overcome inventory management challenges


Inventory Management 101


The first step in inventory management is understanding its definition and the different types of inventory.

According to Merriam-Webster, inventory is an itemized list of current assets, such as goods on hand, materials, or merchandise. In other words, inventory refers to the raw materials, work-in-progress products, and finished goods that a company owns and sells. It also denotes the value of these assets.


Inventory Types and Costs


There are four main types of inventory:


  • Raw materials are the unprocessed products used in production, such as lumber, steel, fabric, etc.
  • Work-in-progress (WIP) inventory refers to the partially completed products waiting to be finished.
  • Finished goods include the finished products ready for sale. Such inventory can be found in manufacturing or retail businesses generating the company’s primary income.
  • Maintenance, repair, and operations (MRO) inventory includes items needed to maintain and repair equipment.


While inventory management might seem challenging, it is crucial for businesses, big or small. That’s because it can significantly impact a company’s bottom line. When done correctly, professional inventory management solutions can help enterprises to save money, improve customer service, and aim for increased profits. Let’s look at the most common inventory management challenges and solutions to overcome them.


Inventory Management Challenges

Inventory management in a big warehouse

The most common issues associated with inventory management include but are not limited to lot tracking, synchronization between manufacturing processes and inventory levels, remote coordination, periodic inventory inspections, lack of technology, strategies, and regular audits. We will further analyze each case and provide working tips on overcoming them.


Lot Tracking Issues


The term lot refers to grouped inventory – items sharing common characteristics, such as source, expiration date, or production batch. While lot tracking is an integral part of the system, it can be challenging to maintain, especially for small businesses. The process involves assigning and labeling inventory items with lot numbers and keeping track of them throughout production. Under the lot’s long numbers and codes indicate stock data, such as expiry dates, etc. 


Lot tracking can be a heavy task for small companies. Small businesses usually bypass economic and technological solutions and adapt spreadsheets as a tracking mechanism. It might seem tempting to open a spreadsheet quickly. However, it is essential to remember that worksheets do not provide competent, effective, and efficient working grounds in inventory management for small businesses.


Tips to Success


The problem with lot tracking is that inventory managers must keep track of an ever-increasing number of lots. The solution is to use inventory management software with a barcode scanner. A barcode scanner can quickly and accurately scan inventory items and update the records in the software. Investing in a suitable inventory management software, such as eSwap, would benefit a small business in many ways, including simplifying lot tracking. 


Another way to overcome this challenge is by using inventory tags. Inventory tags are placed on inventory items. By scanning these tags, inventory managers can track inventory items quickly and efficiently.

Inventory tags can be placed on inventory items in various ways.


Inconsistency Between Inventory Levels and Manufacturing


Small businesses conducting manufacturing activities face difficulties with inventory control processes when dealing with manufacturing and assembling processes, especially regarding inventory levels. The inventory management system should be able to cope with the production process and provide data in real-time.


Controlling becomes more complicated when products of different types and states get involved, such as raw materials, finished, and semi-finished goods.


Small businesses that choose to control the inventory mentioned above processes manually have to deal with even more confusion when entering into international and multi-platform trading.


Tips to Success


Maintain consistency between inventory and manufacturing processes to avoid any confusion. Setting fundamental control processes by implementing technologically advanced systems may be a costly investment and benefit the business in the long run. Opting for eSwap will allow real-time inventory tracking and provide alerts when inventory levels are low.


Poor Supply Chain Coordination


Supply chain coordination


Small businesses go for financially optimal solutions when choosing different locations for supply chain operations. When various departments and vendors are geographically distant, those small businesses find it hard to maintain seamless and uninterrupted business operations. Warehouse and supply chain management optimization becomes challenging when personnel travels through different business units to control stock levels.

eswap-store eswap-store-mobile


Inventory, Order & Shipping Management Software



Tips to Success


In recent years, with the advancement of technology, businesses have become more interconnected than ever. Thus, business owners should choose advanced tools to connect with the supplier’s inventory management system. Such tech solutions help inventory managers to connect with suppliers and vendors worldwide.


Stock management software will help small businesses manage multi-location inventory and following demands. That system will ensure optimal inventory utilization, minimization of transaction and personnel costs, and better warehouse management. 


Irregular Inventory Inspections


Small business owners sometimes have so many functions to perform that inventory check-ups become the last concern. Without an actual image of inventory levels, decision-making becomes highly uncertain. Neglecting inventory check-ups can result in inventory write-offs, a significant loss for small businesses. Sometimes, inventory managers have to bear the brunt when inventory levels turn out to be different than expected.


Tips to Success


To bring consistency to inventory inspections, businesses can categorize inventory into groups and perform inspections daily. It will reflect a more exact picture of actual inventory levels. 


Suppose it is impossible to conduct stock reviews daily, schedule and designate staff to the closest frequency of check-ups. Continuous inventory counts will increase the sense of responsibility of warehouse managers or other people in charge. As a result, theft and error will decrease.


However, inspections will become easier if a company decides to invest in advanced technology. eSwap’s analytics and reporting feature will provide its users with custom-tailored and up-to-date inventory reports.


Neglecting Technology

Businessmen using sales technology

Small businesses choosing not to invest in inventory management software face many challenges. Technological integrations are the key to success in almost every industry nowadays. Investing in software solutions becomes necessary when your business depends on data from different sources, which continuously changes and requires proper tracking and control. However, enthusiastic small business owners usually become eager to control and organize all processes by themselves. This can be an unrealistic goal when it comes to inventory management. 


When it comes to stock management, simplicity is the key. Modern and straightforward control processes can be utilized by investing in software systems. 


Tips to Success


There is no need to spend a fortune designing custom-made software because many affordable options are available in the market, such as eSwap. It provides inventory management features to simplify and synchronize tracking and control multi-channel sales and variant products. 


Absence of Inventory Management Strategies and Audits


Another inventory management challenge for small businesses is a lack of strategies and audits. Companies should have strategic plans to cover every possible inventory situation. The goal is to:


  • Have a plan for inventory shortages
  • A plan for inventory surpluses
  • A way to track inventory levels
  • A way to monitor inventory movement


When it comes to inventory audits, these should be conducted on a regular basis. Many businesses have no idea there are ineffective internal controls and unproductive procedures and strategies. Internal audits bring issues into the light by reviewing the company’s weak points.

Audits help inventory managers to keep track of inventory levels and movement. They also help identify inventory problems and develop solutions for them.


Tips to Success


Many software solutions offer inventory audits and strategic planning features, such as eSwap. These tools can help small businesses to streamline their inventory management processes and procedures.




A retail or production business will face inventory management challenges as long as it operates. The goal, however, is not to jump over challenges that arise. Companies should prepare and be flexible for changes and implement the best possible practices and control mechanisms. By investing in solid fundamentals in the early stage of operations, small businesses will continue benefiting through the development cycle.