In manual inventory management, businesses manage inventory with little to no use of technology. This means that inventory operations are carried out by employees/staff.
As the business purchases and sells inventory, the staff updates the inventory records manually.
This is opposite to what automated inventory management is, which relies greatly on technology to manage inventory.
Comparison of Manual Inventory Management with Automated Inventory Management
Here’s how manual inventory management stands in front of automated inventory management:
- In manual inventory management, staff updates inventory levels and whereabouts manually. On the other hand, software or digital tools update the inventory level and manage orders in automated inventory management.
- Manual inventory management is prone to error as it is done by humans manually. Whereas, automated inventory management can reduce the risk of inaccuracies.
- Manual inventory management has a low initial setup cost, whereas, automated inventory management has a high initial setup cost.
- Manual inventory management consumes more time in comparison to automated inventory management, which gives faster results.
- Employees need less training for manual inventory management as it involves basic operations. On the other hand, the staff requires extensive training to operate an automated inventory management system.
- Manual inventory management provides a limited set of data to the company. Whereas, the automated inventory management can provide advanced analytics and detailed reports.
- Manual inventory management is suitable for small scale businesses that have limited inventory. On the other hand, automated inventory management is suitable for medium to large scale businesses with a wide range of products.
Automated inventory management may seem like the better option for businesses, but manual inventory management has its own benefits.
Are There Any Benefits of Manual Inventory Management?
Businesses may get the following benefits by manually managing their inventory:
For Small-Scale Businesses
Manual inventory management is beneficial for small-scale businesses. One of the major reasons for this is that small businesses don’t have an extensive inventory.
For example, if a business holds a few dozen items in the inventory, investing in an automated inventory management system can be an unnecessary expense. This amount of inventory can be managed manually by a small group of staff.
Small businesses also usually operate from a small vicinity. This also makes it easy to manage inventory manually as inventory visibility is better in small warehouses.
Takes Less Time When Inventories are Small
Manual inventory management may take less time if there is less inventory to manage. For example, counting a small inventory doesn’t take long hours.
Similarly, with a limited number of orders, order management also becomes less time consuming and can be done manually. All staff needs to do is carefully note down the order, process it and note down the remaining inventory statistics.
If the inventory is limited, pointing out mistakes or discrepancies may also not take very long.
Less Costly
Manual inventory system requires less tools to operate, hence, it is less costly as compared to an automated inventory management system.
For example, some of the things required to manage inventory manually include paper, pen/pencil, or a computer with MS Excel/Google Sheets. All these tools aren’t very expensive and are mostly easily available.
Initially, the only major cost incurred for manual inventory management might be the salary of the dedicated staff.
Staff Needs Less Training
Manual inventory management includes basic operations. Some of these are counting the stock, recording the stock level, tracking orders, managing warehouses, managing customer relations, etc.
The staff can learn to perform these operations in a short period and don’t require an extensive period of training. This may not be the case with automated inventory management.
These software are complex and businesses need to hire experts to operate these management systems to get maximum output.
Despite its ease and simplicity, manual inventory management can be challenging.
Challenges that Businesses Face in Manual Inventory Management
Businesses may have to face the following challenges in managing inventory manually:
Vulnerability to Inaccuracy
One of the biggest challenges of manual inventory management is that it is vulnerable to inaccuracies. This is because the factor of human error is high when inventory is being managed manually.
One wrong data entry can lead to a series of actions detrimental to business’s health. This can become rampant if a business expands. Expansion means that the business increases the volume of inventory.
As the inventory increases, the chances of inaccuracies may also increase in manual management.
Inconsistent Inventory Tracking
Inventory tracking can also become a challenge with manual inventory management. This is because each item of the inventory has to be tracked separately by the staff in manual management.
This is a tedious job and takes up an important resource, time. The time spent on individually tracking inventory items can be spent on other operations including marketing, customer relations,, and much more.
Limited Inventory Visibility
For increased inventory visibility, businesses require real-time data access. With regards to manual inventory management, this may be true if the inventory has a limited number of items.
But if the business expands its inventory, the visibility may reduce if there is no automated system employed. For more inventory, a bigger space may be required. Managing this space may not be effective with just manual management operations.
Overstocking or Understocking
One of the results of managing inventory manually is that the business may end up overstocking or understocking. For example, imagine a warehouse employee counted 22 units in the inventory and the reorder level was 30 units.
Thinking that the inventory was below the reorder level, the employee placed the order for inventory replenishment. However, during the inventory count, the employee missed the 10 units that were placed in a corner of the warehouse. So, the actual inventory count was 32 units.
This means that the next order was placed before the reorder level. If by any chance the sales become slow, this business will be left with an overstocked inventory.
Conclusion
Manual inventory systems cost less initially and are easily applicable. However, before implementing this system, businesses should analyze their requirements.
If the business has an extensive and complex inventory, investing in an automated inventory system may be a better choice. If a small-scale business wants to manage inventory, a manual inventory system may work.
