Optimising Inventory Management to Enhance Operational Efficiency : gaining advantages in manufacturing start-ups and SMEs

Abstract

Inventory management is a critical operational function in all organisations, from large, multinational firms to small and medium-sized enterprises (SMEs) and start-ups. It directly affects cost efficiency, stock accuracy, and overall business performance. This study examines the impact of different inventory management approaches on operational efficiency, with a comparative focus on traditional or manual methods, comprehensive Enterprise Resource Planning (ERP) systems, and a low-cost spreadsheet-based solution implemented in a case study at a start-up company. In addition, a common phenomenon in inventory management, the Bullwhip Effect, is discussed as an example of the implications of inaccurate demand forecasting. Traditional methods, while low in upfront cost, can lead to errors, stock-outs, and excess holding costs due to limited visibility and data accuracy. Full ERP systems offer robust functionality, real-time monitoring, and advanced forecasting, but their high implementation and maintenance costs pose challenges for resource-constrained SMEs and start-ups. The Excel-based approach, developed and tested in the case study, demonstrates a cost-effective middle ground, providing structured inventory tracking, basic forecasting, and operational reporting while remaining accessible and adaptable in a small business context. The findings highlight how attainable digital tools can enhance operational efficiency, reduce errors, and improve decision-making. They can bridge the gap between resource limitations and the benefits of advanced inventory management systems. This research underscores the importance of selecting inventory management solutions that align with organisational scale, resource availability, and operational objectives.