It’s always important to evaluate your company on a regular basis to ensure you’re hitting your goals. While this is true for every type of business, in retail, it’s vital to your success. One of the most important departments for any retailer is inventory management. Managing inventory is vital to the success of your business as “inventory” is often the biggest investments companies have. Due to this, you want to make sure you’re using inventory management strategies that can help you master your inventory and grow your company.
Ask yourself, “how well is our inventory management?” Do you have the right products at the right time? Are you experiencing stock outs? Is your inventory arriving in time to avoid empty shelves? Inventory control is an art and as inventory is likely one of the biggest investments your company has, it’s essential you get it right.
What Is Inventory Management?
Inventory management is one component of your supply chain that focuses on having the right products, the right quantity of products and selling those products at the right time. When done correctly, inventory management helps you reduce the costs associated to carrying excessive inventory. It also allows to maximize your sales, which is super important for everyone.
By effectively managing your inventory you can have the right products in the right quantity on hand and avoid products being out of stock and funds being tied up in excess stock. You can also ensure your products are sold in time to avoid spoilage or obsolescence, or spending too much money on stock that’s taking up space in a warehouse or stockroom.
The Right Inventory Management Software
The right inventory management software is going to allow you to;
- Improves cash flow, reduce cost and boost your bottom line
- More accurately forecasting demand
- Prevent excess stock and too many raw materials
- Keep track of your inventory in real time
- Optimizing your warehouse and employee hours
- Preventing product and production shortages
- Allows for easy inventory analysis on any type of device
- Being accessible right from your retail point-of-sale
- Offer quick and painless bar code scanning to speed up intake
- Using multi-location management, tracking inventory across several locations or warehouses
- Inventory management techniques and best practices for small business types
Here are some of the techniques that many small businesses use to manage inventory:
Inventory Management Strategies
(1) Fine-Tune Your Forecasting – Accurate forecasting is vital. Your projected sales calculations should be based on facts, such as your historical sales data (this could be from your POS), market trends, predicted growth of economy, promotions, marketing efforts, sales, etc.
(2) Identify Low-Turn Stock – If you have stock that hasn’t sold in the past 6 months, 12 months, it’s likely time to stop stocking those items. You may also want to consider using different strategies to get rid of that stock — like a special promotion or discounts. Excess stock does you no good if it’s not selling, just a waste of space and capital.
(3) Evaluating Your Stock – Even with the right inventory management software, you still need to take the time to count your inventory to make sure what you have in stock matches what you think you have. We see businesses make the mistake of not counting their inventory and relying on what the software says only to find out later that their inventory is off. Companies use a lot of different techniques to keep inventory accurate, including annual year-end physical inventory counts for all items.
(4) The FIFO Approach (first in, first out) – Goods should be sold in the same chronological order as they were purchased or created. This is especially important for perishable products like food, flowers, and makeup. A bar owner, for example, has to be cognizant of the materials behind the bar and apply FIFO methods to improve bar inventory. It’s also a good idea for nonperishable goods since items sitting around for too long might become damaged, or otherwise out of date and unsellable. The best way to apply FIFO in a storeroom or warehouse is to add new items from the back so the older products are at the front.
(5) Quality Control – No matter your specialty, it’s important to ensure that all your products look the best they can and all are working. This could be as simple as having employees do a quick exam during stock audits that includes a checklist to check for specific things. Quality control matters.
(6) Cloud-Based Inventory Management Software – Look for software with real-time sales analytics. We can’t stress this enough. You want inventory management software that has real-time analytics so you can see how your inventory is moving at all times.
(7) POS Reporting – Your POS data can give you a ton of powerful insights that will allow you to grow your company. Here at Accelerated Analytics, our POS analytics allows you to seamlessly track your sales across multiple locations and see how inventory is moving through those locations as well.
(8) Tracking Stock Levels – You want to make sure you have a solid system in place for tracking stock levels, prioritizing the most expensive products. The right software can save you time, effort and money by doing all the heavy lifting for you.
(9) Hire A Stock Controller – Stock control is used to show the amount of inventory you have at any given time and applies to all items, from raw materials to finished goods. For those of you that have a lot of inventory, you may need one person to be responsible for all of it. We call them a stock controller. They can process purchase orders, receives deliveries and makes sure that everything coming in matches what has been ordered.
(10) ABC Analysis – Many businesses find it helpful to have tighter controls over higher-value items by grouping inventory items into A, B, and C categories. Learn more about ABC Analysis.
(11) Consider Drop Shipping – If your business chooses to use drop shipping methods, you can sell products without physically holding the inventory yourself. With you out of the equation, a wholesaler or manufacturer would be responsible for carrying the inventory and shipping those products out to consumers when they make a purchase from your store. Drop shipping models have a lot of benefits, use them wisely.
(12) Big Ticket Products — While these items will make up the smallest percentage of inventory you have, they do account for the largest annual consumption value. Products grouped into the C category , which are the least expensive items you have, these will make up the largest percentage of inventory but will have the lowest annual consumption value. B products play in the middle. Their annual consumption value is annual demand multiplied by an item’s cost.
*Accelerated Analytics publishes resources like this to provide insights to different analytical metrics, data points and formulas. POS Analytics. Please be aware, this doesn’t mean that our product will this metric, data point or formula. To learn exactly what our reporting covers, please feel free to schedule a demo or give us a call. Thanks for understanding.