Many business owners state that owning a business is all about productive and profitable, but the biggest challenge in running their business is in inventory management.
And as for retail business, selling inventory is the main goal; which is impossible if you don’t know where it is and where it’s supposed to be going, and how much you have. Peace of mind and a more efficient business are waiting for those who want to tackle their inventory head-on. Stay with us for a moment to have a better understanding as Back Office Outsourcing Solutions discuss what is retail inventory management is and how you can use it in transforming your retail store.
What is Retail Inventory Management?
Retail inventory management is what keeps a whole business in order. In other terms, it is a method of stocking of products that your buyers want to buy, using pricing and promotions to sell profitably and maintaining inventory at levels that meet demand without over-purchasing. An ideal inventory management plan guides how it all gets done, with intelligent purchasing and pricing to procedures covering receiving, inventory counts, and location tracking.
Inventory management can be done by hand or electronically. While some prefer to take an inventory by hand, this can be a long and tedious process, especially for stores with larger inventories. There also a need to update your numbers daily to keep track of sales and stock levels. All this equals much more work. Most business owners are just too lazy to do that kind of stuff.
With today’s data-driven economy, managing retail inventory electronically, ideally using retail point-of-sale systems is a big help to the retailers in managing their inventory tasks faster and far more efficient than manual methods. There will be no longer crunching of numbers or spending hours at your desk when your POS updates will do it automatically by itself. All you have to do is log in to your POS, and you can check your inventory levels almost instantly. You can also check what sales were made, when, and by who, as we as what your best selling items are, and even who made the sales. This electronic method takes only minutes.
With proper inventory management strategies in your Back Office Offshoring Services, you’re always in control and always know what’s going on in your business. Without the right system in your business, you’re just asking for trouble.
Why you need a Retail Inventory Management Solution?
It is critical for an organization today to understand its inventory to achieve both efficient and fast operations. Efficient management of inventory helps in reducing costs which further keeps accounts and finances in check.
Can you imagine the mess you would have in your retail business if you don’t manage your inventory? How much would it cost you? From a customer’s point of view, it helps you a lot if you have retail inventory management for you to provide better customer services through fast delivery and low shipping charges, hence, not running out of stocks and meeting customer expectations. It will save you from challenges like the following:
Spending too much on inventory and storage space
Managing the money spent on your inventory and storage space will save you money. Most of the time, the cost of the storage is dependent on the amount of inventory you need to store. To optimize your inventory storage, Cargowise Back Office Operators of Cargowise One Training Service recommends retailers to use a planogram. A planogram is a blueprint of anybody’s store layout. This tool helps you make sure that you use your space with a profitable mindset. A planogram helps you arrange your merchandise in a way that catches the customer’s eye, organize the space in a way that gives you more room on your shelves, and help you always know how much to place on the sales floor.
Loss prevention or retail shrinkage
Stealing accounts is one of the biggest forms of loss for retail stores. In 2016 around 50 billion dollars was lost from the retail industry as a result of theft, which could be due to an unorganized space. Unorganized space makes it easier for people, even your own staff, to steal right from under your nose without even noticing. Even if it doesn’t look natural to you, keeping your inventory organized is one of the first things you can do to prevent loss and retail shrinking. Plus, organizing your space helps you familiar with everything, if where it is being placed. You can’t manage your stocks if you can’t find it.
Administrative errors, at some point, is known as miscounting stock, are a major cause of lost inventory and theft in retail stores. Where in fact more than 20% of the loss in a business is caused by administrative and paperwork errors. This is why taking inventory manually is not the best method to be used in managing your inventory. It would be best for you to be managing your inventory electronically together with your point-of-sales it would eliminate the errors thoroughly.
Avoiding dead stock
If you are running your retail business for a long time, you know how quickly things can go in and out of fashion. Dead stock is excess inventory that isn’t selling or has been so difficult to sell for a long period of time. Sometimes trends go by quickly, and it can be difficult to keep up without your inventory taking a hit. In this situation, you can use a planogram to determine where is the best to put a sales rack, for example, putting the best-selling items at the front of your stores.
Avoiding being out of stock
In order to avoid getting out of stocks, you have to make sure that items are always on hand, especially for the things that are selling very well to not risk losing sales. Running out of stock mostly occurs to the retail business that mismanaged their inventory or has no up-to-date tracking of their inventory and items.
Managing your supply chain
Your supply chain is the process of making and receiving inventory for your retail store. Many different things affect the supply chain. For example, if you sell an item and the price of that specific item just skyrocketed, that means you’re paying more to obtain that item for your retail store. Which will have a huge effect on how much you spend on your inventory. Then there will be price competition among some vendors, and they might raise prices for their own personal gain. Counteract with these vendors wisely, by making sure you only do business with the reliable ones and stay on top of changes in your industry. Don’t let them get to you.
Think about it, if you know how much inventory you should have at all times, know how much expenses you need to get it, how much space and storage units you need to keep it organized, and where it needs to be at all times.
Different Types of Inventory Management Methods
Inventory management methods can be as varied as unique as your business. Some of these methods may work better for different retail businesses, and some may not because it is not a one size fits all scenario.
To help you get started, listed below are some of the most popular inventory management techniques. Pick one that would best fit your business and its needs and build an inventory management system that will keep you organized for years to come.
Physical Inventory Audit
This method is probably the most boring and tedious when it comes to managing inventory, but still can be extremely helpful when managing and making improvements to your budget. There’s no need for you to count your inventory every single day; your point-of-sales should be doing that, but physically counting inventory a couple of times a year helps your inventory keep in order.
If you’re going to do a physical inventory audit, it’s also a good idea to spot check every now and then. Spot checking basically means you pick a few items from your inventory to count and make sure the numbers you have now match up to the numbers you’re supposed to have. If these numbers are off by even a small margin, you may have just miscounted, and it’s back to counting. However, if there’s a large gap between the two numbers, you’ll need to check your inventory again and figure it out why.
FIFO and LIFO
These methods account for when there are items added to your inventory. FIFO or first-in, first-out means that the oldest items in your inventory are the first to be out and sold. LIFO or last-in, first-out means that the newest items in your inventory are the first to be out and sold. You may use these methods according to the items that is highly demand in your inventory. For example, you have added the last items in your inventory and then these are the items that are being ordered quickly and unexpectedly, it would make the last items to be the first to leave since the demand is high.
Some items in your inventory may need special attention. For example, those clothes you have in your inventory will be a trend it will probably sell faster than something from last season. Pay attention to the market you’re within and plan your inventory needs around that.
Retail management software
In managing your inventory, you can make use of a retail management software that has the inventory tools that can help you manage your inventory and other aspects of your retail business. It surely makes sense that your point-of-sales help with your inventory management since the sales processed through your POS directly affect inventory levels and performance. Use your POS to your advantage by leveraging that inventory information to make more informed business decisions.