The dream of every business owner is to grow his business. Developing a successful business is not an easy task; it requires careful nurturing and proper management. One basic strategy that will help your business grow is an appropriately managed inventory.
If you own a retail store, or if you plan to own one, you should know that retailing is all about selling goods. But equal to that, it is about ensuring that your inventory is replaced in a timely manner. Otherwise, your customers will feel its absence and look elsewhere for the desired product.
Your inventories have to be in order if you want to keep your customers. This means adequate supplies of stock, within easy reach for replenishment as soon as they are needed.
What is Inventory Management?
Inventories are your goods in-store; they serve as a backup to the products on the shelf. Every retail business is expected to have inventory in a warehouse. Once goods on the shelf are purchased, the goods would be replenished with inventory from the warehouse.
Proper inventory management is essential. Retailers need to keep a record of their inventory and ensure they are within reach, and that they don’t run out. Retail inventory management keeps your retail business in order. It involves a number of steps, from placing an order for new supplies, to arranging the delivery of new products, labeling them and supplying them as and when they are needed.
There are two methods of inventory management; the manual method and the electronic method.
The manual process is more stressful and tedious. While it may be appropriate for small, mom-and-pop type establishments, it is almost impossible to use the manual method for big stores with a huge inventory of goods and products.
Before the introduction of the electronic methods, like POS and other inventory software, these bigger retail stores generally had their own way of manually maintaining daily records and tracking sales.
Using the electronic methods, it is far easier to monitor and manage inventory, saving both time and your sanity. Electronic methods are very easy to use; you’ll be able to keep track of your stock automatically and updates would take only a few minutes without the need to calculate complex algorithms.
Why Inventory Management?
The business world has changed significantly, especially in the retail sector. There is more competition than ever before, and to keep up with competitors, you need to build a strong customer base. Of course, that means every customer should be considered invaluable. One mistake can mean a lost customer, so you have to be flawless with your delivery. If a customer can’t find what he is looking for in your store, he will go elsewhere. You shouldn’t take chances; you need to make sure your goods are always available. The moment a customer goes to your competitor to get a product because it’s not available at your store, there’s a very big chance he might not return.
One way of keeping your customers happy is by making goods readily available. To achieve this, you need proper inventory management, to make a projection of needed goods before they are depleted, place a request for new supply, then sort them out and make them available for sale.
Whether you are starting up a new retail business or just want to improve your business strategy these are 11 of the most important things you need to know about managing retail inventory.
1. Know Your Customers
Regardless of the type of business, the only way to sell is to know your customers, understand how they think and their possible choices. This will help you satisfy their needs, perhaps even before they recognize them. As a retailer, you can’t just store inventory randomly. They should be stored based upon needs; products that sell fast should have more inventory in-store, and they should be readily available. Conversely, stocks that don’t have rapid turnover shouldn’t occupy valuable space.
Don’t hesitate to discriminate in this regard; those items that sell more should receive more attention, while low selling items should be given little attention.
2. Keep Accurate Records
If your records are accurately maintained, it will make inventory management much easier. To maintain an accurate accounting of your inventory, ensure records are checked regularly. Keeping an accurate record might not be easy, but it’s worth the effort. It is far too easy to make a mistake, but even a little mistake can cause serious losses and reduce your profit margin. If caught early enough, with regular scrutiny, the mistake can be rectified before it has a chance to compound, which is the reason why you need to keep painstakingly accurate records.
Retailers who use manual inventory management are more vulnerable to little mistakes. Once a mistake is detected, retailers spend valuable time trying to correct it. On the other hand, if the mistake goes unnoticed, their bottom line can be negatively impacted. Retailers will find that the appropriate use of inventory software electronic devices like a barcode scanner and Electronic Data Interchange (EDI) will help them minimize errors.
3. Understand Your Inventory
You can’t just replenish your inventory haphazardly; that can lead to complications and confusion.
First, not all items sell equally, so understanding your inventory is an excellent way to start. This will help you know which stock needs to be replaced and when.
Before you make any new purchase, you first need to know exactly what you have in store. Once you notice a product has little stock, you can arrange for immediate replacement. Those products which have adequate supplies can wait until the stock is more depleted (with the exception of high demand items). Essential products with high sales should be replaced based on demand record.
Goods which have seasonality are also a factor. There might be high demand during a particular season or holiday. During the period when there is high demand, you can increase the inventory stock. During the period of low seasonal demand, when you don’t need much supply, you can decrease your inventory. For example, if your retail store sells Christmas trees, then from late November or early December you should have a lot of inventory in the store. Afterward, there will likely be no demand from customers, so there will be no need for inventory in-store taking up valuable space.
4. Ensure Accurate Delivery
Once new stocks arrive from the supplier, you should make sure they are exactly what you ordered; both the quantity and quality of stock should be checked. If there is a mistake from the supplier, you can ask for an adjustment. You will be at a loss if an error goes unnoticed. Say you have ordered 100 packs of a product, and only 88 packs were delivered. If the 12 missing packs go unnoticed, you’ll have a shortage; moreover, you will have paid for those goods which will now never be sold. Don’t just assume your suppliers will provide the accurate numbers of stock that you ordered. They also make mistakes.
5. Prompt Inventory Management Delivery
The entire management process needs to be as fast as possible as any delay can affect your business. For example, if your inventory arrives late, and there is a demand for new stock from your customers you will be unable to meet their needs and they may go elsewhere rather than wait. If you don’t readily recognize that a particular inventory needs replacement, it can slow down the entire sales process, as well.
Failure to request goods needing to be replenished promptly, or a delay in shipment by suppliers, is simply bad for business as you will find yourself behind schedule. Managing your inventory needs prompt attention so your goods can be replaced once they are depleted from the store’s shelves. If there is prompt management of your inventory, your trade process will be smooth, your customers will be happy, and your business will grow.
If you want to make the process faster, then you need quality management tools. Inventory management tools will help you monitor the entire process.
6. Project Future Sales
If you are good at projecting your store’s demand for inventory, it will help the entire inventory management process. You don’t have to wait until you run out of stock before you request new inventory. You can use the previous sales record to place an order for further shipment. For example, say you sell two products, let’s call them product A and product B. If you sold 50 units of product A and 30 units of product B each month for the past three months, you can accurately reorder these products (50 units of product A and 30 units of product B) without first running out of stock.
There are several benefits that occur when you use the previous sales data to make the order; you will never run out of stock, you will have enough time to sort them before they are needed by customers, and you’ll be able to distinguish your high selling products from your low selling products.
7. Take Stock Regularly
You will need to take stock on a regular basis to ensure that everything is in place. There are some little details that you may have overlooked, which can have a negative impact on sales and complicate the inventory management process. With regular stock taking, you’ll be able to find any glitch in the system that ordinarily would have gone unnoticed.
When these glitches are spotted early enough, you’ll be able to find a solution before the error compounds. Regular stocktaking will also help you make informed decisions as regards project demand.
8. Hire Competent and Trustworthy Employees
Data shows that, on an annual basis, retailers lose millions of dollars because of employees. Those losses can be attributed to employee mismanagement, inaccurate stocktaking, and even theft. It’s no longer news that employees steal from the warehouse; most times, they manipulate the figures, so you won’t even know you are being robbed.
In every business, efficient staff affects the business positively, while incompetent staff affects the business negatively. Being efficient is one thing; being trustworthy is another. Theft from employees is a major drawback to retailing. Before hiring, conduct a thorough background check on each potential employee. During your day-to-day activities, ensure that your business is properly surveilled to keep illegal activity minimized.
9. Automate Your Inventory Management Process
The whole retail inventory management system starts with placing new orders. The entire process needs to be handled efficiently; an automated process will save time and improve accuracy. If your store is small, and you are handling the process yourself, you should master the entire inventory management process and make each process automatic. The same would apply to your staff if you run a big retailing company. Your employees shouldn’t need to be told when to place new orders, or what to do when new inventories get shipped in. They should be experts in the roles that they play. Every staff should understand each procedure, and if you have enough staff, you can delegate roles to a select number of employees.
10. Recognizing the Importance of Inventory Management Software
Using the latest technologies will help you boost your inventory management process. There is an abundance of software available; the goal is to find the one most suitable for your business. Before you begin to shop for inventory management software, consider that good inventory management software should be able to help forecast sales, monitor stocktaking, and give you instant information on orders and sales. It also should be able to monitor staff activities and reduce employee theft. If you own a big store, manual inventory management will be challenging, so consider using inventory software and tools that would make the management process easier.
11. Label Your Stock
As part of your inventory management process, ensure each product is labeled correctly. Labeling should include the product name, quantity, and other essential information like supplier and date. Labeling will make identification easier, and you’ll be able to keep records better. Employee theft will also be reduced, especially if you use barcode labeling.
There are three factors that determine excellent retail inventory management; your technique, your employees, and the technologies that you adopt. If you fail to manage your inventory correctly, there’s a higher likelihood that you will lose your customer base. Once that happens, it will be difficult for your business to survive.
Customers are fickle; one wrong move, and you might lose them. If you don’t have the product they want to buy, they may move right on to the next store which carries that product, regardless of their loyalty. All you need to do is make sure every product is readily available. How can you ensure this? The answer is to manage your inventory correctly. The aforementioned tips will help you with all the information you need.
Never forget that every customer should be treated like a valuable commodity, and every sale you fail to make (due to the absence of stock) can affect your business negatively in the long run.
If you have questions or comments about what you’ve read, feel free to add them in the comments section below.