Effective inventory management is a skill, but it’s also a collection of processes that can be streamlined simply by using the right tools and methodologies. Read on for our top tips on how to manage inventory effectively within your small or medium sized retail business.
Drive your decisions through the right reports, not hunches
Do you currently know for a fact which products are under and over stocked across each of your stores? Are you confident in which categories are selling? Having real-time reports and dashboards that allow you get visibility, unveil blind-spots and make data-driven decisions is a critical aspect of mastering how to manage inventory in your retail store.
Unify your inventory data
There are untold benefits from integrating inventory control processes across your eCommerce and bricks and mortar store(s). Having an accurate, holistic business-wide view that factors in stock on hand, laybys and back orders in real time is the foundation of inventory management. Without this, the remaining points in this article become challenging and duplicative.
Configure your data structure correctly
It’s critical that you’re able to break-down your inventory data into detailed categories and sub-categories. So, if you’re in the fashion industry, rather than have a category only for black dresses, you’d break your black dress into multiple sub-categories like Mini Black Dresses, Short Black Dresses, Mid Black Dresses and Long Black Dresses.
This empowers you to perform advanced searches, stocktake by category and obtain high-level insights about specific product lines and types. You can also use this information to power your integrated webstore to make the user experience much easier for your customers.
Use your ABCs to prioritise your focus
One invaluable aspect to optimising your inventory is to assign certain products with priority levels through the use of ABC analysis. For example,
- ‘A’ products are your highest value products – they typically drive 80% of gross margin/revenue, but make up 20% of your inventory portfolio.
- ‘B’ products are medium value products – around 15% of gross margin/revenue, but make up 30% of your inventory portfolio.
- ‘C’ products are low value products – around 5% of gross margin/revenue, but make up 50% of your inventory portfolio.
Once you have these products identified, it will help you to set appropriate order quantities and frequencies, pricing/margin strategies and marketing & promotional programs.
Perfect your stocktake steps
Regular stocktakes have a multitude of benefits: they clarify your profit margin, help to identify slow moving stock to focus on, reduce reliance on back orders and highlight any poor practices or theft before they become a bigger problem.
Stocktake is a process seen by many retailers as a necessary evil, but it does not actually need to be painful. Aside from using a centralised database to streamline the process, be sure to:
- Break stocktake up into less daunting bite-sized sections – known as ‘cycle counts’
- Develop a stocktake plan so staff aren’t doubling up on areas, and
- Have a cross-check method in place within your system to banish any mistakes.
See the 5 point stocktake check to ensure you’re putting your best foot forward.
Act on insights into purchases and suppliers
Once you have your real-time inventory data clearly available you will also be able to drill down into which of your suppliers are delivering on time and providing the best prices – and which are not. Arming yourself with this knowledge enables you to negotiate with suppliers using accurate data-based evidence to improve your margins and fulfilment performance.
If you feel that your inventory management has become an overly difficult or complex process within your business, it may be that your POS system is holding you back. Explore the signs that it may be time for you to upgrade your point of sale system.