Even the most successful businesses in the retail industry can become more profitable, and everyone can do better work. These are premises that we can all agree on. One key aspect that almost all retailers (even the most successful ones) can do better at is inventory management. So what are the key elements of inventory management?
I’m not talking about your regular daily transfers and counts that almost all of us do skilfully, but mainly about the more advanced options that we rarely use such as setting minimum and maximum quantities to get notified, comparing between products, checking product performance and examining past inventory management reports to see if there’s any valuable information hiding from us.
The main thing I’ve learned in my many years in retail is that you simply can’t sit back and let your business run by itself. Even when you feel that everything is ticking like a clock, and all seems to be running well – there is always room for improvement.
With that in mind, I’d like to share 5 tips that would make any retail business run its inventory better and more smoothly.
Why does inventory management matter?
Inventory control and management allow retailers to stay on top of stock. With plenty of money tied up in stock, retailers need to be able to run efficient stock control processes to ensure there is adequate turnover and maximise profits.
Typical aspects of this process include inventory planning, establishing order cycles, balancing stock and tracking inventory to understand when replenishment is needed.
The biggest inventory management mistakes involve a lack of awareness of stock levels. For example, if a retailer does not know their inventory levels, they may continue to sell online, despite not actually having the products ready to ship to customers. When situations like this arise, it can prove costly, both financially and to reputation.
5 Key Elements of Inventory Management
These 5 top features of inventory management will help retailers to understand the most important processes to streamline stock control.
1. Track your activity
As a business owner, you ought to know about any movement in your stock. From product transfers to inventory losses such as testers, damaged goods or missing products, everything must be brought to your attention, so when the right time comes, you’ll be on top of things instead of being overwhelmed by irregularities. In addition to those, it’s extremely important to have detailed inventory management reports organized in one place.
Collecting this inventory data is essential when it comes to identifying room for improvement, so it is key to record all information that you have available in order to fine-tune processes.
2. Daily counts
Managing your inventory is a daily inventory management task. Without keeping daily track of your inventory status, even the most advanced reports won’t help you. Daily counts are a major part of any organised retail business routine and these must be accurate to maintain stock visibility. For retailers that are keen to utilise technology, this can be streamlined with effective inventory control, meaning you do not physically have to count every item you have in storage, providing you are confident that inventory management reporting is accurate.
3. Manage out-of-stock products
With the help of your detailed reports, you will be able to know exactly which products are missing, and which are sold the most. So when you need to reorder – you’ll know exactly what to order and when. As well as helping you to avoid running out of stock, it means you can act quickly to remove out-of-stocks from ecommerce platforms so you do not sell products that are not available.
4. Clear description
A major part of inventory management involves being organised, so you should keep clear and informative descriptions of your products: names, sizes, colours, wholesaler name etc. Without this detailed information, you won’t be able to fully understand your reports and see the total picture. Make sure everything is clearly labelled or marked, so you know what a product is at a quick glance.
This is vital to speed up fulfilment processes, as well as making sure no mistakes are made when it comes to stock counts. If you’re unable to do this work yourself, it’s recommended to hire someone who will.
5. Organized work environment
A clean, spacious and neat work environment might save you a lot of time trying to search for products. Research also indicates that such a work environment may raise the effectiveness of you and your employees. If your storage or warehousing space isn’t already organised, it is worth investing time to improve inventory management. There are no flaws to that – only clean profit.
Improve your inventory control today
By paying attention to these features of inventory management, it’s possible to enhance elements of stock management, improve inventory control and understand stock in more depth.
Having full stock visibility and an awareness of everything that happens means retailers can utilise both instore and ecommerce platforms, as well as introducing models such as the dropshipping model seamlessly.
Retail inventory management FAQs
What are the types of inventory?
The 3 most common types of inventory are raw materials/components, WIP (work in progress), finished goods and MRO (maintenance, repair and operations).
What is the main purpose of inventory management?
The main purpose of inventory management is to understand stock levels, allowing you to balance the quantity of products without running out, or ordering excessive volumes. This is the best way to maintain profits and reduce retail waste.
What are the best inventory management techniques?
As well the elements of inventory management listed in this guide, you can benefit from focusing on accurate stock forecasting, introducing a FIFI, or ‘first in, first out’ approach, identify low-turn stock, carry out audits, utilise cloud-based inventory management software and train warehousing and fulfilment staff to work as efficiently as possible.
What is the 80/20 rule in inventory management?
With stock control, the 80/20 rule suggests that 80% of profits come from just 20% of products. To make the greatest profits, it is key to identify the best-selling stock, reinvest in more and understand key trends that you can tap into.
