Inventory management is one of the foundational principles of successful retail store management. As a component of supply chain management, inventory management includes the supervision of the flow of products from the manufacturer to warehouses, and the final destination: the point of sale.
Poor inventory management can cause serious inefficiencies because you won’t have reliable, real-time information on just how much inventory your business has available. This increases the possibility of ordering merchandise from suppliers in incorrect quantities or selling phantom inventory.
Luckily, those in the business such as Brands Gone Wild’s Michael Guerriero have years of experience in inventory management. Guerriero helps manage inventory levels for Brands Gone Wild, a Toronto retailer that has been active for approximately 30 years. From quantity to quality, Guerriero is in charge of ensuring that adequate inventory levels are maintained on a day-to-day basis.
“Proper inventory management techniques can help both physical stores and even online merchants see an increase in their overall sales, while also cutting expenses and keeping customers happy,” explains Michael Guerriero. “However, that’s only the case if you have the proper strategies and tools, otherwise, you could be wasting a lot of time and money. Nobody wants that.”
Are you not sure where to begin with inventory management? It’s OK, you’re not alone. This article explains everything you need to know about managing inventory levels in retail stores.
There are several types of inventory management systems that businesses tend to use. Such as manual inventory, periodic inventory, and perpetual inventory are three of the primary examples. Perpetual systems are by far the most advanced and precise, whereas manual methods are the least advanced and tend to be not quite so accurate.
Keep accurate data on all product information
“You need to track the product information in real-time for every product, including stock-keeping units (SKUs), suppliers, barcode data, lot numbers, and even the country of origin,” explains Guerriero. “Consider tracking each item’s price over time, so you will be aware of elements like seasonality and scarcity that could impact the overall price.”
You can also track your inventory turnover rate, i.e. the number of times your business’s inventory is sold throughout a timeline predetermined by you (such as a month, quarter, or year). The inventory turnover formula divides the costs of all of your products against how they are sold by the average inventory for the same time period.
Do regular counts of your inventory
“Efficient counts of inventory are the best way to make sure your inventory is accurate. In order to ensure you have accurate stock countries and prevent potential mistakes, take damage, shrinkage, and returns into account when you run these numbers,” says Guerriero. “This process can easily be simplified by using a retail inventory management software, because you don’t have to do the whole thing from scratch. You just have to double-check your data.”
The complexity, size, and type of inventory management system you use influences how frequently physical inventory counts are conducted in your company. But at the very least, experts such as Guerriero suggest counting inventory a minimum of once or twice a year, if not more. There are several counting methods you can consider, such as cycle counting or physical counting.
Deal with bad supplier issues right away
“If you have an unreliable supplier, you’re in for a world of problems,” laughs Guerriero. “So, if you have a bad supplier who consistently makes late deliveries or who has consistently under-performed, be sure to take action immediately. Do a supplier audit and learn what the problem is by talking about it directly with your supplier.”
Be ready to resolve issues with suppliers or even change suppliers if it’s necessary, or you will have to deal with an erratic supply level and insufficient inventory as a result.
Track your sales
Tracking your sales involves a lot more than just adding up product purchases at the end of the day. You should regularly update your inventory and remain aware of what/how many things you sell each day. As well, you’ll need to analyze this data. When do specific things sell quickly or slowly? Is there a particular product that you sell on certain days of the week? Do products frequently sell in conjunction with others? Maintaining keen control over your retail inventory requires an understanding of your sales patterns and figures.
It can be a learning experience when it comes to managing your retail business’ inventory. However, there are tools and resources out there that can help you track and analyze sales data, providing much-needed support for you throughout your journey.