Foundation for Success: What to Know About Inventory Management

Inventory accounts for the highest cost in retail business operations. It’s also an indispensable cost of doing business for all retailers. Without the right retail software solutions, you would not be beneficial to customers.

According to statistics, over $40 billion is lost every year due to employee theft. Therefore, most retailers have started to look for effective inventory management systems. This will ensure that their businesses have a foundation for success.

No matter how good your company’s inventory management system is, it’s always important to research, review and improve. Below are essential inventory management concepts to help you better understand how your inventory flows:

1. Table of Contents

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   Ordering Products

The techniques you choose to follow when ordering your products determine your ordering method. It also helps you select the quantity you need to reorder.

Your business’s ROI should influence the way you choose to order products. Larger retail companies have the advantage of using distribution warehouses to store items. They also use multifaceted systems to break down their inventory into smaller units.

Smaller businesses, however, need to monitor their ordering processes closely. This is due to their financial and space limitations. Monitoring products and current market trends will help you determine the quantity to reorder.

Invest in an inventory book for recording all your products and any changes in the market. Report both slow and fast-moving products to determine which are on demand. You can also determine the most profitable products by measuring your revenue against your carrying costs.

2. Receiving Your Shipment

This is a common point of loss for most retailers. Ensure you closely examine shipment catalogs and packing slips to avoid inventory loss.

You should also scrutinize all items before the shipping company leaves. This will come in handy if you need to file a loss or damage claim. When checking your shipment, remember to count your products and compare them to the packing slips.

Any discrepancies should be noted down and a complaint filed with the relevant vendor as soon as possible.

3. Inventory Storage

After the shipping company delivers your products, you have to choose your storage. You can place the items in a local warehouse, a garage, a distribution facility, or your home’s basement. Whatever you settle for, systematically place the items to be able to find them.

A storage system will save you time and simplify the picking process for your staff.

4. Inventory Value

Determine your current inventory value and pinpoint which supplies or products generate more revenue for your retail business. Having a sophisticated inventory management process will help you take note of this data and use it to allocate storage space.

You can boost your company’s revenue by allocating more space and budget to the highest profit-generating products. Determining your inventory value is also essential for regulatory reporting.

5. Available Physical Space

Before ordering new stock, you must make sure there is enough physical space for storing the products. If you don’t do this, you will run into an overstocking problem where virtual space is taken up by products that don’t generate much revenue at the expense of high-revenue generating products.

If you find yourself out of balance, you will need to find extra space to move the excess inventory and make space for in-season products. This could be both time-consuming and costly. Ensure you coordinate inventory orders with the available storage space to avoid overstocking.

6. Minimize Inventory Loss

Most people think that inventory loss only occurs due to employee theft. Unfortunately, a significant amount of items are lost due to clerical errors. Such errors could happen at any point throughout the inventory cycle and could be quite costly.

Integrating loss prevention procedures will help you avoid inventory loss. Effective inventory management needs the implementation of techniques such as using security tags and closely checking customer returns. You also need to reduce employee and customer theft by installing security cameras and limiting staff access to inventory.

7. Taking Periodic Inventory

Ensure you take inventory of available products regularly for tax purposes. Periodically taking inventory can also help you note overstayed, unsold stock and understand item loss trends.

Implement an inventory-taking culture where you have scheduled days for staff to go through your inventory, checking for age and quality. This will help you weed out old or expired products and avoid customer complaints. You can also have clearance deals to sell overstayed merchandise quickly.

8. Inventory Management Resolutions

If you are a retailer, you will need an inventory management solution specifically designed for your business. There are many systems designed to meet different business needs. However, most systems will help you create purchase orders and invoices, oversee merchandise flow, control accounting, and generate customer receipts.

9. Consider Hiring an Inventory Consultant

Most retail businesses are not able to hire an in-house inventory control manager. This is where inventory consultants come in. An outside consultant can help you create, develop and manage your company’s inventory management system.

Working with a qualified and experienced inventory management consultant will help you manage shipping, storage, and product orders while maintaining inventory accuracy.

10. Inventory Packaging Solutions

Choosing the right packing services is also an essential aspect of inventory management. Whether you’re dealing in hazardous chemicals or selling beauty products, the quality and type of packaging are vital.

Packaging will help your staff distinguish between different products. It also boosts brand awareness, improves customer experience, and increases your ROI. Ensure you test your product packaging and implement product-safe packaging to determine the best packaging for your products.

Use the Right Inventory Management to Create a Foundation for Success

As a retailer, inventory is the biggest asset you have. Thus, to generate revenue and save money, you must guard this asset and foster it in the right direction. Without effective inventory management practices in place, your company will never grow.

Most successful retailers make inventory a priority. That’s because inventory loss can have a significant effect on your company’s bottom line. Ensure you put the right management systems in place as early as possible to set a foundation for success as your business grows.

For more money-saving tips, check out other easy-to-read posts on our website.