It doesn’t matter how big or small your retail operation is, proper inventory management is vital to success. Having an appropriate inventory management technique that allows you to track inventory across virtual and physical stores is necessary if you have multiple locations as well as an ecommerce site.
All of these sales and inventory control procedures need to be linked together for a seamless inventory control management system.
Being sure of inventory accuracy can also be a jumping off point for other related initiatives.
For example:
- You’ll have a more effective supply chain process that takes your sales and current stock levels into account.
- You’ll see an increase in customer satisfaction shown in the form of repeat business, positive reviews, or word of mouth (including social media).
- You will be able to lower inventory cost of raw materials with more accurate estimates of needed supplies corresponding to the current demand.
- Having inventory processes to decrease excess inventory and dead stock save the company thousands in storage costs for stock that isn’t moving.
It will be easy to see when your inventory control systems are working properly, and that your inventory control procedures are being followed by all staff with related tasks. The biggest measure of success is an accurate economic order quantity.
Economic order quantity is an elusive number that varies greatly from business to business. It might seem unattainable, but with proper inventory control management it is possible. Essentially, this is the optimal quantity that you should buy when ordering from your suppliers, and it is based on the total costs related to buying receiving, merchandising, transporting, and holding inventory.
Inventory Management Best Practices
Each company will need to develop their own inventory management processes based on their consumer demand, competitive landscape, seasonal sales, forecasting, and other product/company details. However, there are some benchmarks and practices that every retailer should strive to meet when developing their inventory control procedures template.
- Keep an inventory of safety stock of your most popular items. You’ll want to base the size of your safety stock on your average sales, whether or not the products are seasonal, and what you will do with the unused inventory.
- Use a kitting approach, also known as bundling, to increase average order size and sell off more excess stock. You can increase total order sales and decrease storage costs with these bundled deals. BOGOs fall under this category as well.
- To keep storage costs to a minimum have an inventory control procedure in place to address mark downs and when to move inventory to dead stock.
- A separate set of inventory control processes should be used to address dead stock and how it will be disposed of. Consider
eco-friendly options like recycling, donation to a nonprofit organization, or donation drives. - You should conduct basic inventory audits and review them in conjunction with sales reports at least once per quarter. You should also have an outside third party inventory audit done at least once per year, depending on the size of your business and sales volume.
Finally, you should use a
Typical Inventory Control Procedures
There are some inventory control procedures that every retail business of every size must have in place. These are the minimum requirements that you should look for in a new inventory control solution. Your inventory management software should integrate these features for accurate inventory tracking with minimal time and effort beyond setup.
- Balance inventory on a schedule based on average stock turnover rates, at least every 2 to three months. It can be a good idea to make this part of your normal quarterly bookkeeping.
- Review previous sales records to identify popular, and unpopular items. This should be done at about once per season, and helps you know what to discontinue and how to prepare for consumer demand in the future.
- Have a defined life cycle for your products. At what point is it no longer practical to pay for the storage costs of excess inventory. Know what that point is, define it, and incorporate it into your overall inventory control strategy.
- Proper inventory control procedures must include a plan to reduce shrinkage. Shrinkage refers to lost inventory through returns, defective products, shoplifting, and internal theft. It can also refer to raw materials that are wasted during manufacturing.
What to Look For in Inventory Control Software
Especially if you are a small business, being able to automate as much of your processes as possible helps you reduce labor costs as well as your reliance on somewhat costly service providers. Every inventory management system should include product locations and item quantities, synched and updated across sales funnels. However, to get the maximum benefit of your inventory control software you’ll want to look for these key features.
- Ability to bundle products or mark down products that are not selling as well to decrease excess stock and unload dead stock.
- Intuitive reports that show your best and worst selling products
- Store inventory control procedures should align and sync with ecommerce endeavors for easier and more efficient supply chain management.
- Automate inventory control processes to facilitate growth with fewer resources and manpower
If you want to automate all of your business activities, it isn’t hard to do. You can connect your Ecwid store with many of these items handled in an all in one management software. This makes combining sales and inventory data for better insights and more effective inventory control solution.
Like any other plan you put into motion, you should have clear KPIs to measure the success of your inventory control program. Look for inventory management systems that allow you to customize and track these KPIs as they apply to your business.
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