An Indian management study found that simply implementing inventory management systems at the most basic level increased profits and reduced waste, thus saving the company money.
There are fewer opportunities for theft since inventory is managed, items don’t suddenly run out unexpectedly and you don’t risk going out of stock because you don’t know where items are.
If you know your inventory management is poor and are looking for some simple solutions, here are five must-try ways to improve inventory management.
Track Inventory Levels for Incoming Items
Don’t just track how much you sell and what you have on hand. Track inventory levels and turnover rates. Don’t tie up money in raw materials you won’t need for months if the turnover rate is very slow; consider letting the inventory level drop as you sell it, freeing up money for other purposes. If turnover rates are falling, don’t buy anything else. Don’t buy more of a product that will take months or years to sell.
Include Expiration Dates and Seasonal Information in Your Data
Improved inventory management data on when products go bad reduces losses from products expiring. Tracking which products are seasonal gives you the information you need to know what items to mark down on sale and move to discount as soon as the season passes, instead of paying to store it for a long time.
Prioritize Your Inventory Management
The Pareto Principle says that 80% of your profits come from 20% of your items, and 80% of your sales come from 20% of your products. Focus your inventory management efforts on products that generate the cash flow and profits that keep your business going. If you can only buy so much inventory due to space or financial constraints, buy what you’re selling the most of or what has the best profit margin. Don’t waste time trying to manage products that have little impact on your business unless you have the free time to do so.
Use a Point of Sale System
A point of sale system or ePOS system automatically tracks sales as they occur while deducting sold items from inventory. Good ePOS software processes all popular payment methods, allowing you to sell more items because customers are processed faster. The best ePOS systems also provide cost information when customers request it and can handle returns.
Have Backup Plans
If your main supplier cannot deliver what you need in time to meet your stocking requirements, have backup sources so you can meet customer demand. Consider using cloud backups of your inventory management system data or relying on cloud-based ePOS software so that it isn’t dependent on proprietary hardware or local servers that could go down.
Have plans to handle payment when a storm takes out the satellite dish you use to verify credit card information. Do your research in advance on where you can sell products that aren’t selling well or vendors that will buy failed product lines so that you can quickly clear it off the shelves and get money for it if it isn’t moving.
If you don’t manage your inventory correctly, your retail store may soon start to sink. You don’t just need to know what items you have in stock and what’s running out, but you also need to know what items are selling, what’s staying on the shelves and where you’re losing sales. All of this information can effortlessly be gathered and managed by taking on board some of the above tips.