How to Manage Inventory of Your Retail Store?

Managing the inventory of your retail store is an important aspect that should be undertaken or it is the responsibility of every retail store owner or manager. Effective inventory management of your retail store involves having the right stock in the correct quantity and at the right time. 

It assists in cutting down costs, expanding sales, and enhancing customer satisfaction. Inventory management is not merely the process of tracking inventory; it is a process of planning, analyzing, and controlling stock to meet customer requirements while avoiding overstocking or stockout.

As competition continues to grow in the retail industry, the issue of managing inventory is one factor that can set your business apart. In this article, you will learn about different kinds of inventory, problems, and solutions that will help you maintain high performance in inventory management in the long run. Continue reading to learn more!

What is Inventory Management in Retail Stores?

Inventory management in retail stores concerns the monitoring and control of the acquisition, storage, and utilization of merchandise that a store offers for sale. It also involves managing stock, orders, sales, and delivery of products and services. The objective is to ensure that there is adequate stock to supply the customers without having excess or insufficient stock.

It also encompasses the following things. 

• The evaluation of the sales patterns of various products
• The prediction of the future market demand
• The use of data insights to improve inventory, store performance, and profitability.

Overall, the inventory management aims at making products available for sale when required, avoiding excess accumulation of inventory that consumes capital, and at the same time, avoiding a situation where the company runs out of stock which may lead to loss of sales. 

What are the Different Types of Inventory that Retailers Need to Manage?

Some of the key areas that retailers have to oversee include stock, which can be classified into different categories with different functions within the supply chain process. Knowledge of these types can be useful in improving inventory management and control.

• Raw Materials

The raw materials are the unprocessed materials used to produce the finished products. Merchants manufacturing their products are required to exercise mild control over these materials so that they can always obtain an adequate supply to produce the goods.

• Unfinished Goods

Work-in-progress (WIP) inventory, refers to part-finished products that are in the process of being produced and have not yet reached their final stage. This type of inventory is typical for manufacturing organizations, and it is crucial to track since it directly influences production timings.

• Finished Products

Finished goods are products that are in a saleable state or are almost ready for sale to the consumer. Accurate management of this inventory will enable the store to restock in anticipation of demand without having to deal with large amounts of unsold stock.

• Cycle Inventory

Cycle inventory refers to the part of stocks that is utilized and restocked in the normal course of business. Effective control over cycle inventory enables the proper flow of goods as they reach their destination.

• In-Transit Products

In-transit inventories are items procured by the business and in transit from the supplier to the business or customers. This inventory is pivotal in managing and forecasting to avoid depleting stock levels.

• Maintenance, Repair, and Operations (MRO) Products

MRO products are items used in the store for repairs and maintenance, such as cleaners and equipment. Checking the MRO inventory is crucial so that operations are not disrupted.

• Anticipation Inventory

Anticipation inventory refers to merchandise that retailers purchase, and stores expect a rise in demand to occur shortly, perhaps due to festivals or a new promotion. This inventory assists in ensuring adequate stock is available during the festive season or other such occasions.

• Excess Inventory

Excess inventories are products that are usually in excess and not likely to be sold soon. Excess inventory management means identifying strategies for disposing of them, including lower-priced sales or promotions, to release physical storage and tied-up funds.

Besides, retail managers have to manage safety stock as well, which is an additional inventory kept to avoid stockouts due to fluctuations in demand and supply chain management. This type of inventory is used as a safeguard against stockouts to allow the company to provide its customers with a constant supply of products.

Challenges Retailers Face in Inventory Management

Inventory management comes with its own set of challenges and retailers have to face them. It can significantly impact a retail store’s efficiency and profitability. Here are some of the most common challenges. 

• Maintaining Accurate Stock Levels: Accurate stock numbers are important but hard to maintain, which results in stock differences between the actual number and the number recorded. This can cause stockouts or excess inventories, which affect the production process and the end product.
• Forecasting Demand: It is not very easy to predict the demand of the customers, to begin with. This means that the retail store may end up with too much inventory if  a firm forecasts inaccurately, thus wasting capital, or it may not have enough stock to meet the demand, and this could cost its sales.
• Avoiding Overstocking or Stockouts: The most significant difficulty is maintaining the right amount of inventory so that there is not an excess or a lack of some items. Excessive inventory is costly, while a shortage of inventory results in a loss of sales.
• Dealing with Supplier Issues: Lack of proper suppliers may lead to consistent interruption of supplies and inventory stock.
• Managing Returns: Dealing with returned products in a way that does not harm the stock management is critical and can be challenging and labor-intensive.

Besides, handling multiple sales channel concurrently is another challenge of managing retail inventory. The general management of inventory across multiple sales channels – including physical stores and online – increases the difficulty and likelihood of errors and discrepancies.

Best Practices and Expert Tips for Seamless Retail Inventory Management

Working in this area can also enhance inventory management. Below are some common best practices that you should consider to manage your store’s supply properly.

• Flex Your Ordering Muscles.

Implement an adaptable order cycle that you can easily modify depending on the estimated sales and the current market conditions. This will help avoid situations of overstocking and stockouts.

• Be Proactive with Your Supply Chain.

Negotiate with your suppliers and maintain constant communication with them to keep your supplies on track and handle any problems with the supply chain efficiently.

• Crunch Your Numbers. 

It is useful to analyze sales performance, anticipate future demand, and adjust stock accordingly to effectively manage inventory. It is advised to analyze the data of stocks frequently to make good patterns and strategies for the concerned company.

• Maximize Efficiency. 

Simplify your inventory work by sorting your stocks, utilizing standard methodology, and eliminating redundant activities. This will cut down the time it takes to handle calls and increase general productivity.

• Prioritize Accuracy.

Perform inventory checks and balance your records to ensure accuracy. Implement barcodes or RFID to follow inventory flows throughout the organization.

Proper inventory tracking should improve its accuracy, and this can be done by investing in an inventory management system that will help in the tracking by giving real-time results of the inventory and sales.

Why You Should Invest in a Retail Inventory Management Solution? 

Investing in an application for your store can offer many advantages associated with inventory management.

• Accurate Receiving and Shipping Records

An inventory management system eliminates errors and discrepancies by accurately keeping records of receiving and shipping.

• Real-Time, Reliable Inventory Counts

You will always have information regarding the number of stocks you have, which assists you in making the right decisions since you can track inventory in real-time with the help of retail inventory management systems.

• Merchandise Traceability Using Barcodes or RFID

The application of barcodes or RFID tags allows merchandise to be followed accurately through the supply chain, thus increasing the flow of information.

• Simplified Returns

The inventory management system is also greatly helpful in handling returns because this reduces some difficulties in processing returned items and updating records.

• Better Forecasting

The quantity demanded can be predicted with high precision, which means that you will always have the appropriate stock.

• Performance Measurement with Key Performance Indicators (KPIs)

Key Performance Indicators (KPIs) will show you how efficient your inventory management is and what aspects require changes.

• Insights into Sales Trends

Get useful information about product sales and customer preferences to make the right stocking and marketing strategies.

• Easier Implementation of Promotions and Discounts

Promotions and discounts become easier to execute when using the inventory management system since one can easily identify the available stock.

• Support for Dynamic and Strategic Pricing

You can set a price that better suits your business needs when you have accurate information on the inventory. 

Managers or team leads can get alerts for out-of-stock products, pending orders, and any other significant event concerning inventory so that appropriate actions can be taken. Furthermore, the app can facilitate the preparation of comprehensive reports on stocks, sales, and other variables in a short time, enabling you to make the right decisions.

How Inventory Management Systems Can Help with Retail Inventory Management?

The use of inventory management systems can greatly enhance the overall effectiveness of managing inventories. Firstly, an inventory management system decreases guesswork by offering real-time data on your inventory levels and allowing you to make better decisions.

Secondly, inventory management can also help reduce overhead costs by minimizing high inventories, which in turn increases profitability. Lastly, it becomes possible to keep the most demanded products in stock if you have with good inventory, and this will improve the satisfaction of the customers as well as the sale of the products.

Conclusion

Retail inventory management plays a crucial role in the success of any retail shop and, therefore, should be given a lot of attention. Through the details of the types of inventory, the issues encountered, and the proper strategies, the inventory processes of your store can be enhanced. A well-implemented and fully integrated inventory management system can offer many advantages that include accurate tracking of inventory, improved forecasting, and increased sales satisfaction.

Frequently Asked Questions

• What is the difference between Warehouse Management and Inventory Management?

Warehouse management deals with the reception, storage, transportation, and distribution of commodities within a warehouse. Inventory control, on the other hand, entails the coordination and oversight of the acquisition, storage, and consumption of products right from the supply chain.

• What is the ABC Analysis of Inventory Management?

ABC analysis is a technique for classifying inventories to decide the importance of each item. The ‘A’ items are valued higher, while the ‘B’ items are moderately valued, and the ‘C’ items are the lowest. This assists retailers in applying their strategies to the right stock.

• How to Improve Inventory Management?

Improving inventory management involves the following techniques. 

• Using data analytics
• Implementing best practices
• Investing in an inventory management system 
• Conducting regular audits
• Maintaining strong supplier relationships.

• Which Inventory Method Gives the Highest Profit?

The method of inventory that yields the highest profit differs as it depends on the business model or the type of enterprise. The FIFO method is not used as frequently as the former because it establishes the cost of goods sold based on the physical flow of the inventory, which could result in higher profit margins in cases of inflation of prices.