Retail Inventory Management Best Practices

In the retail game, keeping track of inventory is key. It’s all about having the stuff people want, when they want it, and at a good price.

Retailers use fancy tech, number crunching, and savvy employees to make sure they’ve got the perfect mix of products to meet demand without going broke on storing too much. And, on top of that, it helps them save on shipping and storage costs.

In this article, we’ll go through what retail inventory management is, how a retailer can make the most out of their inventory management system/software, and what the best practices for retail inventory management are.

 

What Is Inventory & How To Manage It?

 

Inventory for retailers and wholesalers is like their stash of goods waiting to be sold.

It’s the stuff lining store shelves or stacked in a warehouse, ready for customers or other businesses to snatch up. Think of it as the treasure chest that keeps the business going, holding everything from gadgets to gizmos.

Retailers and wholesalers keep a close eye on their inventory to make sure they’ve got the right items in the right quantities, so they can meet demand without drowning in excess stock. It’s basically the lifeblood that keeps the business pumping.

 

How do you manage it?

Effective retail inventory management is crucial for retailers, and the ideal solution lies in robust retail inventory management software.

This tech-savvy tool, like ProfitBooks Inventory Management System, empowers retailers to seamlessly track, analyze, and optimize their retail inventory management.

By leveraging real-time data and automation, retailers can make informed decisions on retail inventory management, including restocking, pricing, and product assortment. This not only ensures that shelves are stocked with the right items at the right time but also helps minimize carrying costs and enhances overall operational efficiency.

 

What Is Retail Inventory Management?

The question that we should be asking is what is different about retail inventory management, as the basics are the same for any industry.

Retail inventory management is like foreseeing the right levels of stuff to keep on hand for sale or storage, covering all the different things you sell through various channels. This involves using retail inventory management software to figure out what people want and how much your goods are worth for accounting and audits.

Good retail inventory management also means following smart practices to store and ship products efficiently to stores.

The main aim of retail inventory management?

Making sure you’ve got enough products to meet demand without holding onto things that nobody wants and doing it all without spending too much.

 

The 5 Types of Retail Inventory Management

Retail inventory management is like keeping tabs on stuff as it moves from the maker to the seller, with stops at the warehouse and store. It’s not just about the final products; it’s also about half-done things and other stuff like maintenance gear.

Here’s a rundown of what might end up on the inventory checklist:

 

1. Raw materials: Think steel, wood, cotton, or plastic—basically, the Lego pieces that go into making the final product. Gotta handle these carefully to keep the whole production show running smoothly.
2. Work-in-progress (WIP) items: These are the things still cooking in the manufacturing pot—partly made products or pieces still in the works. The WIP inventory value covers materials, labor, and the direct costs of making stuff.
3. Finished goods: The full package—made, wrapped, and ready to hit the shelves.
4. Maintenance, repair, and operations (MRO) goods: Tools, spare parts, cleaning supplies—basically, the gear needed to keep the machinery and the place itself up and running.
5. Packaging materials: Boxes, cartons, labels, and all that jazz—materials to make sure the goods survive the trip from point A to point B intact.

 

How Does Inventory Management For Retailers Work?

(source: Oracle Netsuite)

 

There’s no hard and fast rule for inventory management for retailers, however, the following ten steps are generally the standard.

 

1. Centralized Record of All Products: List all your goods in one spot with details like product name, SKU, brand, size, price, category, lot number, location, expiration date, vendor info, and costs. Don’t forget product images. Keep this record updated for smooth operations.
2. Identify Stock Location: Know where your goods are—on shelves, in stockrooms, or in transit. Use RFID tags, barcodes, and labels for easy tracking, especially if you’re dealing with multiple locations.
3. Regular and Accurate Stock Counts: Count your inventory regularly, considering shrinkage, damage, and returns. A retail inventory management system makes this easier, helping you focus on discrepancies.
4. Combine Sales and Inventory Data: Integrate sales and inventory data for insights on fast and slow-moving goods. Use this info to decide when to reorder, promote, or discount.
5. Purchasing Process: Set times to review data and place orders. Electronic systems can alert you when stock is running low. Prioritize purchases based on profitability and popularity.
6. Markdowns and Promotions: Plan for markdowns and promotions to move slow sellers and make room for profitable products.
7. Stock Receiving Procedure: Verify incoming orders, check for errors or damage, and update your inventory. Follow a procedure to avoid stock outages or overpayments.
8. Returns Procedure: Handle customer returns promptly. Check if items are damaged, route them for repair, write-off, or return to the vendor. Add sellable items back to your inventory.
9. Dead Stock Procedure: Deal with excess inventory by categorizing and removing dead stock regularly. Return items to vendors, sell to outlets, donate, recycle, or dispose of them based on your product line.
10. Inventory KPIs: Track key performance indicators like profitability, inventory value, sell-through rate, and turnover rate to measure success.

 

7 Best Practices For Efficient Retail Inventory Management

Managing your inventory is a series of common-sense moves: First off, make sure you’ve got enough stuff to meet the demand. Then, figure out a smooth and cost-effective way to get those items to your customers on time. Keep a keen eye on where your goods are coming from, set up a system to reorder before you hit empty shelves and nail down a reliable method for predicting demand.

It’s like having a game plan to make sure you’re always stocked up and ready. Here’s a list of 7 best practices for retailers managing their inventory efficiently:

 

1. Implement ABC Analysis

First off, what is ABC analysis?

It’s like the first smart move in handling your inventory. The idea is to make sure you’ve got plenty of the stuff that brings in the bucks for your business.

Picture this: you take your inventory and split it into three groups (or more). Now, these groups are like VIP sections, ranked by how much they sell or how much revenue they generate.

Following the Pareto Principle, you wanna stash 20% of your goods in the A-list—those are the ones raking in 80% of your sales or profits. The C-list is for the not-so-hot items, and the B-list is in the middle.

Go through our guide on the Pareto Principle to understand this better.

Why does this matter?

Well, it helps you figure out what to order next and where to put your focus when it comes to marketing and showing off your goods in-store. It’s like a strategic game plan for your inventory game.

 

2. Monitor Stock Levels Consistently

This is an obvious point.

Here’s the deal: lots of retailers miss the mark when it comes to keeping a close eye on their stuff. According to a State of Small Business report, almost half of the companies out there (46%, to be precise) don’t have a solid retail inventory management system. Some are doing it by hand, while others are just winging it without any tracking at all.

Now, the smart move here is to regularly check and double-check how much stuff you’ve got. This golden rule applies whether you’re dealing with a warehouse or a brick-and-mortar store. Traditionally, these places do their inventory checks at different times, but the key is to keep it accurate and regular.

 

3. Avoid Store Clustering

Retailers play a balancing act when figuring out what each store needs during different shopping phases. They can up their game in retail inventory management by tweaking what each store gets and when.

With nifty tools and retail data smarts, retailers can keep a close eye on how well certain goodies are doing in specific stores. Then, thanks to machine learning, they can fine-tune what each store gets and how they group them. This helps stores get a grip on what they’re selling and figure out questions like, “Should we mix things up for this group of stores?”

Market vibes change, and trends shake things up. Retailers might lag behind, but using data tech to smarten up assortments and groupings can keep their stock game strong.

 

4. Reorder Timely & Stock Up

The reorder point is like the inventory superhero—it’s the level of stock that shouts, “Hey, time to restock!” In the world of retail, you can figure this out manually, but using nifty demand planning software is the real game-changer.

You can track your stock levels effectively with ProfitBooks software as well. You can see at one glance which stocks to reorder and which ones are in surplus.

This software makes sure you never run out of goodies and that you’re ordering the right stuff at the right moment. Now, there’s a math formula for this superhero move: it’s the number of items you use everyday time the days it takes to get new stock, plus a safety net of extra items, like this:

Reorder point = (how many you use daily x days it takes to restock) + a safety cushion of extra items.

 

5. Determine safety stock levels

Imagine safety stock as a kind of cushion in a retailer’s inventory game. It’s like a backup plan for when things get wild—unexpected demand spikes, suppliers hit snooze on deliveries, or your crystal ball for predicting what people want malfunctions.

For retailers, not having enough safety stock is like missing out on a gold mine. In 2021, running out of stock cost US retailers a whopping $82 billion in just consumer packaged goods sales.

To figure out the right amount of safety stock, it’s a math game—multiply the items you sell daily by how many days’ worth of backup you want. So, if you sell 200 items a day and want a safety net for seven days, that’s 1,400 units of safety stock.

 

6. Analyze, Understand, & Implement Data

When you’re figuring out how much of each thing to stock, dig deep into your sales data. Check out things like:

• Seasonal trends
• How much stuff you already have
• Any price changes
• What your competition is up to
• Anything that might sway how people shop.

This smart analysis ensures your shelves are just right for what customers want. In retail, crunching these numbers is a big deal for a couple of reasons.

First off, looking back at what sold well helps predict what folks will want next. That way, you won’t end up drowning in extra stock or missing out on sales because you didn’t have enough.

Plus, it’s like a crystal ball for making your business more profitable by turning over inventory smarter. So, keep an eye on those sales stats!

 

7. Get A Power Retail Inventory Management Software

 

Get some software or apps to handle your inventory levels – it’s like having a wizard for your stock.

This tech magic gives you instant updates, helping you figure out if you need more stuff or if it’s time to tweak prices for a quicker sale. For any retailer, having a top-notch retail inventory management system is key. Using software in retail inventory management has heaps of perks:

 

• Sharper Accuracy: Keep your retail inventory management records always spot-on with the software. No more wasting time on hunting down lost or wrong records. Now you can put that effort into growing your business and keeping customers happy.
• Superior Efficiency: When all your inventory details are in one spot, managing your stock becomes a breeze. Quick reorder when needed, and smooth returns to suppliers when stuff isn’t wanted anymore.
• Cut Costs: With the software in your retail inventory game, say goodbye to unnecessary expenses tied to stock management. No more burning cash on labor for chasing down missing items or fixing mistakes. Automation takes care of the nitty-gritty, freeing up time and resources for growing your business.

 

Wrapping Up: Looking For A Powerful Retail Inventory Management Software?

Look no further! ProfitBooks Inventory Management Software is the best FREE solution for retailers and wholesalers. And yes, you heard us correctly, it is 100% FREE to use!

When it comes to retail inventory management, there are a few key considerations:

1. You need to be able to track stock levels across multiple stores and warehouses.
2. You need to be able to manage sales orders and purchases from a single platform.
3. You need a solution that can help you solve retail inventory management issues quickly and efficiently.

Software like ProfitBooks retail inventory management helps with these considerations.

With ProfitBooks, you can view your:

• Stock levels
• Sales and manufacturing orders
• Purchasing data.

You can also use ProfitBooks retail inventory management to create and manage multiple warehouses and store locations.

 

 

One added feature is that we are a cloud accounting software, so you can manage all your inventories while on the go! ProfitBooks travels with you!

Plus, ProfitBooks’s built-in real-time stock management features can help you solve any retail inventory management issues that may arise on the fly. With ProfitBooks’s intuitive yet easy-to-use user interface, it’s a breeze to manage your retail inventory and keep track of sales orders and purchasing data.

Get your 100% FREE account now!