Good retail inventory management practices ensure you know how much stock you have and where it’s located. Great inventory management takes it to the next level by blending point-of-sale (POS) technology and data to increase insights, automate processes, and optimize business results.
What’s the secret behind going from good inventory management to great? Here are three.
1. Ditch the spreadsheets.
Keeping track of the various items on the shelves, in the stock room, or at a warehouse is the first thing most people think of when they think of inventory management. Maintaining an accurate count as you take deliveries of new stock, make sales in-store and online, and take in returned merchandise takes full-time attention.
Today’s omnichannel retail environment amps up the complexity, making it almost impossible to manage inventory with physical counts and tracking spreadsheets. Luckily, POS technology can provide the automation and integration you need to track your stock counts in real-time. That way, you’re able to focus on meeting customer needs by having the right inventory on hand at the right time.
POS inventory management software brings together inventory tracking across all of your sales channels, providing an integrated view to help you minimize overstock situations and reduce the expenses that come from having too much capital tied up in inventory. Use real-time on-hand inventory reports to track how many items you have in stock, down to the SKU level and the value of your current stock at any given time.
Automating your inventory tracking and re-order points is critical to avoid running out of stock. For example, if a customer places a large online order, automated re-order triggers that take all channels into account can help ensure you’re able to keep your store shelves stocked. When you do, you reduce missed sales, which can add up quickly when an item is out of stock. Retailers miss out on an estimated $1 trillion in sales every year because they don’t have the items customers want on hand.
Related: Inventory Forecasting: A Guide to Accuracy and Getting Started
2. Gain insights.
Once you have your inventory tracking set up, centralized, and automated, it’s time to dig into the wealth of data you’re compiling to better understand your customers and your business. Your POS system becomes a valuable data hub, providing a range of standard and customized reports.
Basic standard reports include daily, weekly, and monthly sales reports; on-hand stock, best-selling, and low-selling inventory reports; and new, return, and dormant customer reports. With these in hand, you can turn the information into actionable insights that improve business efficiencies and drive additional sales. Here are three key inventory management insights to monitor:
To determine how different products are performing and identify precise re-order timing, track the sell-through percentage. Divide the number of items sold by the original inventory quantity. Then, multiply your result by 100 to get the percentage.
Track inventory turnover – the number of times an item sells within a defined time period – to ensure you don’t have too much money tied up in inventory at any given time. Calculate the turnover rate by item SKU by dividing the cost of items sold by the average inventory amount. For most retailers, a higher inventory turnover rate means you’re selling without overstocking.
Cost of Goods Sold (COGS):
This metric tells you how much it’s costing you to acquire the products you’re selling, which helps you compare product lines, determine pricing, and gain efficiencies. A lower COGS means product costs are relatively low compared to the sales you’re making. Calculate the COGS by adding the costs of inventory at the beginning of a defined period to the costs of additional stock added during the period. At the end of the period, subtract the costs of the ending inventory.
Related: 5 Essential Facts Your Inventory Management Reports Should Be Telling You
3. Optimize your inventory management.
Retail inventories are unique and often complex. To get the most out of your inventory, make sure your POS system aligns with the specialized needs and requirements of your business.
For example, wine and liquor retailers need POS capabilities that allow them to track items by alternate units, such as wine by the bottle, half case, or case. Fabric and quilt stores need to track items by measurements like yards, short bolts, or fat quarters. Clothing retailers need the ability to add hundreds, sometimes thousands, of seasonal item SKUs and manage various styles of a single product. Craft and needle arts stores must manage a wide-ranging inventory, often down to the specific dye lot a skein of yarn came from.
The right POS system can help you turn inventory management into a competitive advantage. POSIM is a point-of-sale and inventory management system that makes managing your inventory in a way that fits your business easy. To explore what’s possible with POSIM, contact us for a demo.