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/ 12.8.2020 / News,Operation Educate,Retail Tips and Tricks

When you have the items your customers want on-hand when they want to buy them, you’re a retail genius with your finger on the pulse of your market. When stock runs low, and you have to turn away buyers, you feel the pain, right in your business’s bottom line. It’s estimated that collectively retailers lose up to $1 trillion in annual sales because they don’t have items on-hand when customers are ready to buy.

Inventory management is a little bit of art and a whole lot of science. Getting it right starts with banishing misperceptions and outdated beliefs that keep you from optimizing your inventory management – and your profits. Read on to explore common inventory management misperceptions and what to do if you hear yourself saying any of the following statements. 

“I can manage without inventory management software.”

You wouldn’t try to build a house without tools. Don’t try to build a successful retail business in the 2020s without the right point-of-sale (POS) system. Navigating inventory tracking and reporting through spreadsheets and formulas is a recipe for mistakes and frustration. 

Instead, choose a POS system with inventory management capabilities that fit your business today and can adapt and grow when you need it. The inventory management tools within your POS will centralize, integrate, and automate your inventory information across brick-and-mortar and e-commerce channels, so you get an accurate, all-in view of your stock. This means it’s simple to access and analyze your data so that you truly understand what’s selling, what’s not, and if your inventory is keeping up with customer demand.

Related: Does Your POS System Have the Right Answers to These 3 Questions?

“Forecasting and inventory management are two totally separate things.”

Every retail business has fluctuations in customer purchase patterns. Some lucky retailers have predictable patterns with easy-to-understand buying cycles. Most have a mix of predictable busy seasons like annual holiday shopping combined with less predictable surges of demand tied to market trends, certain products, or different customer types. 

A centralized POS system makes it easy to leverage historical inventory data so that you not only forecast accurately, but also identify different buying patterns and adjust your ordering in real-time. In other words, solid forecasting relies on solid inventory management – and helps to ensure that you don’t end up with a storeroom full of unsold products that have to be sold at a discount at the end of a season. 

Related: Inventory Forecasting: A Guide to Accuracy and Getting Started

“It’s impossible to get the timing right on re-orders.”

While inventory is an asset on your business’s balance sheet, having too much on hand can make it a liability when it comes to cash flow. And, while re-ordering the right amount of stock at the right time is a balancing act, your POS system should provide tools to help you automate and streamline the process. 

Each item in your inventory has an ideal re-order point, which takes into account the in-stock threshold based on customer demand and inventory turnover rates, as well as the lead time needed to order, receive, and re-stock. The key is calculating the right amount of “safety stock” to cover unexpected delays in receiving new inventory without over-stocking. To determine an item’s appropriate safety stock amount, multiply its maximum daily usage by the maximum number of days of lead time for re-ordering. Then, think about the typical scenario. Multiply the average daily usage by the average re-order lead time. The difference between the two results is an indicator of the safety stock amount you should have on hand for that product. 

Optimize your POS system’s capabilities to automate re-order point notifications along with key reports, such as daily sales, top-selling items, and slow-selling items.  

Related: 5 Essential Facts Your Inventory Management Reports Should Be Telling You

“Taking a physical inventory has to be time-consuming and painful.” 

Taking periodic physical counts of inventory ensures accuracy and prevents unexpected out-of-stock situations. There are two keys to increasing the efficiency and effectiveness of your physical inventory efforts. First, leverage your POS system to digitally reconcile your inventory reports and physical counts across thousands of SKUs to identify differences due to shipment errors, damaged items, or shoplifting. Second, tackle physical inventory on an ongoing, rotating basis by counting specific product categories on a daily or weekly schedule. This ongoing approach, often called cycle counting, typically takes fewer resources and reduces disruption to operations.  

Establishing solid inventory management behind-the-scenes helps keep the focus on meeting customer needs and maximizing overall profitability. POSIM delivers robust, integrated inventory management that gives you access to the information you need to make data-driven decisions and grow your business. Contact us for a demo today. For more inventory insights, download our guide, Countdown to the Holidays: 10 Steps to Optimize Inventory Management and Increase Sales.

Philip Beedle

General Manager | POSIM

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