Whether you love to organize things, make lists, or checkboxes are your bane of existence, what is certain is an unorganized inventory is a lead weight on the retail business. Like it or not, you must keep on the top of inventory management to run a business optimally and, essentially, make more money. Whether you are considering utilizing inventory management software or want to optimize the existing system, our retailer’s ultimate guide will leave you with helpful tactics to win at inventory management.
What Is Inventory Management?
The process of ordering, storing, and managing the inventory refers to as inventory management and is a crucial pillar for successful retail operations. Optimal inventory management provides you with the information to:
- Increase profit margins
- Minimize excess stock
- Cut down the inventory costs
- Creating better efficiency through workflows
Inventory Management Techniques Every Retailer Must Know
- Inventory Valuation
- Understanding how much inventory is costing you is essential to make appropriate purchasing decisions. Here are some inventory valuation methods:
- The retail method
- The retail method compares the price and cost of stock to provide an approximation of the ending inventory balance.
- Weighted average method
- This method is useful when the product prices don’t often change. To calculate it, divide the cost of items available by the number of units available, which provides the weighted average cost per unit.
- First In First Out (FIFO)
- In this method, the oldest items in the inventory should be sold first. Retailers prefer this approach to prevent the goods from becoming obsolete.
- Last In First Out (LIFO)
- In this method, you must sell the newest items in the inventory first. Retailers prefer this approach when their products are more expensive than older stocks.
- Regular Reconciliations
- Regular reconciliation always keeps you on top no matter what’s going on with the stock. Here are a few tactics for regular reconciliation.
- Physical inventory counts
- It refers to counting every single available unit. It gives the most accurate picture of inventory levels. However, full counts take a significant amount of time. It must be done once a year, especially when SKU levels are lowest.
- Cycle Counts
- It refers to counting a specific amount of inventory more often and helps in bridging the gap between full inventory counts. Using this method, you can watch out for your inventory levels without going through the entire stock.
- Spot Checking
- This method refers to counting the same portion of inventory for several weeks in a row. This helps you identify patterns or any unexplained shrinkage in a specific kind of product.
Importance of Inventory Management
Inventory management is essential for retailers to minimize inventory costs and decrease out-of-stock risks. Furthermore, it helps identify inefficiencies that happen when items become obsolete and prevent product spoilage. Inventory management enhances omnichannel/multichannel performance and order fulfillment if you run a business via physical stores. Besides that, the shipping process can also be simplified, and staff stress, customer complaints, and errors can be minimized.
Implementing the perfect inventory management strategy can be time-consuming and confusing. However, hopefully, our retailer’s ultimate guide to inventory management can help you find the right way to manage your inventory without hassles.