Poor inventory management decision making is among the greatest reasons why retail companies fail. While nobody gets it 100% right every time, there are a number of simple to implement practices that can minimise risk. In actuality, there are loads […]
Poor inventory management decision making is among the greatest reasons why retail companies fail. While nobody gets it 100% right every time, there are a number of simple to implement practices that can minimise risk. In actuality, there are loads of examples of highly-successful retailers who’ve carved out a long-term competitive advantage by focusing on getting the leader for product availability and choice in their own category.
The main objective of any retail business is to have the ability to sell as a lot of your profitable products as rapidly as possible rather than tie up funds in slow-moving, unprofitable products. For this to happen, successful retail inventory management depends on skilful teams, streamlined processes and shared, accurate data to establish the best product assortment in the ideal quantities for each shop / station. Provide shoppers with the ideal choice of products and also have inventory readily available and you increase your chance of winning the sale. Fail to do so and be ready for your opponents to eat your lunch.
It has been estimated by IHL Group that merchants globally lose a staggering $1.75 Trillion yearly because of sub-optimal inventory decisions such as:
- Preventable Returns: $642.6 Billion annually
- Out-of-stocks: $634.1 Billion annually
- Overstocks: $471.9 Billion annually
The average retailer loses 4 percent of potential revenue because of customers purchasing products from other retailers when things aren’t immediately available for purchase.
A lot of this can be prevented by following some important principles of effective inventory management and it can quickly become a source of competitive edge. In actuality, within the ConnectPOS customer portfolio, we’ve seen companies quickly add $15,000 annual profit per store by simply implementing these optimization plans .
So, what are the practices which actually have impact?
1. Maximise Inventory Availability In-store and Internet — Endless Aisles
Informed retailers require an omni-channel approach to stock management called an Endless Aisles. All channels and stores have access to’pooled’ stock across the whole supply chain, in direct response to customer requests and requirements. Employees can readily access goods and stock data, and clients have access to inventory quantities regardless of if they step into a store or shop online.
Imagine you had a endless warehouse, fully stocked with each SKU in every size, color and variation. This basically refers to an infinite aisle approach, except instead you use a wide range of systems and practices to provide that stock availability including:
- Making All of Your in-store stock available online (and vice versa)
- Click & Collect and in-store inventory check
- Automated inter-store inventory transfers, or delivery to home/work from other places
- In-store kiosks or tablets that allow clients to navigate your entire product range
- Fall –shipping
Having an Endless Aisles approach, you’re not merely maximising your inventory offering but also facilitating a better customer experience, since they may choose whichever channel is fastest and most convenient for them. Needless to say, this approach will only work if you manage your inventory data correctly, which brings us to our next crucial clinic…
2. Use(true, live) data to drive decisions
Having precise, real-time information, reports and dashboards that permit you to get visibility, unveil blind-spots and make informed decisions is a vital element of managing inventory on your retail operation.
Retailers must be basing their merchandise variety and inventory forecasting based on an extensive evaluation of which products or groups have performed well in the past and key trends in their revenue and customer information (such as seasonal cycles and crucial segment demand). As soon as you’ve got these tendencies identified, it is going to enable you to set appropriate order amounts and frequencies, pricing/margin strategies and marketing programs. Yet many still rely on gut instinct or their providers recommendations to plan inventory as opposed to letting the information guide them.
Additionally it is crucial to be constantly reviewing inventory versus sales in all your locations and stations. Do you know for a fact which products are beneath and overstocked across every one of your stores? By being informed about such scenarios, you can move stock around your operations, plan promotional strategies to move excess stock or leverage finest actors and make better choices about future stock purchases
Your data should factor in stock on hand, laybys and backorders in real time across your eCommerce and bricks and mortars stores. Many low-end POS Systems neglect to incorporate each these factors which begs the question — are you making decisions based on incorrect data?
Data has to be structured into classes and sub-categories, to let you perform advanced searches or receive a high-level, helicopter perspective of important trends.
3. Utilize Automated Replenishment To Optimise Stock Levels & Remove Manual Admin
- Sales daily (run rate)
- Lead time in the provider
- How much inventory you have in each shop
- Just how much is currently on order or in-transit to each shop
- How long you want the new stock to last you for
You’ll be more likely to buy items which will sell and minimise overstocks and under-stocks.
You’ll also have the ability to save many hours of manual admin. Normally, a merchant can cut their labor hours spent on replenishment by 50%, saving $7500 per month.
Want to include $120,000 Per Store For Your Bottom Line?
It has been found that retailers that exceed customer expectations and give the fastest and easiest access to the ideal products, can cement a strong competitive edge in their category. Our customers see a mean of $120,000 increased annual profit per store by empowering such plans.
►►► ConnectPOS is a cloud-based POS software compatible with multiple platforms including Magento, Shopify & Shopify Plus, and BigCommerce.