Retail Inventory Management Best Practices 2022
February 10, 2022
Effective inventory management can drastically lower the ongoing running costs of your business, increase customer satisfaction and improve profitability overall. This blog will explain why applying the best inventory management practice to your business is so important. We’ll cover what retail inventory management is and why ineffective management is costly to your business, as well as share some of our best-practice tips for managing your inventory.
What is retail inventory management?
Retail inventory management is the term for managing stock levels within a company. This may seem simple at first glance, but with every additional product and component your business needs, the more complex managing your inventory stock mix can become. For example, your product may be perishable or require perishable ingredients, making managing inventory even more challenging. Or, your end-product may be a kit product and therefore is made up of many other products before sending to the customer. Scenarios like this can make managing inventory challenging, so following best practices is essential.
Why is inventory management critical?
Ineffective inventory management can be costly to businesses. Below, we have listed some examples demonstrating why good inventory management is so important and how it can save your business money.
Optimise use of space and reduce costs
We have said it before, and we’ll keep saying it. Ineffective stock management can result in a business paying more than it needs to for space. Whether your inventory is held in an office or colossal warehouse, you can maximise the value of your space by optimising your stock management. For example, holding too much stock means you’re paying for a larger space than is needed. Equally, owning or renting a space that is too small to have enough inventory to cope with demand is costing you sales lost due to out of stock issues. Similarly, by ensuring your space is efficiently laid out, you can save valuable time on picking, packing and assembling orders as they come in. Overall, managing your inventory well is hugely important if you want to optimise the space you have.
Improve cash flow
Buying excess stock can be an expensive business and damage your cash flow. For example, if you buy too much stock, this leaves you with less cash until that stock sells. Worse still, if that stock dates or is perishable (for example, technology products, the in-trend toy or gadget and food), that stock will decrease in value over time or become waste. Because of this, effective stock management allows you to improve your cash flow situation. We recommend keeping an eye on your sales using the data that StoreFeeder can provide you with. This will help you to accurately forecast to anticipate demand and prepare stock in a way that will benefit your business’s cash flow situation.
As mentioned above, as well as reducing wasted space and budget spent on storing stock, efficient inventory management can avoid product waste. A recent undercover investigation by ITV showed millions of unsold items being taken from Amazon warehouses and destroyed. As mad as this looks, it shows that stock that doesn’t sell is a drain on the business, and it’s cheaper to destroy it than keep it on the shelves. This accurately demonstrates the need to plan stock and space to avoid potentially vast amounts of waste.
Avoid disappointing your customers.
Chaotic inventory management can increase the chance of error. This might be overselling stock, leaving you with the need to disappoint customers and let them know their delivery will be delayed or needing to refund them, leaving you at risk of receiving negative reviews. Similarly, a chaotic stock management system can mean that the incorrect items are more likely to be picked and packed as team members struggle to find the correct items and begin to rush.
What is retail inventory management best practice?
Accurately forecasting stock levels is key to efficient inventory management. To accurately forecast anticipated demand for your products, it’s essential to look at historical data and new trends, carry out market research and consider your planned marketing activities. The more information you can arm yourself with, the better your forecasts. StoreFeeder customers can achieve this by using our sales report function. This will allow you to analyse sales, but season, day, week, month you name it. You have the tools to see what is selling and when it sells. By accurately forecasting demand, you can ensure that you have just the right amount of stock - not too much and not too little.
Consider space design to drive picking and packing efficiencies.
If your stock is poorly organised or laid out in a convoluted way, this can negatively impact many aspects of your business. A poorly organised space can make it hard to grasp how much stock you have, mainly if you don’t use technology to scan products in and out. Failing to organise your space can also impact the time it takes to pick and pack products, driving inefficiencies that will cost the company time and money.
As a company that provides our users with the software to effectively manage their inventory, we advocate for using technology to manage stock.
Using technology lets you ensure each component, material or product is scanned in and out, meaning you always know how much stock you have of each and every part. Better still, this technology can sync with your store so that you never oversell stock and have to disappoint customers.
Tracking stock in this level of detail also arms you with a wealth of information that can be used for forecasting future demand. Overall, it takes all of the hard work out of managing inventory!
Consider your growth plans.
All businesses want to grow and scale, and it’s essential to factor this into your inventory management strategy. Traditionally, businesses would sell in-store, on their online store or both - meaning they had a lot of control and visibility in managing supply and demand. Your business channels tend to be familiar territory. However, today consumers shop across multiple platforms. Whether it’s Amazon (the world’s biggest online marketplace), eBay, Etsy, Not On The High Street or any other marketplace, tracking inventory can become seriously challenging.
Planning for growth and anticipating which online marketplaces you may wish to expand into is key to effectively managing your inventory.
Our StoreFeeder software works across marketplaces, meaning whether you sell on your website, Amazon, eBay or a combination of the leading marketplaces. Our software can manage your inventory effectively.
Many of our clients initially utilise our software for just one or two channels but plan for growth and end up using our software to manage listings, inventory and more across many marketplaces.
If you’re considering how to manage your inventory more effectively in 2022 and beyond by implementing best practices, then we would love to help. StoreFeeder is one of the UK’s leading multichannel software providers to retailers, and we help our customers to grow their businesses by providing software that drives efficiencies. Get in touch today for a free demonstration to tailor to your business.