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Inventory management is often not an easy task. That’s why it requires the involvement of everyone in the company, from the warehouse manager to the financial experts. Otherwise, business growth is likely to be affected.
One of the biggest problems with inventories worldwide is organization. In fact, research conducted by Order Dynamics and IHL in 2016 revealed that retail chains lose approximately one billion dollars a year due to unnecessary returns, out-of-stock and over-stocked products.
Therefore, using a retail inventory management system is essential to control your business’s stock.
By correcting these inefficiencies, retailers can add $117,000 in revenue per million dollars in sales to their margin. That’s why it’s imperative to find solutions to minimize these revenue-constraining problems.
Below are the shortcomings that appear in the stock management process.
Deficiencies in Stock Inventory Management Process
When an organization seems to be failing to deliver the desired results in its stock management, it may exhibit the following symptoms:
- Surplus stocks in some lines, SKUs or families
- Decrease in the level of service due to shortages
- Increase in lost or denied sales
- Low inventory turnover
- Saturated or significantly underutilized stores
- Increase in the level of obsolescence and shrinkage
- Decrease in cash flow
- Lack of justification for inventory levels
- Increased investment in security or buffers
- Increased emergency purchases
- Higher costs to maintain inventory
Methods for Inventory Management for Retailers
So that you don’t fall into this problem here are five methods that lead to good inventory management.
Using Inventory Management Coding Practices
This method speeds up processes such as purchasing, requisitioning, and receiving. In addition, it promotes standardization and is indispensable in quality processes.
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Using Classification Practices
The best known classification system is the ABC system. This method allows the analysis of all the available inventory, dividing it into three categories: A, B and C. This method separates the products that require a lot of attention from those that do not in order to prioritize management.
Managing Decentralized Stocks in a Synchronized Way
This is the best practice for inventory optimization in large organizations where multi-stage distribution networks exist, due to structuring according to service levels.
Inventory Management Using the Just-in-Time (JIT) Method
The Just in Time method is one of the most widely used methods in the supply chain. This method helps maintain inventories at optimal levels while reducing storage costs.
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Using Strategies such as Modularization and Deferral
Applying this method allows the delay of the customization of the product as much as possible in the flow of the supply chain. As a result, there is a better response to demand. In addition, it provides cost reductions.
These methods are tools that will facilitate proper inventory management. Likewise, they will help you to keep goods in the best condition possible helping you to meet demand.
Efficient inventory management in the retail industry is not trivial. It involves precise processes, a technological infrastructure, and adequate controls.
However, it is important to continually improve and update the methods you rely on. This will generate greater opportunities for survival in today’s highly competitive markets.