Inventory management is the heart of retail.
You cannot wing your inventory management system and expect to win. You need to have a modern agile system that reduces risk, boosts efficiency, and promotes growth.
To do that you need to follow best practices.
What are best practices?
Best practices are simply things that most successful companies do exceptionally.
They are the most efficient and effective ways of accomplishing something. They’re techniques that, through experience, research and quantification, produce the best results possible.
#1. Upgrade your automation
Many retailers today rely on outdated inventory management systems and technologies, missing out on the massive savings prodivided by modern, efficient systems.
Advanced AI like what is found in our R1 program can drive complex data gathering and deep learning analytics, resulting in the highest sell-through and net margins for every touch, movement, sort and pricing decision.
If it’s been 5+ years since you revisited your inventory management system, you are likely leaving millions on the table.
#2. Implement smart contracts
You’ve likely heard of blockchain technology, but do you know that it is already revolutionizing the way inventory contracts are managed?
Smart contracts allow companies to build in automatic payment transfers based on contract activity. This can be particularly advantageous in inventory liquidation, as manual payment processing can be skipped, with parties automatically receiving activity-based payments based on the contract.
We use hyperledger fabric smart contracts here at goTRG. Other options include Ethereum and NEO.
#3. Centralize your inventory system
Using a fractured and scattered inventory data collection system can hurt your business.
First off, a spread system is prone to errors. Also, it leaves your system vulnerable. Next, it leads to duplication of duties. Finally it causes system clashes since operations are not synchronized.
Work on using technology platforms that help you to integrate and centralize your company’s processes. A centralized inventory system allows you to:
- Get up to speed with inventory levels at a glance.
- Enter required inventory data once not repeatedly.
- Bring down mistakes of selling the same product twice.
- Fulfill orders quickly and efficiently.
Clearly, centralization is the way to go.
#4. Manage your aging stock
Aging stock can eat into your profits … fast.
Here’s how to deal with a stale inventory:
Sell-through rates and weeks of supply are handy metrics when handling aging stock. Calculate them so you’re not stuck with old stock, waste precious space and tie up cash in obsolete inventory.
As a last resort, mark down old stock and sell it so as to create space and have the cash to buy new stock. Or you can donate to it to the community and market your brand.
#5. Conduct inventory audits regularly
You need to set up an effective internal counting cycle.
Use the following questions for guidance:
- How many counts per year? (frequency)
- How to count: item, category or value? (strategy)
- Who’s in charge? (personnel)
Make sure what you have on the ground tallies with what’s in the system.
In addition, invest in external consultants. Specialists can unearth hidden hitches in your system, give you invaluable ideas, and update you on the latest inventory management technology.
#6. Know your consumer spending trends
Demand forecasting helps you predict your inventory needs.
Dig into your order stats and identify peak and low periods of demand for your products.
Analyse sales data to identify your best sellers and worst sellers and balance your stock. Use social media to do surveys and Google trends to gauge current customer trends.
Use the results to accurately predict demand.
#7. Appraise your supplier performance
Your inventory management system should include your suppliers.
You need to have a compliance program. It enables you to deal with product problems up the supply chain before they reach your premises. Enforce vendor compliance through in-depth inspections.
Your compliance policy should cover:
Routing guides, item specification sheets, retail and direct packaging, accounting standards, chargeback policies, advance shipment notice (ASN) and acceptance/rejection criteria.
Drop non-performing vendors and get new ones who’re willing to meet your specifications.
#8. Learn from your system fails
Research and learn from times when your business experiences acute shortage or abnormal excess.
Key points when this is likely to occur are:
- during peak season.
- after a launch.
- a sudden spike in sales.
You need to dig into why the inventory was out of sync with demand. Figure out what went wrong and fix it. It could be that you failed to replenish in time. Or maybe you didn’t watch your sales velocity closely enough.
#9. Bump up your customer service standards
I know you may be wondering but, yes, customer service impacts on your inventory.
If your customer service standards are stellar and customers are impressed they’ll buy more and move your stock fast. On the contrary, if your customer service is poor, your stock will collect dust on the shelves.
Train your workers adequately so they’re able to promptly respond to customer queries and confidently explain product specifications.
#10. Implement rigorous quality control
Quality control procedures ensure customer satisfaction. Satisfied customers buy more which keeps inventory moving.
For a start, use this basic checklist to check all received products for the following:
- Signs of damage: are there any leaks or tears?
- Discrepancies in descriptions – are product colors, styles, and sizes identical to purchase orders?
- Storage- are goods stored in a place that can ruin your inventory quality?
If product quality doesn’t meet the standards it must be promptly returned to the supplier.
To win, you’ve got to upgrade your system to match what the best in the business do. However, always remember that your business is unique and tweak some of the methods to fit your context.
Adopt best practices for a faster, cheaper, and easier inventory management system that gets cash flowing at an optimum rate.