Every retail business needs efficient inventory. If a business doesn’t have a system to track the inventory or does it by using robust spreadsheets, it will face numerous issues. For instance, if you have no idea how much inventory you have in stock, you won’t be able to list items accurately online or make smart reorder decisions. You may also end up with incorrect amounts of certain products.
Retailers of any kind – physical stores, eCommerce, omnichannel, or multichannel — need an efficient inventory management system in order to stay competitive.
The Difference Between An Inventory Management System And ERP
Most clothing retailers use clothing inventory software to track the stock and lifecycle of every inventory item. Unlike ERP solutions, inventory management systems focus on only one process in the supply chain. They usually have an ability to integrate with other systems, such as shipping, point of sale, or channel management to enable you to build a personalized integration stack in accordance with your company’s specific needs.
Inventory management is a stage in the supply chain where stock quantities and inventory are tracked in and out of the warehouse. By using an inventory management system, you will always know where your inventory is and how much inventory you need to reorder.
The Importance Of Inventory Management
When your inventory is organized, you will avoid mistakes in the other steps of the supply-chain management such as overstocks, out of stocks, mis-picks, mis-shipments, etc.
Such mistakes will cost you time, wasted labor, and of course money. As a result, your customer loyalty and reviews will also suffer.
12 Inventory Management Tactics For Retailers
Your inventory management software’s efficiency will depend on how you use it. It’s wise to have the company that made the software set up the system. If you work with the experts who created the system, you’ll make sure to use the right features and techniques to make the most of your inventory management software.
Here are some inventory management techniques you need to know:
1. Bulk Shipments
This is a cost-efficient shipping method where your inventory is palletized in order to be able to ship a larger amount at once.
2. Forecasting Demand
Forecasting demand is based on past sales data in order to calculate an estimate of the expected customer demand. It is actually an estimate of the services and goods that a company expects customers to buy in the future.
3. Lean Inventory Management
Lean refers to a broad set of management practices that apply to any business. The goal is to improve the process’ efficiency by eliminating obsolete activities and waste from daily business.
Dropshipping is a fulfillment method where a store doesn’t keep the products in stock. Instead, they buy the products from a third party and have them shipped to consumers. The sellers actually never see or touch the products.
5. Consignment Inventory
Consignment inventory is a deal where a consigner (wholesaler or vendor) agrees to give a consignee (a retailer) their products without the consignee having to pay for the goods upfront. The consigner is still the owner of the goods and the consignee will pay for them after they’re sold.
6. Batch Tracking
This is a quality control technique where users can group and track a set of products with similar features. This inventory management method enables you to trace defective items back to the original batch or track the expiration of inventory.
7. LIFO And FIFO
FIFO and LIFO are techniques used to determine the inventory’s cost. LIFO (Last-in, First-out) assumes that the newer inventory is sold first and helps to prevent it from going bad. FIFO (First-in, First-out), on the other hand, assumes that the older inventory is sold first and is a good way to keep it always fresh.
8. Safety Stock Inventory
This technique is used in order to prevent stockouts usually caused by inaccurate forecasting or unexpected changes in customer demand by ordering more inventory than the expected demand.
9. JIT Inventory Management
JIT (Just-in-time) inventory management arranges orders of raw material from suppliers in connection with the production schedules with an aim to decrease inventory costs.
10. ABC Analysis
ABC analysis is a categorization technique where subjects are split into 3 categories in order to identify the items that have a significant impact on the overall inventory cost.
Category A contains the most valuable products that bring the highest profit; category B contains the products that fall between the least and most valuable, whereas category C contains products that are important for the overall profit but in general, they don’t matter very much individually to the business.
11. Minimum Order Quantity (MOQ)
Minimum order quantity refers to the smallest amount of stock that a supplier is willing to sell. If you aren’t able to buy the minimum order quantity of a certain product, the supplier will not sell it to you at all.
12. Economic Order Quantity (EOQ)
This is a formula for the ideal order quantity that a business needs to buy. It takes into consideration factors like total production costs of production and demand rate. The goal of the economic order quantity is to reduce related costs by minimizing buying.
Your inventory is your company’s biggest asset, so if you want to see your profits rising, you need to take good care of this asset. Having an inventory management software and proper inventory management techniques is key to a successful retail business.
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