9 Tips for Better Retail Inventory Management in 2023
Effective retail inventory planning is critical to the success of your business. However, mastering inventory management can be challenging, especially if you are running a rapidly growing company or are new to retail.
Fortunately, you don’t have to navigate your inventory planning hurdles alone. Join us as we take a deep dive into retail inventory management. We’ll examine the retail inventory method and identify a few popular methods you can incorporate into your business model.
We’ll also reveal 9 tips that can help you manage your inventory more effectively.
What Is Retail Inventory?
Retail inventory describes all the available stock that’s currently in your inventory. While you generally track the individual stock levels of each item, you also need to maintain awareness of the cumulative value of your inventory.
Retail inventory management is the process of overseeing both stock levels and your total inventory value. Losing sight of current inventory levels can lead to stock-outs, which will negatively impact customer experience.
On the other hand, failing to monitor the total cost of your inventory can create cash flow challenges that threaten business continuity.
What is the retail inventory method?
The RIM (retail inventory method) is an accounting method designed to estimate the value of your store’s merchandise. This method measures the cost of inventory as it relates to the price of your merchandise.
The RIM is widely considered to be the best tool for estimating merchandise value and stock levels. However, it is only an estimate. As such, you should always engage in periodical inventory counts to verify the accuracy of this accounting method.
Achieve Better Retail Inventory Management with These 9 Tips
The RIM is a good starting point for tracking and managing your inventory. But there are several ways in which you can optimize your inventory management capabilities. Specifically, we suggest that you:
1. Categorize Your Inventory
Not all inventory is equal. Some products will cost more and sell less frequently than hot-ticket items or trendy goods. With that in mind, you should categorize your inventory into a few priority groups. There are several ways to go about this, but a common method involves creating A, B, and C, inventory groups.
Items in group A are more costly, which means that you need fewer of them. Group B products don’t sell quite as slowly as A items, but they are more costly and slower to turn over than C items. Group C products are affordable and easy to sell fast, which means that you need to order them most frequently.
2. Track All Relevant Product Information
When setting up your inventory management systems and processes for retail, it is vital that you track all relevant product information. Some of the information you need to track includes:
- Lot numbers
- Barcode data
- Country of origin
You should also monitor the cost of each item. Doing so will enable you to monitor seasonal or scarcity-related price changes.
3. Conduct Audits
Remember, the RIM only provides an estimate of your physical stock and its value. Therefore, you should conduct an extensive inventory audit and compare it to your estimates.
Some businesses will only conduct an audit once per year. However, others will perform monthly or quarterly audits. In between audits, most retailers will do spot checks wherein they count the physical stock of a few of their top sellers.
Regardless of which audit intervals you choose, make sure that you are conducting some form of physical stock count on a recurring basis.
4. Assess Supplier Performance
Suppliers are critical to inventory management. If a supplier is unreliable or frequently late with your deliveries, it will be nearly impossible to effectively maintain adequate stock levels.
As such, you should continuously assess supplier performance. If a particular supplier keeps falling short of your expectations, reach out to them and see if you can remedy the issue. Don’t be afraid to cut ties if a supplier cannot meet the needs of your business.
5. Leverage the 80/20 Rule
Generally speaking, 80% of your revenue will be generated from 20% of your inventory. Once you identify what items fall into that 20%, prioritize managing those items to ensure that they are always in stock.
To be clear, you shouldn’t neglect the other 80% of your inventory. But your top sellers should receive the majority of your attention and focus.
6. Use Consistent Receiving Methods
Processing incoming stock is a core component of managing a retail business. It is also something that you are already doing regularly. The question is, do you have a standardized process for receiving new shipments? If not, you will inevitably encounter stock issues such as inaccurate inventory counts.
To prevent these issues, develop a consistent receiving process. Once you have done so, bring your team up to speed to ensure that every inbound order is processed the same way.
7. Closely Track Sales
Tracking sales seems like an obvious tip. But you would be surprised how many retailers simply add up their total sales volume at the end of each day.
In addition to calculating sales volume, you need to update inventory totals and determine how many units of each item were purchased. Next, you will need to analyze this information so that you can stay apprised of the latest purchasing habits.
8. Manage Restocks In-House
Some suppliers will offer to reorder inventory for you. This may seem like a convenient service that takes some responsibility off your plate. The downside is that the vendor is focused on accomplishing their goal, which is to move inventory. They are not necessarily looking out for the needs of your business.
To ensure that you do not get bogged down with unnecessary inventory, manage restocks yourself. It may take a little extra work, but it will also help your business better adapt to shifting buying trends.
9. Explore Inventory Management Systems
If you want to optimize your inventory management capabilities, you should consider investing in dedicated software. While many retail inventory management systems are on the market today, they’re not all equally effective.
The dynamic solution that Datapel Cloud.WMS offers provides real-time insights into your inventory. You can use our powerful reporting tools to track purchasing trends, monitor stock levels, and make sure that you never run out of your best sellers.
To learn more, get a 14-day free trial with Datapel Systems today.