Retail Inventory Management Best Practices – Forbes Advisor

To ensure your efforts put your retail business on the road to success, keep these retail inventory management best practices on your radar.

1. Set KPIs

Key Performance Indicators (KPIs) are designed to measure performance over specific periods of time to help you achieve specific goals. When you set inventory KPIs, you’ll have a clear understanding of what milestones you want to achieve on a weekly, monthly, quarterly, or yearly basis. KPIs also give you the data you need to make smart business decisions. Some examples of KPIs that you might want to set are cost of inventory, inventory turnover rate, order status, and tracking and fill rate.

2. Use ABC analysis

ABC analysis is a method where you rank your inventory in order from most important items to least important items. While the A items are considered the highest priority inventory and need to be reordered frequently, the B items are valuable but have medium priority and are reordered once a month. The C items are priority items with low stock levels that do not need to be reordered very often as they are usually transported in large quantities. By organizing your inventory using ABC analysis, you can optimize your storage space and streamline handling.

3. Create a strategy for registering goods receipts

The reality is that suppliers make mistakes. If you don’t have a proven process to inspect and record received products and find flaws and damage, you will encounter problems such as: For example, untracked stock levels, unexpected stock outages and payments for items that you never ordered. To ensure the accuracy of your stock records, count products against orders, track errors, shortages or damage with suppliers, fully unpack entire shipments, and update stock levels in your inventory management system.

4. Invest in an inventory management system

While you can manually manage your inventory, it’s tedious, time-consuming, and risky. By using a single, high-quality inventory management software or POS (point-of-sale) system, you can automate many of your processes, understand how your inventory moves, and expand to other brick-and-mortar store locations or simply to the web. This can lead to fewer errors, improved efficiency and increased productivity.

5. Build strong supplier relationships

Your suppliers are among your greatest assets. Because without them, it would be difficult for you to make or sell products and make money. Because of this, it’s a good idea to keep them updated on what happens to their items after they leave their hands. By building strong relationships with them, you may be able to secure discounts, reduce the risk of delays and quality issues, and simplify your inventory management. Don’t be afraid to drop underperforming or problematic suppliers and find new ones.

6. Calculate minimum inventory thresholds

The minimum stock threshold refers to the lowest amount of stock that you need in your warehouse at any time. If you can figure out what that number is, you’ll have enough inventory to handle an unexpected influx of sales. You’ll meet demand and reduce the risk of long turnaround times that can damage your reputation. Use this formula to calculate your minimum inventory limits:

(Average daily product sales ÷ number of working days per month) x average product delivery time

7. Manage remaining stocks

Remnant inventory is inventory left over at the end of a season. For example, if you sell clothes, you might have spare shorts when summer comes to an end. To manage and reduce this type of inventory, you can create season codes with style numbers when entering the items into your inventory management system. This can make it easier to analyze sales and seasonal inventory so you can better prepare for future seasons.

bottom line

As a retailer, you know that your inventory is the lifeline of your business. By following these best practices and making sure you always have the right amount of product, you can meet demand, keep your customers happy, and grow for years to come.