5 Inventory Management Best Practices Your Retail Business Should Follow

While many say inventory management software is a must only in recent years, we’d say having one in place is a no-brainer no matter what kind of retail business you run or what size it is. You could be running a small mom and pop store selling stationery items or be a giant retail chain like Walmart, serving millions of customers across the globe. You’d still need to plan your inventory to ensure that your losses are minimised and your customers get what they’re asking for. 

Moreover, when we talk about inventory, we usually think of clothes, household appliances, furniture, groceries or end products in general. But, did you know that managing inventory is critical and cuts across the various stages of a product or service life cycle. In other words, it is required as much for raw materials and unfinished products in the production stage, as it is for MRO goods (maintenance, repair and operations goods), packing materials and finished products.  

Inventory management is beneficial for businesses for a number of reasons; 

• It helps retailers determine what quantity of goods they need and when 
• It minimises surplus stock 
• It minimises the probability of items being out of stock, especially when there is demand for it 
• It gives better visibility into the supply chain process 

• It helps retailers build a better supply chain network, and build better relationships with suppliers 
• It increases revenue and profitability 
• It helps retailers develop better end user experience 

The Current State of Inventory Management  

Data shows that 43% of businesses in the U.S. still use a manual system to track and maintain inventory, and often it has resulted in them showcasing/selling a product that’s out of stock, or experiencing supply chain delays.  

On the other hand, there is a significant rise in the number of inventory management software in the market. According to Databrige, the inventory software market is set to touch USD 3.82 billion and grow at a CAGR of 6.12% between 2021 and 2028. And, specifically, the Asia-Pacific market is expected to dominate this industry, given the rising demand for RFID technology. 

If you ask us, we’d say shed the manual work and adopt a few best practices along with an inventory management software to run your business smoothly. Here’s what we suggest as steps to follow. 

A Merit expert says, “Several retail businesses are still relying on intuition or experience to manage inventory. But this would be a big mistake. Using data and analytics to drive inventory decision-making will have a direct impact of business performance and financial metrics. This is not to say, ignore your gut; Use it wisely.” 

Best Practices to Manage Inventory Efficiently 

#1 – Invest in an inventory management software 

Having such a software in place can help you track inventory from placing to fulfilment. For example, if you manage multiple stores at multiple locations, and have multiple warehouses to stock your inventory, having an inventory management system can help you identify which products are available in each warehouse, the fulfilment stage your products are in, and get real-time visibility into your inventory levels.  

The software can also use historical data to predict peak demand based on seasons and trends. It smooths out your order placement and shipping processes and saves expenses that may arise from expedited shipping in the event of unplanned low stock, or losses due to excess stock.  

It can help you plan a better supply strategy, and enable you to take into account unforeseen circumstances (like delayed shipments). Lastly, adding sales channels is easy because the software shows all your data in a centralised location. 

#2 – Choose your suppliers wisely 

Not surprisingly, having an inventory management system in place can help you build more meaningful relationships with your suppliers. Keeping them updated on the order status, how the stocks are performing, and planning demand and supply in advance can help you build a stronger supplier network.  

In fact, if you’re able to understand and estimate the demand for your products, you can also clearly identify suppliers who can meet your requirements, shed those who don’t fit the bill, and add more suppliers to your network when needed (let’s say, during peak demand season).  

#3 – Keep a track of stock and receipts 

It’s very important to keep track of what products you’re getting from your suppliers, the quantity, the quality and where those products are being stored (across warehouses).  

Monitoring and inspecting your products continuously can ensure that you receive what you ordered, that the products are not worn out or damaged, and ensure you’re not paying for something you haven’t received.  

One of the ways to track your products across stores and warehouses is via RFID tags. UK retailer, Marks & Spencers, for example, has been using RFID tags for its products since 2001, and the company has stated that it saw a 5.5% boost in sales ever since it started using RFID tracking. It also resulted in better inventory management, reduced losses and theft of items, and easier product management and tracking for staff. 

#4 – Carry out an ABC Analysis 

‘A’ being the product that is of highest demand and priority and ‘C’ being the product that is of lowest priority and less in-demand (and B somewhere in between). Categorising your products based on this analysis can clearly tell you which products you need to order and in what frequency. This can ensure you save costs on shipping, storage and fulfilment and avoid excess stock in your warehouses. 

#5 – Explore drop shipping  

This makes sense mostly for ecommerce businesses. With drop shipping, you don’t need to store your products in a warehouse. Instead, you can just list them on your site, and when an order is placed, you can ship it directly from the manufacturer.  

Merit’s Expertise in Retail Data and Intelligence  

Our state-of-the-art retail data harvesting engine collects raw data and provides actionable insights  

• Three to four times faster than standard scrapers  
• At lower cost  
• With Increased accuracy (up to 30% compared to standard scrapers)  

Our powerful, new scraper engine can gather massive data sets from multiple sites and geographies in real-time so you can stay informed on customer behaviours and market trends.  

Merit’s eCommerce and retail data engine provides a high degree of confidence in insights generated from analytics – thanks to confidence in the data quality and access to enriched data.  

To know more, visit: https://www.meritdata-tech.com/service/data/retail-data/