The inventory management system is one of the most important systems for a retail business. It is not uncommon for many businesses to be able to boost their sales through marketing campaigns, only to find themselves with lower profits, due to a poorly managed inventory, prone to human errors and high costs. The inventory system involves all the activities that have to do with purchasing merchandise, storing that merchandise, controlling it, and shipping it to the right customers. By optimizing this system, you can prevent costly errors, but you can also improve your stocks, to better satisfy the demands of your customers. So, on one end, you will be able to save money, and on the other end, you will be able to make more money by boosting your sales naturally. Here’s how to easily achieve these goals:
1. Find a good inventory software
To find a good software, you will have to consider the current problems that you currently experience within your supply chain. The point is to find a software solution that can help you fix those problems. Ideally, you should opt for a mobile app with barcode scanning capabilities. This will allow your warehouse staff to easily scan all the merchandise that arrives in your inventory, and you will have access to your stock levels in real time. For an affordable and easy to use inventory software, consider the Sortly Business App. This app can be installed in a manner of minutes, it is very intuitive, and it comes with numerous functions meant to improve your inventory system.
2. Identify the responsible inventory staff
The overall inventory process should be supervised by a single person who should have access to all relevant data. That person should also be able to delegate inventory tasks through the app, so that they can easily know which staff members are responsible for which tasks.
3. Set re-order alerts
First of all, you need to establish some par levels for all the types of products in your stock. The par levels are the minimum stock levels that should be found in the warehouse at all times. These levels are different for each product, depending on how easy to sell each product is. By setting alerts, you will be quickly notified when stock levels drop below the determined par levels. Some inventory apps also come with automatic re-order functions, which simplify the whole process. Nonetheless, keep in mind that the retail industry is very dynamic so the recommended par levels will have to vary throughout the year, depending on market trends, on seasons or on various holidays.
4. Prioritize your stock
Since not all products sell at the same rhythm, it is important to prioritize your stock accordingly. Ideally, your main focus should be the high-value products. Even if they sell on a lower frequency, they usually have a higher return on investment, so they deserve more attention. Your next priority should be the low-value items that sell at a high frequency. Last but not least, the moderate value items with moderate sale frequency should be your last concern, although they too require attention.
5. Use the FIFO system
FIFO stands for “first in first out”, and as its name suggests, it implies that you must prioritize the merchandise that first entered your inventory system. If you neglect this merchandise, it can turn into a dead stock that will be stuck in your warehouse for a long time. This is particularly important in dynamic industries, like the fashion industry where the needs of the customers change with each season.
6. Improve your forecasts
To improve your sales forecasts, you will need comprehensive historical data, as well as some relevant projections on market trends. Ideally, your inventory system should have a good analytics tool to help you with the forecasts. By improving the accuracy of your forecasts, you will first be able to cut down on your caring costs. These costs imply everything that has to do with holding the stock over time (storage costs, insurance costs, personnel costs). When you carry dead stock, the carrying costs can also include depreciation or taxes. By improving your forecasts, you will be able to better anticipate your stock needs, thus cutting down on your carrying costs.