Inventory management is an inseparable part of retail businesses. There’s almost no place for any mistakes.
Gone are the days when options were limited! Today is the age of pampering your customers with an overwhelming number of choices and ‘making it easy’ throughout. Investment in retention of your existing customers is as important as investing on luring potential buyers.
The optimal way to manage inventory may vary from one company to another, but here are a few techniques that will improve inventory management and consequently, cash flows:
1. Set quantity limits:
Set reorder levels for must-have inventory items. So, all you need to do is order the extras to bring back the stock to the predetermined level. These limits are governed by few factors like, how fast the item sells, time required to get it back in stock (reorder time) etc. Also, these limits needn’t be fixed throughout the year. It could vary based on market conditions.
2. Use the FIFO technique:
FIFO stands for first in first out. Make sure your oldest goods are sold before your recent ones. This will avoid a situation where you are left with products nearing sell-by, that can’t be sold. This applies to non-perishables too.
3. Maintain a good relationship with suppliers:
Analyze the store from time to time, re-think slow selling items, make space for fast-moving items and troubleshoot manufacturing issues. All of this is possible only if your adaptability cycle is short. Communicate with you suppliers in an intelligible manner, they are not your in-laws! Save the awkwardness for those relationships.
4. Prioritize your Inventory:
There might be high valued products with less sales, moderate valued products with moderate sales and low valued products with high sales. The first set requires regular attention and the last set requires the least attention because of the difference in the financial impact they make.
5. Conduct Regular Audits:
Regular audits are a vital part of efficient inventory management. Even if you use the best in technology, there is always a need to reconcile the numbers in books. A quarterly audit could do you good!
6. Forecast accurately:
It is no-easy task to forecast demand. But, you could come relatively close to precise. While projecting your future sales, you should consider market trends, the previous year sales, the present year growth rates, upcoming promotions, guaranteed sales etc. An accurate or even close forecast will help you manage your inventory efficiently.
In a nutshell, proper inventory management lowers storage costs, ample usage of funds and timely delivery to customers. So, are you getting the most out of your inventory management? Choose the right inventory management technique for your business and implement it right away!