- Request a Demo
Retail businesses are always fighting the inventory battle, trying to determine if they have too much or too little, what needs to be bought, and how much to buy. Managing inventory can be much more of a headache than one would think. “I have to do an inventory check tomorrow” is not the most thrilling thought for any business owner. But managing your inventory effectively is extremely important to the flow of a business and making a profit.
There’s no bigger turn-off to customers than seeing empty shelves, whether virtual or physical. Likewise, overstocked inventory can result in just as much wasted revenue. The National Retail Federation estimates that retailers lose about $224 billion from having overstocked shelves and $45 billion from under stocked shelves. Therefore, moderation is key. Take control of your inventory with these management tips.
It’s easy to overspend and overstock your inventory. You’re afraid of running out of products, so what’s the harm in filling your shelves until they’re brimming over? There’s a lot at stake, actually. Warehousing products like that can lead to stagnant, unsold products that only become harder to sell. Eventually, many businesses end up liquidating old products, only getting a fraction of what was spent on them. To avoid this, you need to calculate accurate projections of sales in the future. For example, take a look at the past year of sales.
If your business sells a certain number of items per month, it’s safe to say you’ll continue to sell that same amount. Compare that number to seasonal fluctuations. Most retailers see a spike in sales around the holidays. Consider your industry and when you’re likely to see more sales: for instance, a home improvement store will sell more products in the spring and summer. Using your baseline sales projections and accommodating seasonal spikes, you can come up with a decent estimate for inventory.
Lead time is how long it takes to reorder and receive new inventory. Have you ever purchased something that was backordered without an estimated date of when it will be back in stock? Probably not. Your customers won’t want to order a product if they have no idea when it will be back in stock. And it’s just as important that you know, too.
Generating lead time reports will tell you how long it takes to get your shelves restocked so you can order before you run out. To do this, keep track of orders from your various suppliers. Different suppliers have different packing and shipping time frames. Get to know which orders take the longest so you can place those first.
Not all inventories are created equal. There are just some products that make the backbone of your revenue. As a general rule, roughly 20% of your inventory will be the money-making products, accounting for about 80% of demand. The trick is finding these big ticket products and making them a top priority.
These are the products that seem to fly off the shelves consistently, regardless of season. Give them the most attention; review stock, generate forecasts, and reorder these products more frequently than the rest. Products in slower-selling categories can be addressed more casually. Prioritizing your stock this way will help you avoid overstocking unnecessary products or running out of hot sellers.
Throw out your spreadsheets and stop using a pen and paper to keep track of your products. Inventory management software lets you scan barcodes of individual products and provides insight into your supply. The trick is learning how to use it correctly. Every single one of your products should have a detailed item description, number, and unit of measurement. As you transfer your inventory to the software, be sure to enter these important fields.
Descriptions tell you and your employees about an item so there’s no confusion when it comes time to reorder. Item numbers let you search and categorize items easily for reordering. And giving each product a unit of measurement will make reordering specific quantities much easier. Once all this information is in the system, you will be able to use the software to generate detailed reports and check up on low stock. Remember to occasionally compare actual inventory to digital records, which will help you account for errors and pinpoint cash flow issues.
What Can You Expect from TallySales? Download our Complete POS Guide to TallySales Retail Management Suite