Long a cornerstone of retail success, proper inventory management is becoming increasingly important as retailers face growing competition and strive ever harder to meet the demands of educated consumers who insist on being able to purchase what they want, when they want it. Let’s take a look at why effective inventory management is essential to navigating today’s retail climate and how you can use your POS system to optimize your inventory management practices.
1. Effective inventory management means happy customers and fewer lost sales. Proper inventory management practices greatly increase the likelihood that shoppers’ desired items will be in stock, in turn boosting customer satisfaction and encouraging repeat visits to your store(s). It also enables you to avoid sacrificing sales to the competition because a particular item customers want is unavailable when they wish to purchase it.
Your POS system can help with this aspect of inventory management. Instead of basing orders on hearsay and guesswork, you can generate forecasts of which item(s) will be popular based on previous sales figures and set minimum re-order levels, as well as access accurate, real-time reports that specify which SKUs are selling and in what quantities. This increases your potential for having on hand what customers want, when they want it, and guards against losing sales to another merchant.
With the inventory management module of a POS system, multi-unit retailers can also easily determine whether out-of-stock SKUs are available at one of their other locations or from the distribution center. If so, they can arrange for the items to be delivered to the store or shipped directly to customers’ homes or offices. Once again, the end-result is happy customers and salvaged sales.
2. Effective inventory management leads to low storage costs. Like it or not, storing excess inventory that is not needed on store shelves can involve a considerable financial outlay. So it follows that the less “extra” product you have on hand, the lower these costs will be.
Your POS system is a good weapon against big bills for inventory storage. Why? For one thing, purchasing larger quantities of an item than will truly sell is difficult when your inventory management strategy includes reviewing data from the POS system and/or you leverage forecasts from an inventory control module to create orders. The less excess inventory you have on hand in a warehouse or distribution center, the less storage space you will need for unwanted goods—and the less money you will pay to store that inventory until you need it for replenishment purposes.
In addition, by reviewing POS records and any information within the inventory management module of your POS system, you will be able to easily identify which items are, despite the fact that they are selling, moving more slowly off your shelves than other products. You can then either mark these items down for rapid sale and avoid re-ordering them, or adjust re-order quantities accordingly. In either case, you will have a smaller volume of surplus inventory to store.
3. Effective inventory management means no unnecessary overhead. In addition to storage, the cost to maintain inventory includes insurance, risk of obsolescence, damage, inventory taxes, and opportunity expenditures, with the latter comprising the sum of money which, if not spent on inventory, would be earmarked for business-building initiatives, like advertising campaigns and loyalty programs. The longer inventory sits in your warehouse or on your retail floor, the higher the inventory overhead.
As we discussed above, when you harness data from your POS system and the inventory management module, you cannot help but be more on-target when it comes to the appropriate quantities of merchandise to order. You will not be stuck with excess inventory or overhead expenditures you would otherwise be incurring.
Proper inventory management is as critical to retailers’ success as proper merchandising and other key business practices. Once you understand why—and how to make your POS system work for you to achieve it—your business should remain firmly in the black.
