Inventory management has always been fundamental to a retailer’s success but never more so than in today’s unbelievably competitive market. Consumers are able to purchase anything they desire from anywhere and at any time and are becoming increasingly sophisticated in their approach to shopping.
Items out of stock, delayed deliveries and a failure to accommodate new and seasonal trends will hold back your business and see potential customers shopping elsewhere. Meanwhile, inadequate inventory management will have a crippling effect on your cash flow. It has never been more important to nail this aspect of your operation!
The Challenge for Retailers
Unless you offer an incredibly limited range, inventory management will be a complex issue. One with the potential to swallow up unlimited man hours and to cause a raft of problems for your business. Multiple locations and retailing via different sales channels will only serve to make keeping track of your stock even more difficult.
Life would be so much easier if every dress, cricket bat, candle or whatever merchandise you are selling was only available in one size, colour or finish! But that is rarely the case. Variants contribute further complications to inventory management. But it is vital to know which variants could prove to be the most popular, the items that are selling well and those which are simply being left on the shelves. Without this understanding and accurate inventories, it will be impossible to order your merchandise in time and in the right quantities.
Lead Times and Supply Chains
You will inevitably discover that delivery times vary from supplier to supplier and may be subject to seasonal fluctuations. That best-selling printer isn’t going to generate impressive profits for you if it is still in your supplier’s overseas depot or on a ship in the middle of the Atlantic. Your cash flow will be severely impacted if your warehouse or stores are full of next season’s stock whilst your current success stories have sold out.
Effective inventory management involves understanding your supply chains and how they influence your stock holding. Timely ordering is key and to get this right you must be aware of the idiosyncrasies of your various supply chains and have the facility to analyse historical sales data.
If only your merchandise sold consistently throughout the year! But, of course, it doesn’t. The changing seasons will mean that demands on your stock fluctuate. Christmas, Easter and other celebrations cause further peaks and troughs as do special events such as the Olympic Games. It is vital to understand how these factors influence your sales and to be prepared with adequate stock to meet demand.
Ecommerce has brought with it a whole new headache. Online purchases continue to rise but the rate of returns from consumers is incredibly high. Those consumers are investing in goods which in many cases they have not tried on or even seen and enjoy significant rights regarding the return of their purchases. The constant influx of returns poses significant inventory management issues to retailers of any size and demand the use of ever more complex management systems.
In addition to the day to day issue of returning these goods to stock, it is crucial to account for your rate of returns when purchasing new stock. You don’t want to sell out of popular items but you won’t want to be left with excess stock at the end of the season either.
Stock would be much easier to manage were it being sold via a single channel but this is rarely the case. You may be selling via multiple online platforms and this strategy brings with it yet more complications. If you are to avoid being unable to fulfil an order, your stock must be adjusted in real time when an order is placed via any of your sales channels.
You may also find that variations in success across those channels makes it even harder for you to assess how much stock you need to invest in at any given time. A new collection could be selling fast on Amazon and failing miserably on your own eCommerce site or bricks and mortar store. It is crucial that you can assess your sales both in their entirety and by each sales channel if you are to maintain the correct inventory and in the right place.
If you are selling via multiple channels or operate more than one retail outlet, then your stock will be located across several different sites. You could be discounting unsold stock in one location whilst being out of stock in another. You will require a good understanding of sales variations across the various channels and locations to maintain the correct stock levels at each site. Efficient inventory management will enable you to order accurately and to move stock at any time to where it is most needed.
Sadly, theft is a risk from both customers and employees. For accuracy, inventories must be consistently updated to take account of theft. Monitoring the rate of theft will enable you to better understand which goods are being targeted and to put in place measures to reduce your losses.
The Financial Implications of Inventory Management
Your inventory is the key to your cash flow and profitability. If you manage your inventory well you will be on the road to success but if you fail to keep a tight grip on your stock movements both your cash flow and your profits are going to disappear rapidly. The following problems will seriously impede your path to success:
- Missed sales opportunities through lack of stock
- Failure to fulfil orders placed through lack of stock
- Failure to fulfil an order in time because you are waiting for a delivery from your supplier
- Holding excessive stock which will remain unsold
- Holding stock in the wrong colours and sizes
- Holding the wrong quantities of particular variants (you need more of the popular ones!)
- Holding your stock at the wrong site or sites
- Failing to account accurately for returns
- Failing to control theft
- Failing to control spoilage
- Failing to account for seasonal and new trends
There is so much to think about. Potential sales can slip through your grasp so easily whilst unsold stock could swallow up any profits that you have made. It would be almost impossible for an individual to account for all aspects of a supply chain and sales. It is only through investing in Inventory Management Software that you will able to control your business with the efficiency required.
The Benefits of Inventory Management Systems
Giving you real time stock adjustments across multiple channels and accurate stock ledgers for all of your sites, an inventory management system is quite simply essential. Through detailed analysis and reporting, the best retail systems ensure that you are in complete control of your inventory and therefore your business. Errors are minimised and profitability maximised to keep you ahead of the game.
You might be asking yourself if you can afford an investment in an inventory management system, but could you really afford to be without one?
For a demo, or to learn more about our inventory management capabilities, contact us today.