Top Tips for Successful Retail Inventory Management

Managing inventory is one of the most important yet overlooked aspects of running a successful retail business. Without a dialed-in inventory system, you risk tying up too much cash in oversupply, missing out on sales from undersupply, or losing products to shrinkage and misplacement. 

Have a Centralized Inventory System

Keeping track of inventory is crucial for any retail business, big or small. If you don’t have a solid system in place, you risk losing money from oversupply, undersupply, or misplaced items. Follow these useful tips to masterfully manage your store’s inventory.

Categorize Your Products

Rather than just having one lengthy list of every product, make your inventory easier to navigate by categorizing similar items together. The categories will depend on what type of retail store you operate. For an apparel store, you might group by men’s, women’s, children’s, accessories and so on. For a store selling wholesale sunglasses and accessories, the experts at Olympic Eyewear say that potential categories could include style, brand, purpose, materials and more.

Use Unique SKUs

Assign every single product its own unique SKU (stock keeping unit) code. SKUs allow you to quickly identify and track specific items. Get a SKU labeling system and have a logical process for labeling new inventory as it arrives.

Conduct Regular Cycle Counts

Don’t just do one big annual inventory count. That lets too much time go by with inaccuracies. Instead, cycle count different product categories more frequently, say, once per month or quarter. This keeps your records consistently up to date.

Optimize Par Levels

Par level is the ideal amount you’d want in stock for each product to meet demand without oversupply. Monitor sales velocity and supplier lead times, then set appropriate par levels for every SKU. You should only order more when products dip below their par.

Prevent Shrinkage

Shrinkage is when inventory goes missing because of theft, damage, or human error. Do regular inventory audits and shrinkage checks. Keep storage areas secure. Have simple processes for returns and damages. A little shrinkage prevention goes a long way.

Leverage Inventory Software

While a spreadsheet can suffice for basic inventory, robust software is invaluable. It automates record keeping, generates insightful reports, sets low-stock notifications, and gives a high-level view of your entire inventory. It is therefore well worth the investment.

Set Reorder Points

The reorder point is when you initiate reordering certain items based on calculated inventory levels and lead times. Determine a reorder point for each product to maintain a healthy inventory without tying up too much cash in oversupply.

Audit Your Counts

Even with familiarity and strict protocols, mistakes can still happen. Have a secondary person periodically verify physical inventory counts against your recorded numbers. Cross-checking will catch any discrepancies.

Incentivize Your Team

Inventory management takes diligence. Incentivize your employees to follow best practices. Offer bonuses or other rewards for those who show outstanding inventory control. This awareness of accountability motivates people to follow protocols meticulously rather than getting sloppy. When your team knows inventory management affects their compensation, they’ll be motivated to get it right.

Conclusion

Managing inventory is rarely glamorous work, but it’s a vital discipline for any retail business. Letting inventory get out of control translates to lost sales from stock-outs, overspending on excess supply that doesn’t move, and a frustrating customer experience. Consistently buying too much or not having hot items on hand alienates shoppers.

By implementing these tips and best practices with diligence, you ensure your store always has the right product mix and quantity on hand to maximize sales and profitability. Mastering inventory management may not be exciting, but it directly affects your bottom line success.