The modern point-of-sale (POS) system has rapidly changed retail inventory management. These new inventory control techniques allow retailers to more easily sell products across channels, organize warehouse space, carry more inventory, communicate with vendors, maintain stock levels, and much more.
While retail has developed quickly, many retailers still don’t use these powerful methods. If your business falls in this category, it’s worth upgrading your system, starting with inventory control processes. Effective inventory control entails thoroughly tracking all catalog products.
Doing this right ensures your business correctly orders, stocks, prices, and manages your whole inventory. At its core, the goal is to adequately stock shelves without overfilling your warehouse. You should know your inventory’s exact location and quantity at any time.
Various Methods for Retail Inventory Management
Your inventory management, typically part of your retail POS system, generates and manages these techniques. By housing all product data in one platform, your POS provides helpful reports and recommendations to guide business decisions.
Proper inventory control is crucial because if you run out of stock, you’ll lose sales and likely customers. Shoppers who can’t purchase an item may shop elsewhere long-term, severely impacting your small business.
Conversely, overstocking an item hurts your cash flow by tying up money in excessive inventory occupying storage space. Both scenarios prevent you from ordering more products. So with the right methods, you’ll see more sales from in-stock items, improved customer loyalty, storage efficiency, and less retail waste.
Your inventory management truly supports your whole operations. Ineffective control immediately affects many business areas, while proper management markedly improves them. Here are 11 key inventory control techniques for small businesses:
- ABC Retail Analytics ABC analysis individually examines your whole catalog, assigning an A, B, or C grade to each product based on sales and profitability data. This quickly identifies top-selling items needing marketing and pricing adjustments versus lagging products requiring changes to improve performance. Your POS can provide a detailed 15-second ABC retail analytics report.
- Just-in-Time Inventory Control Just-in-time or JIT inventory management reduces on-hand inventory by ordering products as needed until receiving new stock. This maintains efficient storage space and cash flow levels. While not suitable for all retailers, JIT works well for businesses manufacturing some or all products.
- Economic Order Quantities Economic order quantity or EOQ control balances avoiding out-of-stocks with preventing overstocking. The EOQ formula factors in production, demand, sales, ordering, carrying, and storage costs. Most retailers rely on EOQ calculations to place wholesale orders.
- Custom Par Levels Custom par inventory notifications through your POS alert you when items reach predetermined stock levels differencing for each product based on factors like sales volume, delivery times, order frequency, and case sizes. Although initially time-consuming, the ongoing automation makes par level control efficient.
- FIFO and LIFO Costing First-in-first-out (FIFO) and last-in-first-out (LIFO) inventory costing calculate sales against expenses differently. FIFO matches sales against the longest-standing order cost in stock. LIFO uses the most recent order cost. Each provides advantages, with FIFO more commonly preferred.
- Vendor Relationship Management Maintaining positive vendor relationships prevents damaging issues like late orders. POS integrated vendor management and automated ordering simplify supply chain communication and inventory replenishment.
- Demand Forecasting Review historical sales patterns to predict future demand changes, such as much higher December orders than July. Estimate coming monthly needs to prevent severe stock deficits or surpluses.
- Minimum Order Quantities Suppliers often set minimum order quantities (MOQs) to offer discounted wholesale rates, so retailers must purchase certain volumes yet avoid overstocking. Higher MOQs tend to apply to inexpensive products.
- Safety Stock Ordering
Carrying slightly excess safety stock protects against stockouts from unreliable vendors, product availability fluctuations, and seasonal demand swings. While overordering carries risks, safety stock provides a buffer when done judiciously.
- Perpetual Inventory Counting Perpetual counting tracks inventory daily throughout the year rather than solely conducting an annual stocktake. This quickly catches losses and thefts while keeping quantities current.
- Dropshipping Dropshipping eliminates handling inventory as products ship directly from manufacturers or wholesalers to customers. Arguably the most efficient model, you simply facilitate transactions.
Your POS inventory management platform tailors these techniques to your catalog and operations, providing inventory insights to help your business flourish.