For business owners and managers everywhere, the end of the fiscal year means that one of the year’s most dreaded tasks must be addressed once again—inventory audits. Physical inventory counts may seem like a daunting exercise, but as a business owner awareness of where and how errors occur can reduce the likelihood that minor mistakes become massive problems and take some of the punch out of the audits in the future as a result of best practices. On the other hand, poor inventory management can increase stress for owners and managers over time whether it’s the result of mismanaged inventory levels or simple human error. Whether it’s adjusting your par levels, ordering on time or automating your processes, here are some signs that your inventory might need better management and what you can do about it.
You’re Not Ordering Enough
If you consistently run into issues with keeping your shelves stocked, there’s a good chance you’re under ordering or orders aren’t being placed at the right time. If your customers can’t make the purchases they’ve hoped to because your business is missing items they want, you’re gambling with their trust. Will they give you another chance the next time they’re shopping? With the continued rise of online vendors like Amazon that can deliver an endless assortment of products within two days it’s a risk to assume that your customers will keep coming back after failing to meet their expectations—even just once.
Or You’ve Overspent
Don’t overdo it when it comes to stocking your shelves, though. Unfortunately, too much inventory can wreak havoc on your bottom line. Your Days on Hand for each piece of inventory should be relatively low otherwise you’re wasting valuable real estate on product that has potential to sell at a faster rate. By ordering too heavily, you may also miss the opportunity to sell through an item when your customer is most interested in buying it. Try selling a jacket in June or a bathing suit in October in most places and you’ll be hard pressed to do so without losing most, if not all of your margin on it. Additionally, the capital used to make the purchase is locked up in unsold items instead of being used to replenish your store with newer or more seasonally appropriate items.
And Your Shrink is Unmonitored
Unaccounted for shrink is a bellwether warning that somewhere in your process there is a tracking error. Shrink is typically determined as:
The bigger the difference, the bigger the problem. While theft can certainly account for a large chunk of inventory discrepancies, there are a number of places where human error can greatly impact your shrink such as administrative, paperwork and vendor errors. In fact, more than 25% of shrink can be attributed to these errors—what is known as “paper shrink”—according to the National Retail Federation. Failing to properly receive a shipment leaves an opportunity for shortage in a vendor delivery to go unnoticed. Even if the intent isn’t malicious, lacking a process of audits can cause a problem to develop especially when vendors are allowed to stock their own products. Improperly SKUed items or items being rung up improperly is another common issue when left unaddressed can cause your shrink pounds to spiral out of control. According to that same study, as much as £14.10 of every £80 sold is shrink. If you’re an £80k business that number starts to look pretty terrifying.
Order Well and Shrink Your Shrink
Keeping the right amount of inventory on hand and making sure that it’s appropriately accounted for can feel like a massive, ongoing undertaking, but there are plenty of tools and best practices that business owners can leverage to make the process as painless as possible.
A perpetual inventory management system tracks your stock level, so that you can take the guesswork out of how much inventory you’ll need the next time you place a purchase order. Whether you’re receiving shipments, scanning barcodes or entering SKUs reducing the opportunity for human error by integrating your inventory tracking into your point of sales means that you’re getting an exact account of your current stock levels. When real-time inventory reporting is deployed, you have a much more precise idea of what you should be ordering and when. That data can also help you forecast and clarify which purchasing decisions you should make whether you’re tracking changes from month to month, season to season or even year to year.
Revel Systems Point of Sale is full of inventory control features that give business owners and managers everything they need to improve discrepancies that are a result of human error and make sure that product doesn’t run out before it can be replenished. With real-time reporting and low-stock alerts that notify you when inventory is starting to trend low, you can keep your stock levels at their ideal at all times. The platform can even generate purchase orders for you. If you’re ready to walk away from inventory management headaches then schedule a live demo with us and see how we can help make them a thing of the past. Already using Revel and want to know how to get the most out of your system? Check out these inventory updates from our latest release 2.16.