The ability to effectively manage inventory at item level has evolved from a “best practice” into a “life or death” situation in these times when every transaction is of the utmost importance. Excellence in inventory management becomes the mark of the successful retailer and inventory mismanagement in any capacity may severely hurt a retailer’s performance.
We are all aware that an inventory surplus leads to underutilized working capital and loss of profit, and that inventory stock outs create customer dissatisfaction and the loss of revenue and margin. How does over/under-stocked inventory affect merchandising/product placement?
In many ways, when compared to the larger supply chain, the retail sales floor remains significantly more chaotic from an inventory management perspective. Until retailers gain better control of inventory on the retail floor, they will be missing critical opportunities to reduce costs, enhance customer yield, and generate cash. Applying more order to retail floor inventory management willrequire at least item-level management, and in some cases, item-level intelligence. Until retailers take advantage of the ability to track inventory on an item-level basis, the retail sales floor will remain shrouded in questions.
What are some of the benefits of implementing item level inventory?
- Controlling inventory in the store optimizes the delicate balance between in-stock inventory levels and out-of-stock conditions and reduces working capital deployed.
- In order to maintain accurate inventory item levels, store personnel will be trained to scan all individual item SKUs at the POS. For example, when the cashier is presented with a 20 oz. Pepsi and a 20 oz. Mountain Dew during a 2 for $2 promotion, the cashier may be tempted to scan the Pepsi twice instead of scanning each product separately. Doing this will cause sales data from the POS to be misrepresented and cause the replenishment order to be incorrect.
- By keeping an accurate balance of inventory at the store by knowing what products are selling, what items are necessary to stock and what is overstocked, the backroom stock that tends to pile up is drastically reduced and much easier to manage.
Thousands of dollars are spent on equipping stores with POS systems, implementing scanning, and training personnel. Item level inventory management systems use the transaction sales data that is already being captured to create an accurate replenishment order.
Quality inventory management can make all the difference.