Inventory Management is the foundation of a functioning retail operation. Inventory management tracks inventory as it flows in and out of your company. Whether companies do not have a handle on their own act of inventory, or even worse, poorly track it via outdated spreadsheets and computer code, all the other pieces, such as order fulfillment, do not fall into place either. Inventory is a critical component to any retail operation and a key factor in customer satisfaction. There are many effective ways to improve inventory management and maximize your profit margins.
The number one problem is a lack of knowledge. In order to improve inventory management and maximize profit through optimum warehousing, you must know your product well. Many factors go into the determination of what your inventory actually is, such as demand and seasonality, among others. If you do not understand your product well, then you cannot accurately determine the correct quantity of inventory to purchase for that product.
Inventory cycle counting is a critical element of inventory management and should be an integral part of any large retail store chain as well as a smaller business. Effective cycle counting takes into account thousands of items in inventory. It is important to track both long and short cycle inventory. Long cycle inventory is items that have been in storage for over a year or more. They have built up a considerable amount of wear and tear since the last time they were sold. The items in this category typically require much more frequent replenishment than those in the shorter cycle category.
Conversely, short cycle inventory management is very similar to retail store purchasing practices. It takes into account the day of sale inventory and what has sold over the weekend and into the following Monday. This type of inventory management also takes into account seasonal trends which impact merchandise sales.
Inventory managers should understand RFID (Radio Frequency Identification) technology from the strategic operations field. RFID is the future of inventory management. In order to properly use RFID technology, you need a high quality warehouse with modern lighting and climate control, good security, dedicated staff and a very solid inventory management system. In the past, warehouse inventory management used to be conducted manually. However, new software, such as RFID Assisted Point of Sale (void paq) has made it possible for warehouse operators to electronically enter and manage their own inventory reports.
Inventory managers often have to make trade-offs between inventory management software functionality and organization's budgetary constraints. Many small businesses are still trying to figure out how to get the most from their existing inventory management software. As e-commerce continues to grow, inventory management software can become more complex and enterprise wide. Inventory managers should use their budgeting tools to determine what functions should be automated and where additional personnel might be needed.
Inventory managers should consider using third party vendors for some functions in their inventory management system to reduce the overall cost of ownership. For example, instead of building a full complement of shelves in the warehouse, the vendor will provide software that does most of the work. It may also be possible to eliminate some warehouse labor costs by incorporating the inventory management system into an electronic tool.
In many cases, companies have to choose between efficiency and quality. The more warehouse space that is used, the more efficient the process is, but when there are limited resources, cost may be the main priority. Inventory control and management software to provide a starting point where efficiency and quality can be weighed against one another. Once those priorities are decided on, then the company can move forward toward implementing inventory management systems. When goods are delivered, they are more efficiently handled because of better inventory management software.
