How Do Retail Stores Keep Track of Inventory?

In the dynamic realm of retail, effective inventory management is crucial for sustained success. This article explores the intricacies of retail inventory, shedding light on the methods and technologies employed by stores to maintain & control. From defining inventory to discussing best practices and addressing common concerns, this comprehensive guide provides valuable insights into retail inventory management.

What Does Inventory Mean in Retail?

Inventory in retail encompasses the goods and products a store holds for sale. It represents a vital asset that directly impacts a retailer's financial health. In simpler terms, it includes all items available for purchase, from apparel to electronics, on the store shelves or in the warehouse.

How Do Retail Stores Keep Track of Inventory?

Inventory management is critical to succeed in the retail business. Efficiently tracking and managing inventory helps retailers ensure product availability, minimise stockouts, and optimise overall operations. 

Various methods and software applications are employed to streamline this process. Let’s discuss the different tools and technologies that retail store owners use to keep track of their inventory. 

Point of Sale (POS) Systems:

POS systems are the most popular method that retail stores use to keep track of their inventory. They not only facilitate sales transactions but also provide real-time tracking of inventory levels. Modern POS systems integrate seamlessly with other software applications, enabling comprehensive inventory control.

For Example: POSApt POS provides retail inventory management and tracking systems for Australian Businesses. 

Radio-Frequency Identification (RFID):

RFID technology uses RFID tags on the items to track and identify each item with the help of radio waves. It provides accurate and real-time data on inventory levels, location, and movement. RFID is especially useful for high-value items and large-scale retail operations.

Examples: Zebra Technologies, Alien Technology, Impinj.

Barcode Systems:

Barcodes are widely used for tracking and managing inventory. Each product is assigned a unique barcode, which is scanned during various stages, such as receiving, stocking, and sales. This method enhances accuracy and efficiency.

Examples: Barcode scanners from Honeywell, Zebra, and Datalogic.

Inventory Management Software:

Dedicated inventory management software provides a centralised platform for overseeing stock levels, reorder points, and supplier information. It often integrates with POS systems and accounting software to offer a holistic view of the business.

Examples: QuickBooks Commerce, Zoho Inventory, TradeGecko.

Enterprise Resource Planning (ERP) Systems:

ERP systems integrate various business processes, including inventory management, finance, and human resources. This comprehensive solution is suitable for large retailers with complex operations, offering a unified platform for managing diverse business functions.

Examples: SAP, Oracle NetSuite, Microsoft Dynamics 365.

Demand Forecasting Software:

Forecasting software uses historical data and statistical models to predict future demand. By understanding demand patterns, retailers can optimise inventory levels, reduce holding costs, and avoid stockouts or overstock situations.

Examples: Blue Yonder (formerly JDA Software), Lokad, and Demand Solutions.

Cloud-Based Inventory Solutions:

Cloud-based inventory solutions are becoming effectively popular among retailers to keep track of their inventory. These solutions offer the advantage of accessibility from anywhere with an internet connection. They streamline collaboration among team members and provide real-time updates on inventory levels and sales data.

Examples: inFlow Inventory, Fishbowl, Unleashed.

Warehouse Management Systems (WMS):

WMS focuses on optimising warehouse operations, including inventory tracking, order fulfilment, and warehouse layout planning. It works in tandem with inventory management systems to ensure efficient logistics.

Examples: HighJump Warehouse Management System, Manhattan Associates, 3PL Warehouse Manager.

Mobile Inventory Apps:

Mobile apps empower businesses to manage inventory on the go. With features like barcode scanning and real-time updates, these apps enhance flexibility and responsiveness in inventory management. Retailers use apps like Sortly, Scanner Mini, Stock Control, etc. to track their inventory with ease. 

Data Analytics and Business Intelligence Tools:

Analytical tools help retailers gain insights into inventory trends, customer preferences, and overall business performance. By leveraging data analytics, businesses can make informed decisions to optimise their inventory strategies.

Examples: Tableau, Microsoft Power BI, and Google Analytics.

Bonus Content: Cloud Technologies Used in Retail

What is a Good Inventory Turnover Ratio for Retail?

Maintaining a healthy inventory turnover ratio is essential for retail success. The ideal ratio varies by industry, with a common benchmark being around 4-6 for most retailers. This figure indicates how many times a store sells its average inventory in a given period, reflecting efficient stock management and cash flow.

Inventory Management Best Practices

To optimise inventory control and ensure the smooth functioning of retail operations, retailers should adopt key best practices. These practices contribute to efficient inventory management, enhance customer satisfaction, and minimise costs.

Strategic Storage: 

Organise the store layout in a way that places high-demand items in easily accessible areas. This strategic placement facilitates quick retrieval by customers, reducing waiting times and improving overall customer experience.

Proper Organisation: 

Implement a systematic shelving or categorization system for efficient tracking. This ensures that items are placed in a logical order, making it easier for staff to locate products during restocking or when fulfilling customer orders.

Storage Conditions:

Maintain suitable storage conditions, particularly for perishable goods. Monitoring temperature and humidity levels is crucial to preserving the quality and integrity of products. This is especially important for items that are sensitive to environmental factors.

Minimal Wastage:

Establish a minimum stock threshold based on historical data and demand forecasts. Regularly review and update inventory to minimise product expiration and obsolescence. Careful planning and monitoring can help reduce wastage, leading to cost savings and improved profitability.

Regular Audits:

Conduct regular physical audits of inventory to reconcile system records with actual stock levels. This helps identify discrepancies, prevent theft, and ensure the accuracy of your inventory data.

Supplier Collaboration:

Foster strong relationships with suppliers to streamline the replenishment process. Collaborate on demand forecasts, delivery schedules, and order quantities to maintain optimal stock levels and reduce lead times.

Advanced Analytics:

Leverage advanced analytics tools to gain deeper insights into consumer behaviour, seasonal trends, and product performance. This data-driven approach enhances decision-making, allowing for more precise inventory management and strategic planning.

Track Your Inventory More Efficiently

We hope you now know how retail stores keep track of their inventory. By embracing these elements, retailers can maintain optimal stock levels, enhance customer satisfaction, and drive overall business success. Moreover, implementing additional best practices contributes to a comprehensive and effective inventory management strategy. 

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Frequently Asked Questions About Inventory Management

How do retail stores buy inventory?

Retailers source inventory through a combination of direct purchasing from manufacturers, distributors, and wholesalers. Negotiating favourable terms, considering lead times, and maintaining strong supplier relationships are essential in the procurement process.

How Much Inventory Should a Retail Store Carry?

The optimal inventory level varies by industry and store size. Conducting regular demand forecasting, considering seasonality, and monitoring sales trends help determine the right balance between having enough stock to meet demand and avoiding overstock situations.

What do retailers do with unsold inventory?

Retailers employ various strategies for excess inventory, such as offering discounts, bundling products, or donating to charities. Additionally, exploring secondary markets or online platforms can help recoup some losses and reduce excess stock.

Where to sell excess retail inventory?

To sell excess inventory, retailers can leverage various channels, including online marketplaces, discount stores, or even organise clearance sales. Collaborating with liquidation companies or donating to charitable organisations are ethical alternatives to managing surplus stock responsibly.

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