Inventory management refers to the ability to have the right products in the right quantities at the right time so that customers can buy them. By accurately managing inventory, you can increase your revenue by avoiding stockouts, overstock, or unsold products. A software program can automate inventory management for small businesses.
We recommend that you use an integrated POS system like Lightspeed to automate your inventory management procedures. Lightspeed will simplify your inventory management, save you time and keep your records accurate. Lightspeed provides insight and reports about your bottom line.
1. Organize Product & Vendor Information
Your inventory organization starts with setting up stock and supplier information in an accessible and reliable system. Some businesses use spreadsheets for manual tracking. However, the best option for retailers is to use a point-of-sale (POS) system that will keep a vendor directory and searchable product pages for you.
You will need to first record the information about each product and then file it on a product page. You should include the following product-specific information:
- Name of the product
- Quantity
- Your internal product stock-keeping unit (SKU) number
- Manufacturer's Universal Product Code/European Article Number or any other unique identifier
- Short description
- Family, product category or class
- Wholesale price
- Regular retail price/MSRP
- Your selling price
- Sizes and colors
- Name of the vendor, supplier or manufacturer
- Reorder quantities
- Details about shipping: dimensions, weight, box packaging, cost, dispatch time, etc.
- Image of product or picture
Lightspeed allows you to make detailed product pages where you can store all of your product information.
(Source: Lightspeed)
You will need to keep a record of all your products, their information and also file the information of all your vendors into your system.
This information should include:
- Vendor name
- Vendor contact name
- Vendor billing information
- Vendor phone
- Vendor email
- Vendor website
- Order volume
- Modalities of payment
- Contact the showroom or line rep
Establish relationships with product suppliers
Even with the best inventory management plan, issues can still arise where you need products ASAP to fulfill an order. Retailers are left at the mercy their suppliers when this happens. A good relationship with your supplier is key to quickly resolving quality issues or discrepancies in a purchase order (PO).
Ecommerce and retail businesses can develop strong relationships with suppliers by staying with the same suppliers for a long time, meeting suppliers face-to-face at trade shows, as well as paying invoices on time.
2. Create & Submit Accurate Purchase Orders
POs are basically buyer-created receipts which document the sale of products that will be delivered at a later date. These are the best way to track your stock purchases. They allow you to track each purchase from the time it was placed to the time it was delivered and when it was paid. POs are financial transactions, so create them when you have time to review your cash flow and realistically forecast your stock needs.
Lightspeed Retail has a built-in vendor directory and product catalog so that businesses can send POs directly through their software. (Source: Lightspeed)
You should keep track of all your POs to ensure you have a complete record of everything purchased from your supplier. This will allow you to cross-reference your deliveries and what you actually received. This will help you stay on top of your inventory counts and prevent shrinkage.
Let's say, for example, that I want 300 pairs of shoes from my preferred supplier for the spring. Fill out a purchase order form and specify the shoes and quantities you want. Then, check the total price and send your PO to the supplier. My PO forms will allow me to verify that the correct quantities, sizes, or models are received in the spring when my shoes arrive.
Vendors can submit purchase orders electronically via email or through the vendor's online ordering portal. If your vendor does not have an order form, you can download our purchase order template to make things easier. Lightspeed POS software also has features that can make it easier to manage your POs.
Many POS systems offer directory features that allow you to keep track of vendor contact information. Some even allow you send POs from the interface. Low-stock alerts are also available in POS systems. These alerts let you know when inventory items reach a certain minimum threshold so you can place a new order. This will help you to prevent stockouts and the accompanying disappointed customer.
3. Get accurate inventory orders
After you submit your purchase order, make sure you get the stock you ordered. It is common for supplier errors to occur. If you don't take the time to ensure that you receive your stock accurately, you could end up with inventory shortages, overcounting, or undercounting your orders. This can result in shrinkage and lower margins.
To receive inventory correctly, companies should receive and unpack all boxes in the same space, count each box, and check the items received against original purchase orders.
Receiving your inventory accurately will ensure that you have a good understanding of your stock and that you are not missing any items.
(Source: Highway Logistics)
It is especially important that all items received are checked against your PO. Usually, suppliers include packing slips listing the quantities and items in your shipment. Although this packing slip should match the physical shipment, it is possible that the supplier may have made an error in order entry and their packing slip might not reflect the actual quantities.
You run the risk that you will think you received stock that never arrived if you don't check for order discrepancies. This can lead to stock shortages and backorders that ultimately result in cash losses.
How to Receive Stock Shipments Accurately
- Pack the shipment carefully and arrange items according to product.
- You must ensure that all boxes, containers, and other items in your shipment are received according to your POs.
- If products and counts match, you can file as received in your POS system or physically.
- You should immediately notify your supplier if you notice errors such as missing, incorrect, or shorted items.
- All stock received correctly should be stored (tag or label your stock first, if necessary).
- In your accounting software, enter your bill.
4. Tag & Label Inventory
Once you have your products physically in stock, you need to label and tag your inventory so that it is organized and ready for use on the floor. Two main points should be included on your tags:
- PriceThe sellingPriceThis is the item. This information is required for all inventory items before they can be placed on the floor and made available to customers.
- Product labelsLabeling is essential for inventory management. It will allow you to organize your inventory and keep it organized. We recommend the following:Barcode systemTo make it easy for customers to checkout as well as your inventory management process.
No matter what type of label you use, it is a good idea to tag and label inventory during stock receipt. This ensures that the task is not overlooked and prevents unlabeled stock being displayed or shelved.
Labels can be attached to the product packaging, price tags or shelves once printed. You can track inventory in your POS by adding bar codes to some inventory that may have been prelabeled. In that case, if you're not using SKU numbers, your job is easy. Simply add a price label.
5. How to organize your stockroom or warehouse
A well-organized stockroom will make it easier for your employees to locate the items they need, and will allow you to fit more merchandise into it and keep better track of what inventory you have.
Tall storage shelves and double-tier hanging racks in retail stores can maximize wall space while still allowing for movement and easy accessibility. To maximize floor space, storage bins can also be stacked on the ground and labeled.
You will have more space to store your goods in larger warehouses with built-in shelving or hanging storage. You will need to make sure that your storage options are appropriate for your merchandise, and that they can be changed over time.
My boutique had a tiny storage area with limited space. To maximize the space we had, we used many hanging racks and stacked boxes. They were easy to roll and could be labeled with rack tags. The bins worked well for heavier/knitted items that didn't fit in the available hanging space. They were also easy to label depending upon the inventory.
No matter how you store your inventory, it is important that your inventory be organized, clearly labeled and easily accessible for inventory counting and pulling. You can do this using boxes, stacking bins or hanging separators to hang apparel.
A well-organized stockroom will make life easier for your employees, and will help you spot stockouts and see your inventory levels.
(Source: arxiusarquitectura)
6. 6.
Good inventory management is about tracking your inventory levels and making sure you have the right products on shelves. A sound inventory management system tracks every sale and adjusts inventory levels accordingly, whether it is done manually or via your POS system.
While you can use a spreadsheet for real-time inventory tracking, we recommend a POS system to streamline this process dramatically. POS systems can track inventory levels in real time and adjust your sales accordingly. You can also set up automatic PO generation, stockout warnings and reorder alerts as your inventory levels decrease with every sale. A POS system makes it easy to track inventory levels and reorder supplies. It also bases your inventory on actual sales trends and not your best guess.
7. 7.Keep a regular inventory count
It can be tedious and monotonous to count physical inventory. Physical counts can help to reduce inventory problems in all kinds. For tax purposes, most small businesses conduct a full inventory count every year. However, it is a good idea to do smaller partial counts or cycles, even if your POS system allows for this.
Quantity of Hands
Your current Quantity On Hand (QOH), or the inventory that you should have in order to keep every item in your inventory, is the basis for both annual and cycle inventory counts. Here is the formula for QOH:
QOH = (Previous QOH + Received Inventory)-Sold inventory
Your QOH is the number against which you will calculate your annual and cycle counts. For example, if my QOH calculation indicated that I should have 272 gum packs, then I would look for 272 gum packs in my annual or cycle count. If I discovered a discrepancy of 250 packs of gum, it would be a sign that there was an error or theft and I would investigate further.
Annual Inventory Counts
An annual inventory count is a complete inventory count. These counts are usually done at the end of each fiscal year to determine income tax. These count give you an overview of the inventory that you have at the end of each year. Businesses can use annual inventory counts to identify inventory shortages caused by miscounts, shrinkage issues or misplaced stock.
Most retailers do more frequent inventory counts. However, small businesses with fewer staff or smaller inventories will only conduct this type of inventory count every year. Although annual inventory counts are good practice, they can be too late to correct most of the issues that they reveal. You should also conduct periodic counts (called cycle counts) to catch inventory problems before they become expensive.
Cycle Counts
A cycle count is a periodic spot count that takes inventory of a specific category or subset of products. My boutique would conduct a few cycle counts every week for various types of clothing. For example, basic T-shirts, jeans, and earrings. Cycle counts allowed us to see how products performed or whether it was time to restock.
You will typically perform cycle counts frequently. You might count your shirts every Wednesday, and your jeans every two weeks. To keep an accurate grasp of the levels of all your products, it is a good practice to cycle count them daily. This is almost impossible without the right technology and staff. Your cycle counts will be determined by how fast you move through inventory. Items that sell quickly get more frequent counts.
Automated or manual counting
There are two options when it comes to counting your inventory. Either manually count your inventory or you can use a POS system that automates the process. We will be discussing both automated and manual inventory management options, and how each can benefit your business.
Manual Counting
Although we recommend using a POS system for inventory counting, you can still do it manually. Your first step is to add up your QOH, which will be based on last year's inventory and your POs. Also, keep track of the sales totals. From there, you'll need to create inventory count sheets to record your physical counts and begin counting.
Although you can do manual counts, they are more accurate and take longer than the automated POS option.
Automated POS Counting
Although it cannot count all physical items in your inventory, a POS system can provide live QOH counts and inventory lists to speed up and streamline your inventory counting. A POS system can help reduce errors in inventory management and improve efficiency for your business.
If you do decide to go with a POS system to count and track your inventory, we recommend Lightspeed. Lightspeed tracks inventory levels and alerts you when there are low stock items. It also keeps live QOH counts for you as you sell and receive items.
8. Reconcile Discrepancies
Your physical inventory should be comparable to your QOHs. This is not always true. You will need to determine if you have less or more product than you expected and work out the solution. This is called shrink in retail.
Shrink: The difference in the actual number of products that you have and what you think you have.
Inventory shrinkage can be caused by two main reasons. Inventory shrinkage can be caused by theft or a clerical error. Clerical errors can sometimes be mistaken for actual losses. An item might have been misplaced, or a key could have been incorrectly typed. Other times, shrinkage indicates actual loss and you should investigate where it happened so you can work on preventing it in the future.
You should adjust your QOH if you find that the missing merchandise is indeed gone. You should then record the dollar loss due to shrinkage in your inventory.
Bottom line
An inventory management system that is accurate and complete will ensure that you have a clear picture of all your stock. This will allow you to avoid unnecessary waste and give your customers the best experience and merchandise. This guide will help you get started in implementing an efficient inventory management system. These principles can help you organize your inventory and improve the efficiency of your existing system.
Comments
Post a Comment