As a retailer, holding the appropriate amount of inventory can be quite challenging especially during the holiday season due to the increased demand. Therefore, this makes it challenging to effectively carry out retail inventory management resulting in plenty of unsold products. Having an excess inventory is costly. It is because excess inventory eats into your profit margins, takes up floor space of popular goods as well as ties up your cash flow in working capital.
Consequently, discussed below are some inventory management techniques you should employ to ensure rarely stock excess inventory.
1. Always Perform Accurate Forecasting: Excellent inventory management always entails precisely predicting the demand. However, this can be quite challenging because of the infinite variables which are involved plus you never are too sure of what exactly is going to happen, but you will have a general idea. Some of the factors which help you in projecting future sales include the annual growth rate, trends in the market, seasonality, and overall economy, the sales of the previous years among others.
2. First-In-First-Out (FIFO): It is a crucial inventory management principle whereby the oldest stock (first-in) is sold first (first-out) and not the recently bought stock. Usually, this method is increasingly vital if you are dealing with perishable goods, selling them before they spoil while still in your hands.
Furthermore, practicing FIFO on non-perishable products is ideal because boxes get worn out with time and packaging features and design frequently change, hence you do not want to have a product that is obsolete and difficult to sell.
3. Conducting Regular Auditing: It is crucial to frequently carry our frequent reconciliation using reports from your warehouse and software hence have a better idea of how much stock you currently have. Moreover, guaranteeing that these facts matchup is necessary and there are several techniques, you can use to do this. It includes cycle counting, physical inventory and spot-checking and subsequently, you will have a clearer idea of how much product you have in stock.
4. Stick to Making Small Batch Orders: By ordering in small batches, you frequently carry out replenishment. Thus, this keeps you on-track with having low inventory, minimal chance of a possible overstock, and a reduced holding cost. Additionally, ordering smaller consignments negates the need for storing a considerable quantity of stock as well as assisting with Just-In-Time, thereby suppliers carrying out deliveries more often and in a lesser amount.
Using this technique is also very beneficial to the customer since products get sold before their expiration date hence improving the product value.
5. Get Rid of Excess Inventory: In case you have inventory that is not moving, you should try returning it, donating it, or bundling it with other popular products. Usually, bundling these products entails you combining this product with a fast-moving good and then selling at a discount to encourage its purchase. Furthermore, you can donate merchandise that is not moving and this in some countries attracts a tax deduction equivalent to the market value of the goods. Lastly, you can return the product to the supplier, but this will be charged a restocking fee.
6. Execute a High-Quality Inventory Management System: Typically, inventory management software with a portable inventory management gadgets and mobile inventory workstations are vital in assisting you monitor short-stocks and hand overstock. Often, firms make use of inventory management software to minimize their carrying costs. It is because this software tracks parts and products while being transported from the vendor to the warehouse, and to the final retail destination or the customer directly. Therefore, the firm is always aware of the amount it stocks at any given moment.
7. Liquidate the Excess Inventory: If you want to get rid of all the slow-moving inventory, liquidation is an excellent option despite this significantly slashing your profit margins. Nonetheless, by liquidating this inventory by either selling to a liquidation firm or selling through online platforms, you get to reduce the total inventory costs and quickly remove your stock.