Retail Inventory Control – A Lethal Weapon

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Part of the answer to the “buying problem” is inventory control. In fact, the biggest reason retail businesses fail is that they lack inventory control. However, when employed aggressively against competitors, effective management of your inventory can be a lethal weapon.

Imagine doubling your inventory turnover rate (certainly not far-fetched with proper control): you could sell product at half the normal margin and still gross the same amount of dollars in a given time period. Inventory control has been used to take down many competing retailers.

Like much of the new technology available to business owners, Management Information Systems (MIS) is still evolving, and along the way it becomes both more sophisticated and less expensive.

MIS tools can be implemented to gain a significant advantage over competitors. However, it is critical that you understand the uses and goals of an inventory management system before implementing.

The best examples of inventory management come from big retailers. To put it simply: Kmart neglected inventory control and failed, and Wal-Mart concentrated on becoming the leading edge of inventory control and is now one of the world’s largest companies.

It is a common misconception among small retailers that only industry giants like Wal-Mart can use MIS effectively. Sam Walton himself began as a small retailer, but one of his most advantageous assets was his deep understanding of inventory control’s importance.

MIS is commonly regarded as a daunting system to implement by those with limited experience in this highly-technical area; however it is critical to understand exactly what MIS can accomplish.

Although internal hires are available, MIS is made greatly accessible to the small retailer by consulting companies. The basic goal of a point-of-purchase inventory control system is to provide information on profitability, status, and rate of sale for every item a retailer stocks, instantly. These metrics can then be used to improve inventory turnover and return on investment.

Once an MIS infrastructure is established, it makes sense for the retailer to integrate vendors into the system. Vendors are subject to an incentive to keep their inventory on store shelves, and systems are available which provide vendors with sales and stock information directly from the point of sale system.

Providing your vendors with timely information and making them responsible for maintaining inventory your overall efficiency is improved as your own workload is diminished. The net impact on your business is increased turnover rates and fewer runs on inventory.

Anything that results in making the chain between Vendors, Retailers and Customers more efficient also results in additional profit. RFID, an example of an electronic recognition system, enables tracking of items via a computer chip embedded in the product or packaging, which is detected at various stages along the distribution process.

Product information obtained in this way is uploaded instantly to the inventory control system, which reduces the time spent in receiving and stocking and allows for a more efficient shipping process. It is imperative for retailers to be aware of inventory performance and its effects on profitability.

Inventory control is not, however, the answer to all questions. It doesn’t tell you what new products you should carry. Buying is a great area of opportunity, especially for the small retailer who is close to customers and much more responsive to their demands than is the national chain.

Of course, inventory control is not the ultimate solution to retailers’ problems. For example, inventory control tells you what products are performing well, but it can’t tell you what new products to stock. Inventory control is a great way for small retailers to act like one of the big guys, and gain an advantage over other small competitors.

Have you read?:

1. Measuring Retail Inventory Productivity – Inventory Turn and GMROI
2. Stop Bleeding – Control Retail Shrink to Increase Retail Profits
3. Retail Distribution Made Easy
4. Retail Service: Considering the Cost of a POS – Point Of Sale – System
5. Niche Retailing: Uncovering New Retail Opportunities
6. Make Digital Retail Signage Work for You and Increase Retail Sales