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What is Inventory Management?
Inventory is a term used to describe unsold goods and material that can exist in a store, the back room or a warehouse.
Inventory management is the system of keeping tab on the goods available and sold, along with managing stock so that the retailer is never out of it. Inventory management is a complex and time consuming process and is usually the top priority for retail decision makers. Unless you have a very specific and slim product mix, there is a high chance that you may end up spending lots of time just tracking inventory. This is of course a very important process and once finessed, will become the strength of the business. Remember, inventory management comprises of many units of the supply chain and each unit may end up using a different tracking system.
Inventory management is vast and covers many aspects of the retail business. Here are a few components that are part of the management system; - inventory forecasting, pricing, cost of storing inventory and replenishing exhausted goods, managing space to store inventory, shipping and return/exchange processes and policies, demand and sales forecasting, and inventory status.
So, why do we need Inventory Management?
There are many reasons why keeping an inventory is necessary.
With the modern day retail industry booming and ecommerce penetrating into the market, it is very important for a retailer to not delay the product availability. If a customer doesn't find what he or she needs, they will simply move to another retailer. Inventory helps manage the time to delivery by always having a ready stock of products. There is a also a high chance that production will be uniform through the year, but buying patterns will change; festivals and holidays will see a boom in purchase, whereas, the end of a financial year will see a dip in buying. Retailers may want to hold back goods during a price or stock revision, to increase demand or offer discounts.
Of course, there is the uncertainty of customer behaviour which is hard to predict and is important to maintain inventory for scenarios like these.
Inventory Management will allow retailers to :
1. Focus on optimizing the product range. A narrow inventory leads to improved stock management, lower warehouse costs and also removes the possibility of good expiring or becoming harder to sell.
2. Although creating a lean inventory is ideal, this may be a hard task to achieve. With increased competition in the retail market, discount battles, retailer are rethinking and realigning their product lines to be more relevant and appealing to buyers. This often involves, diversifying the products families as it is believed to increase revenues. Do keep in mind that introduction of newer products often kills the older products on shelves. Optimize before you diversify.
3. Build a computerized inventory management system with most repetitive tasks being automated. A digital inventory management system will allow retailers to keep a tab on ordering, shipping, delivery information, finances and costs involved. The system will help predict demand based on inventory status, historical data and user inputs.
To sum it up, remember the 5 R’s of inventory management. The product should be available at the right time and at the right place. Customers should be able to acquire the right quantities, at the right price and the right quality.
Inventory Management Systems
There are a lot of cost effective inventory management systems available which offer a suite of tools that allows:
1. In-depth and real time insights into the inventory, consumer and supplier, ultimately delivering the right goods at the right time and at the right cost.
2. Product performance indicators with the ability to forecast.
3. Customer support for vendors and customers; this could include self help like what we see with many online retailers
4. Keeping track of sales, costs, discounts and providing on-demand or timely reports
5. Reducing the chance of fraud either by a customer or by an employee.
Modern day inventory management solutions are now cloud enabling their tools to allow on-demand and real time management of the process. Managers can now access their business ERP from virtually anywhere in the world, even using their own personal devices! The cloud provisions for systems to stay simple initially, and dynamically scale along with the business, a growth model many recommend.