Peter Pishko, VP of Operations at One Step Retail Solutions
1) Classification- The breakdown of your inventory should be based upon specific classifications. I often meet with customers that classify their inventory by vendor. Telling a vendor story is a great way to display your merchandise but it falls short when it comes to inventory management. It is your business not ABC vendor’s business, classifying your inventory in the same manner as your vendors could lead to disastrous results. It does not allow for flexibility in your assortments or is just too dependent on vendor performance. The viewpoint I like to take is that every retail location can be viewed as a mini department store. Break your merchandise down by departments and classifications at a minimum, so you can follow historical trends in your assortment. Do not be too specific in your department breakdown, or it will not allow you to view trends easily.
2) Physical Inventory- It is imperative that a physical inventory is performed at the very least once a year, ideally twice a year and some merchandise should be counted on a regular cycle i.e. monthly or based on seasonality of your goods. Physical inventory is my favorite task because it allows me to reset everything from floor plans to stockroom resets. It’s an opportunity to start over post season when you are at your lowest stock levels and between assortments. Marking down all the left overs and preparing for the new season gives you an opportunity to evaluate your buying and value your merchandise.
3) Forecasting- The most important thing is forecasting, inventory management allows you to get real numbers on what is selling and what you project to see selling in the future based on your sales trends. There are many forecasting methods to consider and maybe more than one is applicable to your vertical, but be sure to consider sales history, customer demand, open to buy, planning and seasonality just to name a few. There are entire schools of thought on supply management but the idea is to have a forecast plan in place. Review your units forecasting vs. your cash forecasting and be sure to balance the two.
4) Automate- Having inventory management software is a standard practice but are you using the software and all of its features? Become familiar with all of the applications and use all of features in your inventory management software. This will make your life easier, you should not be working for the software. Automate purchasing through the use of suggested orders from your software based on your selling history. Suggested orders can be approved through a system of checks and balances, but it will save you time and give you a starting point on reorders based upon properly established order points. Create receiving documents from purchase orders and enter your purchase orders in your software so that you have a record, we used to call it a paper trail, now I’m aging myself.
5) Minimize- It is possible to reduce your stock levels in many cases and increase your customer service by taking advantage of drop shipping, in many cases we can take advantage of not having high stock levels at the store and drop shipping to the customer instead. It may even be more cost effective to drop ship directly to the customer from your warehouse. Investigate an alternative to maintaining stock and drop ship from your distribution site or directly from your vendors.
6) Historical perspective- We have discussed forecasting but what else can we see in inventory management from a history perspective? The aging of customers changes our assortment; it is not difficult to look around and see companies that have not kept current with the times or changed with the customers. I had a customer who discovered that her business had shifted entirely away from books to gifts over time and she was able to respond through a historical view of her business. Make sure to analyze the purchases your customers are making so you keep your store current with the times.
We hope you found this inventory management guide useful and if you need assistance, please feel free to reach out to one of our retail experts that would be happy to assist you at info@onestepretail.com
Happy planning!
Peter, a native New Yorker, grew up in Albany and began his career in the retail industry right out of college in 1984. After a career with Jordan Marsh Department Stores, Peter opened the New York City flagship store for Bed Bath & Beyond in 1991. When working as a district manager for several specialty retailers he found One Step Retail Solutions in November of 2001 and has been there ever since. Since arriving at One Step Peter has installed and trained Retail Pro across the United States, Great Britain and France. Peter’s 20 plus years of retail experience gives him the insight to connect with retailers for a valuable partnership between their industry and technology solution provider.
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