In a stock-centric industry such as retail, inventory is typically one of the business’ largest assets. Keeping an accurate record of inventory levels and performance is critical to realizing the full potential of your business. Here are some ways that investing in accurate inventory information (and, in particular, correct inventory levels) will help your business.
Being able to rely on inventory information is important to facilitate business planning. Keeping accurate inventory records enables a business to properly understand its current position and the challenges that it is likely to face. In particular, accurate historical inventory data is a useful resource to determine inventory trends across previous periods. These trends can be used to develop a strategy for future periods. For example, a vineyard that can determine that a particular varietal has sold well during the summer season can take action and respond to leverage that seasonal demand in future years.
Solid Customer Service
Having accurate, correct inventory information is important to serve customers well. A company that manages its inventory well is less likely to unexpectedly run out of stock, so is better placed to fill customer orders and be seen as dependable. In the event that a branch does not have a product in stock, accurate inventory information allows for customer-centric responses, such as being able to point the customer to another branch with stock or being able to provide an accurate timeframe as to when the item will be in stock. If your business is unable to provide this level of customer service, then customers may cancel orders and go somewhere else.
If a business does not have a good handle on its inventory levels, managers might be tempted to avoid risk by purchasing large amounts of stock. Purchasing a buffer of safety stock can be a smart inventory strategy, but it can be easy to go too far. If your business is able to rely on its inventory information, then it becomes easier to correctly estimate a reasonable buffer of safety stock.
On the other hand, accurate inventory information is also useful to prevent understocking. Closely monitoring inventory levels allows a business to reorder stock when required, and to pick up on any trends earlier on. If inventory levels are not correct, a business may have a large amount of stock on paper but insufficient stock in reality.
Reducing Stock Shrinkage
Keeping inventory data up to date makes it easier to identify stock shrinkage and obsolescence. If a product is not selling well, it becomes easier to identify the problem and respond to clear the remaining stock. Theft and damage by staff is more straightforward to control as staff can be held accountable for the inventory for which they are responsible.
Promote and Reward
On the other hand, effective inventory control also provides an opportunity to reward good performance – up to date inventory data can be used as a good barometer for staff performance, particularly in the sales space.