In retail, one of the primary reasons for holding stock is to reduce the risk of stock-outs and the potential of lost sales. Additionally, seasonal supply and demand fluctuations may require companies to hold higher stock levels at certain times throughout their business cycle.
Whatever your reasons for holding stock, it is important to manage it in a way that increases the advantages and lowers the risk. Sometimes good inventory control often just requires a good old-fashioned inventory spring clean.
Do you have dated stock gathering dust in your warehouse? Slow moving, out of season products need to be cleared out to make room for new season or faster selling items. When the money invested in inventory stock has already been spent, it’s better to sell an item at or even below cost, to recover a portion of that initial investment.
Often the reasons for holding stock are outweighed by the costs to hold and the increased likelihood of damage and deterioration to old stock, which means you will only discard it later when it is no longer saleable.
There are no good reasons for holding stock of goods that represent a sunken cost, or a cost that has already been incurred and cannot be fully recovered. Many retailers have discovered ways to successfully clear out ageing or unwanted inventory stock.
A clearance sale is a good way to reduce inventory stock or clear it completely. However, companies who have spent time and resources to establish themselves as a premium brand, may feel that the idea of a clearance conflicts with their brand reputation. In these instances, clearance items can be listed under an alternative business name and sold on third-party marketplaces and auction sites.
Consider offering items you are looking to clear to your best customers first by selectively targeting loyal repeat customers. Not only is this an opportunity to clear unwanted stock but it has the added benefit of rewarding loyalty and building customer relationships.
Having a clearance of your old inventory stock is unlikely to see you recoup the full amount originally invested, but it will clear your shelves of old inventory stock and recover some cash without necessarily damaging your brand.
Get organised and stay organised. Categorise and label inventory before it is shelved. Having inventory stock easy to locate allows you to quickly find items for efficient shipping and dispatch.
Effective inventory control can be achieved by consolidating inventory processes into a single integrated system – a system that facilitates accurate counts, tracks and records inventory movement in real time from the minute it is receipted in stock, until the moment it leaves your business. Accurate record-keeping and a standardised process are essential to staying organised.
Failure to take a strategic approach to inventory management can leave your business with an assortment of challenges including increased costs, inventory stock errors and inventory mistakes.
Invest in technology that automates inventory control. Optimising inventory processes to ensure you maintain the right inventory balance and avoid the need for spring clean clearances.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.