Why Is Inventory Management Critical For a Merchant?

12 October 2012

Inventory is often the largest asset on your balance sheet and can account for as much as 75 percent or more of your total assets.

A major expense attributed to carrying inventory is ‘shrink.’ Shrink is what happens to your inventory as a result of theft and administrative error and/or mismanagement – your inventory shrinks or disappears. It stands to reason, if you can control and limit your loss of inventory, you are saving money or increasing profits.

By having an accurate physical inventory and access to real time data analytics, you can easily monitor stock levels and identify products or items with high levels of shrink. Products identified with high levels of shrink can be monitored closely, packaged or repackaged, marketed or merchandised and distributed differently to help reduce losses.

If you are unable to easily and quickly identify what your poorest and best selling products are, in real time, you could be in for some heartache. Carrying products can be a significant expense for merchants. By knowing what products you should mark down or otherwise discount, you are able to clear out your inventory rather than have slow moving or non-selling products languishing away in the dark recesses of your dusty backroom.

By knowing you are getting low on your best selling product, you can place the restock order in time to ensure you are never without your best selling product on the shelves.

How important can that be? Say your store or chain is being plagued with losses from higher than normal returns due to the poor economy. Let’s consider how your inventory control policies can be affected by using an outdated system. Because things seem to be picking up you’re very busy and a return takes at least 10 minutes or longer. Typically your process was fraught with the danger of mistakes and fraud, chipping away at your bottom line.

Paper-based management and transactions with receipts that are required to execute returns are a perfect example of how costly mistakes are made. Let’s say you capture all of your customer information on handwritten forms at the point of sale. You then transfer that information by typing it into a computer, which produces a new receipt that reflects the return transaction. The customer signs the receipt and you keep all of the paperwork for reconciliation later.

This is a laborious process that is not designed to catch mistakes. Oftentimes customers returning discounted merchandise receive full-price refunds because there are no reports or records to consult.

Receipts should be bar-coded and a simple scan of that bar code pulls up the entire transaction history, as it occurred in real time. The actual sale price is recorded and a receipt cannot be used more than once for a return. A receipt can’t be faked and returns can be processed in seconds.

Capitalizing on the available technology to efficiently monitor and control your inventory can be done easily without breaking the bank. In fact, there are solutions that can easily and quickly be implemented by merely downloading an app. The app is priced as an affordable monthly fee enabling an almost instant return on investment (ROI). There are no expensive point of sale (POS) licensing fees and no heavy investment in POS system equipment or training regimens.

Control and manage your inventory and you will also be controlling and managing your business destiny at the same time.

Thanks to today’s affordable technology, you can use POS system features and enjoy the benefits that enable the easy management and control of every aspect of your business and related inventory so you capture every possible profit you’re entitled to.

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