Inventory management is the process of overseeing the flow of products, from procurement to sale. It ensures that the right items are in stock at the right time to meet shoppers’ demand while avoiding excess inventory. Profitability and customer satisfaction hinge on it, as inefficient stock handling can hit retailers hard.

According to IHL Group’s 2023 Retail Inventory Distortion study, outdated inventory practices cost retailers hundreds of billions of dollars each year! On the other hand, careful stock control through automation, data analytics, and integrated retail software and point-of-sale (POS) solutions keeps shelves full and reduces waste.

Let us explain the core concepts, strategies, and challenges of retail inventory management and how solutions like Veras OmniView deliver real-time visibility and control across all channels.

What is Inventory Management & How Does it Benefit Retailers?

Inventory management is the systematic method of tracking, controlling, and optimizing stock quantity, cost, and location across the supply chain. Put simply, it means getting the right products to stores in the right amounts, so customers can find what they need.

Effective stock management reduces costs and provides more accurate sales insights. For example, systems track the location and quantity of each product at every store or warehouse. Retailers can then identify which items sell the fastest, helping them determine what to reorder and when.

• Inaccurate inventory can cost retailers up to 4% of their annual sales due to stockouts alone (Corsten & Gruen, Harvard Business Review). By reducing dead stock and ensuring optimal stock-to-sales ratios, you free up capital and reduce holding costs.
• Avoid Stockouts and Overstocking:
  Stockouts not only result in immediate sales losses but also cost retailers nearly $1 trillion worldwide each year (Retail Dive, 2018), damage brand loyalty, and increase operational costs due to rush restocking and lost customers. Simultaneously, excess inventory ties up working capital and risks obsolescence.
• Save Time:
  Modern systems automate reorder triggers and data capture, making manual spreadsheets relics of the past. This also reduces human error and frees staff for higher-value tasks!
• Keep Customers Satisfied:
  When products are reliably in stock, customers trust the brand and are more likely to return. Accurate inventory translates to a seamless omnichannel experience, allowing retailers to know what is available online, in-store, or for BOPIS (Buy Online, Pick Up In-Store).

Core Strategies for Better Inventory Management for Retail

An effective retail inventory system combines four fundamental pillars with proven methodologies:

1. Ordering

• Track current stock counts and sales velocity to forecast what to order and when, without exceeding storage capacity.
• Apply demand forecasting using historical sales data, seasonal trends, and promotions to set accurate reorder points.
• Use Just-in-Time (JIT) ordering to minimize on-hand inventory and holding costs. While JIT conserves capital, it requires a tightly integrated supply chain to avoid stockouts.

2. Storing

• Optimize warehouse and backroom layout for rapid pick-and-pack operations.
• Implement a FIFO (First-In, First-Out) policy for perishable goods: sell the oldest items first to minimize spoilage and markdowns.
• Conduct regular cycle counts to reconcile physical stock with system records.

3. Selling

• Monitor sell-through rates and sales velocity to adjust promotional pricing or markdowns on slow-moving stock-keeping units (SKUs).
• Use ABC Analysis. Categorize inventory into A-items (20% of SKUs generating 80% of revenue), B-items (30% generating 15% of revenue), and C-items (50% generating 5% of revenue). Focus attention on A-items for tighter control.
• Leverage bundles or cross-sell complementary items.

4. Tracking

• Maintain real-time inventory visibility across all touchpoints and locations to minimize stockouts and, consequently, prevent lost sales.
• Utilize barcode scanning or RFID technology to minimize manual data entry errors. Batch tracking is also crucial for recalls, as it helps identify defects.
• Generate alerts when inventory levels drop to a predetermined minimum. Automated replenishment ensures timely restocking!

Common Challenges in Retail Inventory Operations

Even with the best intentions, retailers often face challenges in inventory management that hinder their operations. Knowing them is the first step towards figuring them out:

• Complex Omnichannel Operations: Coordinating stock across physical stores, online channels, and third-party marketplaces introduces additional complexity and potential errors.
• Demand and Supply Volatility: Retailers face unpredictable demand spikes and more often than not supply disruptions. For instance, stockout rates in the U.S. exceeded 35% during the 2020 pandemic (Knight & Mitrofanov, Harvard Business Review).
• Data Gaps and Errors: Inaccurate records or manual counting can skew inventory levels, leading to stockouts or excess stock, which in turn hurts revenue and cash flow.
• Excess Stock Risk: Overstock ties up valuable capital and incurs costs. By late 2022, U.S. retailers held about $740 billion in unsold merchandise (McKinsey, 2023). Conversely, understocking results in missed sales opportunities and frustrated customers when popular items are unavailable.
• Expiry Management: For businesses handling perishable goods or items with limited shelf lives, tracking expiration dates without proper retail software can lead to significant waste and financial loss.
• Returns and Reverse Logistics: Processing returns complicates inventory counts. Without a streamlined system, processing returns can create inventory chaos and inflate shrinkage.
  
  
• Technical Glitches: Legacy POS solutions may not update inventory in real-time, causing overselling or stock discrepancies.

Addressing these challenges head-on requires a comprehensive, data-driven system: one that ties together sales data, warehouse management, and replenishment logic.

Boost Your Retail Operations with Smart POS Solutions – Contact Veras Retail.​

Veras OmniView: A Smarter Approach to Inventory Management

For mid-size and enterprise retailers, effective inventory management was once a challenge. Now it is a key competitive advantage. As we’ve discussed, the right combination of proven strategies, meticulous tracking, and intelligent stock optimization can reduce costly errors and set stellar omnichannel customer experiences in retail.

Fortunately, today’s retail software platforms have proven to be undeniably decisive in centralizing stock data. These cloud and mobile systems integrate sales and inventory, auto-updating counts across stores and channels instantly when a sale occurs. They also help streamline pick, pack, and ship operations, allowing stores to function as micro-fulfillment centers and ensure that online orders are filled accurately and on time.

Veras OmniView is our leading software suite designed to empower retailers to meet modern omnichannel demands. It enables the management of location-based inventory for stores and fulfillment centers, helping employees quickly identify a product’s shelving location and guiding efficient picking. Associates can access exact stock levels down to the aisle, bay, shelf, and bin, and automate replenishment from the backroom when popular items are low on the floor. Quicker sell-through means fewer disappointed customers.

Lightweight and easy to deploy, OmniView supplements your e-commerce and merchandising systems to streamline putaway and picking workflows. Our API-based solution works seamlessly alongside any existing ERP systems and flexible POS solutions such as Veras CheckOut, adding location tracking and efficiency without requiring a costly overhaul of your current platforms.