Inventory Management in Retail

Study Notes

Retailers need to know what products are selling and how much stock is on hand
Out-of-stock items lead to unhappy customers and lost sales
Excess inventory hurts profits
Accurate inventory records are crucial for customer satisfaction and profitability

Managing stock (inventory) is a significant and time-consuming part of running a retail store
Inventory management involves tasks like ordering, receiving, checking, marking/pricing, storing, handling transfers, managing damaged goods, and handling returns
Point-of-Sale (POS) systems are often integrated with inventory management systems, automatically updating inventory levels after a sale.
Ordering process is initiated when stock reaches a minimum level defined by retailers

Ordering merchandise is usually the buyer's responsibility
Under-ordering results in out-of-stock situations, leading to lost sales
Over-ordering increases inventory levels and takes up valuable space
Modern stores use integrated POS and inventory management systems to track stock and automatically update levels
Activities include checking stock levels, creating purchase orders, getting approvals, and placing orders with vendors

Merchandise arrives at a designated area in a retail store
Procedures vary by store size/type
Goods should match the order (description, quantity, price)
Delivery order (DO) is checked and signed by the manager
Important information is recorded (date, time, vendor details, number of packages)
Big stores receive from a central warehouse; smaller stores may get supplies directly from vendors (suppliers)
Items may arrive in various forms: plastic containers, cartons, crates, or on pallets

Part of receiving procedure
Supplier's invoice or delivery order (DO) is checked against the store's purchase order
Items are unpacked and sorted
Quantity and quality are checked against the supplier's invoice or order
Discrepancies are recorded and items returned to the supplier if needed

Two ways to store merchandise: forward and reserve stock.
Forward stock is stored near where it is to be sold
Reserve stock is stored in an area separate from the sales floor
Retailers use stock sheets to track products, quantities, and any stock removal
Balancing stock (floor v. reserve), important to prevent excess stock and ensure enough for sale

Items need to be transferred if one store runs low, accurate documentation needed
Merchandise received must be verified
Dealing with expired or damaged goods: some items can be returned and others may have to be written off
Schedule to check expiry dates and inspect for damaged goods.

Physical count of all items in the store (and stock rooms)
Provides valuable store information (e.g., saleable items, outdated stock, items for return)
Opportunity to rearrange store displays
Usually conducted 1-2 times per year; frequency may vary based on the needs of the store

All staff purchases (including the owner) must be monitored to prevent abuse of benefits
Entitlement forms/cards for employees are created
Purchases are recorded
Purchase verification (by a designated person)

Effective inventory management is crucial for retail success
It involves multiple stages from ordering to stocking.
Keeping accurate records and monitoring all activities (received goods, stock transfers, returns) is necessary for customer satisfaction and profit.