Inventory Management in Retail

Managing Inventory

• 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

Overview of Inventory Management

• 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

• 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

Receiving Merchandise

• 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

Checking Received Merchandise

• 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

Marking/Pricing Merchandise

• Essential for handling merchandise, various techniques used
• Price labels may be directly placed on items, shelf labels, or electronically
• Several marking options exist (pre-priced, un-priced, non-marking)
• Pre-priced items come with manufacturer or vendor price tags
• Un-priced items require staff to add prices
• Items on special offers may not require specific price tags

Storing Merchandise

• 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

Handling Transfers, Returns, and Damaged Goods

• 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.

Stocktaking

• 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

Monitoring Staff Purchases

• 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)

Summary

• 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.