Retail Inventory Management PDF

## Lesson 2: Managing Inventory Retailers need to know which products are moving, which are not, and how much stock they are holding. If customers can't find what they are looking for because it is not in stock, they are likely to leave the store unhappy without making any purchase. On the contrary...

## Lesson 2: Managing Inventory Retailers need to know which products are moving, which are not, and how much stock they are holding. If customers can't find what they are looking for because it is not in stock, they are likely to leave the store unhappy without making any purchase. On the contrary, excess unsold stock is likely to hurt profits. To achieve customer satisfaction and maintain a healthy bottom line, retailers have to create, monitor, and maintain accurate inventory records. ## Overview of Inventory Management One of the most challenging and time-consuming aspects of operating a store is managing inventory or stock. Unless a retailer manages his stock well, he/she will spend a significant amount of time in tracking inventory. Inventory management in a retail store involves the following tasks: - Ordering merchandise - Receiving merchandise - Checking the received merchandise - Marking/Price tagging the merchandise - Storing merchandise - Handling inter-outlet transfers - Managing expired and damaged good - Handling returns and claims - Stocktaking ## Ordering Merchandise Ordering merchandise is often the buyer's responsibility. Under-ordering results in out-of-stock situations leading to loss of sales. On the other hand, over-ordering increases the inventory levels taking up space in the store room and on the sales floor. Today, in most stores, the POS systems are integrated with the store inventory management (SIM) systems. When a transaction is made at the POS, the inventory level in the SIM is automatically updated to reflect the sale. When the merchandise reaches the minimum stock level defined by the retailers, the ordering process is initiated. Ordering merchandise involves the following activities: 1. Monitoring the current stock levels 2. Filling up the order form or purchase order (PO) 3. Getting the order approved by the head office, if required 4. Placing orders with the vendors ## Receiving Merchandise In a retail store, the merchandise is received at a designated area. The receiving procedures vary depending on the size and type of the store. When receiving merchandise from suppliers, retailers need to ensure that the goods received are in good condition and match those that had been ordered-in terms of description, quantity, and price. The store manager checks and signs the delivery order (DO), and records the number of packages received, the date and time, the vendor's name, and any other facts about the receipt of the goods. Big department stores usually receive truckloads from a central warehouse. The products arrive in plastic containers, cardboard cartons, wooden crates, or other packaging materials. Some merchandise may be on hangers while other items may be on pallets. The warehouse staff receives the merchandise and transfer the merchandise to the retail outlet. Small shops may receive goods either from a central warehouse or directly from the vendor. ## Checking the Received Merchandise Checking the merchandise is a part of the receiving procedure. It involves the following activities: 1. Checking the supplier's invoice/delivery order (DO) against the store's purchase order. 2. Opening the containers/cartons. 3. Unpacking and sorting the merchandise based on criteria such as style, color, and size. 4. Checking the quantity and quality of the goods received against the supplier's invoice/DO. If the quantity/quality of all items is correct, the invoice/DO is signed by the person performing the checks. 5. Recording discrepancies, if any, on the invoice/DO, and returning items to the supplier. ## Marking/Price Tagging the Merchandise A crucial step in handling merchandise pricing the merchandise. Different retailers use different techniques. Some small shops may place price labels directly on the product while others may use self-labels to communicate prices. Today, many retailers use barcodes and electronic price labels for pricing. | Types of Marking | Information on the Price Tags | Re-Marking Items | Considerations | |---|---|---|---| | Pre-priced merchandise | Pre-priced merchandises are items that are price-tagged by the manufactures/vendors and arrive at the store with price tags already attached. | Un-priced merchandise Un-priced merchandises are items that are not pre-priced and do not have any price tag attached. The sales associates tag the items based on the price | Non-marking Certain types of items may not be marked at all. Groups of items on special offers can be displayed in bins or on tables with large price tags. | Computerized marking Retailers who carry merchandise with UPC tags (barcodes) need to input all product information such as price and product code into the POS system. Then, | ## Storing Merchandise It is not possible for retailers to order the exact quantity of merchandise to be sold. A certain amount of additional stock is required for daily replenishment. In addition, more goods may be needed for seasonal peak periods such as Christmas, Diwali, and other festivals. There are two ways of storing merchandise: forward stock and reserve stock. - **Forward stock:** Merchandise that is stored on the sales floor near the selling department. For example, in the drawers or cupboards below the shelves and cabinets above the racks. - **Reserve stock:** Merchandise that is stored off the sales floor, either in the stock room or at the central warehouse. ## Receipt and Removal of Stock Retailers use a stock sheet to record the product code and quantities of each item that is placed in the cabinet or stock room. Any removal of stock will be recorded in the stock sheet and the balance updated. To save space and reduce cost, retailers store more merchandise on the sales floor (forward stock) and minimum merchandise in the stock room (reserve stock). | WAREHOUSE INVENTORY | |---|---| | TOTAL INVENTORY VALUE: $4,649.00 BIN C 6 | | SKU | DESCRIPTION | | SP7875 | Item 1 | 734 | TR87680 | Item 2 | 734 | MK676554 | Item 3 | 1571 | YE98767 | Item 4 | 798 | XR23423 | Item 5 | | PW98762 | Item 6 | ## Handling Transfers, Returns, and Damaged Goods ### Handling Inter-Outlet Transfers There may be situations when a particular item in one retail outlet is running low in stock and the merchandise has to be transferred from another outlet that has stock. In such situations, retailers maintain proper documentation to ensure that every item is accounted for For example, when a stock is transferred to another outlet, retailers fill in the stock transfer form and then update the information in the system. When a stock is received from other outlets, retailers check the merchandise received against that stated on the transfer form, update the inventory records in the store, and then display or store the merchandise. ### Managing Expired/Damaged Goods A store's profitability suffers when merchandise cannot be sold because they are damaged or past their shelf-life. Selling expired or damaged products may result in a possible lawsuit and tarnish the retailers' reputation. Some items can be returned to the vendors while others may have to be written off. To avoid such situations, retailers carry out random checks on the expiry dates of goods and watch for damaged goods when receiving stock. To prevent anything from being overlooked, the Store Manager also sets up a schedule and designates a specific staff for this task. ### Handling Returns and Claims During the checking process, any breakage, damage, shortage, excess, and even substitution of goods may be discovered. In such situations, retailers need to record any irregularities in a receiving book, record the items to be returned on the Returns form/Discrepancy report, return the goods, and exchange the items for the correct stock. ## Stocktaking Stocktaking involves the physical counting of every item in the store and the stock room. Stocktaking provides the following advantages: - Retailers get to know more about their merchandise. For example, saleable products, outdated merchandise, or damaged goods due for return to suppliers. - Staff is able to retrieve any misplaced merchandise. - Stocktaking can be a time to 'spring clean' the shop. - An opportunity to rearrange shelf displays. The sales personnel may rearrange the shelf displays after stock taking. Stocktaking is usually carried out once or twice a year. The longer the interval, the less useful is the information. To increase the accuracy of inventory control, certain areas of the store may be counted on a regular weekly, fortnightly, or monthly basis. The schedule varies based on the needs of individual retailers. ## Monitoring Staff Purchases In a retail store, all staff purchases (including purchases by the owner) are monitored and recorded to ensure that there is no exploitation or abuse of benefits. For the administration of staff purchases, retailers: 1. Create an entitlement form/card for each staff member. 2. Determine the maximum amount of purchases allowed for each month. 3. Record each purchase in the form/card. 4. Verify the purchase. This is carried out either by the person-in-charge of staff purchases or the store owner. ## Recap - Retailers need to serve customers with the right product at the right time at the right price with the right appeal to effectively market their stores and increase business. - The first important operation in store management is securing the desired goods. It includes ordering the required merchandise, receiving and checking the ordered merchandise, pricing the received merchandise, and storing the merchandise for sale. - Stock management also involves stocktaking-the physical counting of every item in the store and the stock room.