Inventory risk is the possibility of losing money or sales due to having too much or too little stock of your products. It can affect your cash flow, customer satisfaction, and profitability. In retail, managing inventory risk is a crucial skill that requires planning, analysis, and adaptation. Here are some tips on how to do it effectively.
The first step to managing inventory risk is to understand the demand patterns of your products. You need to know which items are fast-moving, seasonal, trendy, or slow-moving. You also need to consider external factors such as market trends, customer preferences, competition, and events that can affect demand. By knowing your demand patterns, you can forecast your sales and adjust your inventory levels accordingly.
Always try to use data and analytics to predict demand accurately. Maintain buffer stock for unexpected spikes. Work closely with suppliers for flexible and responsive inventory management. Regularly review and adjust inventory levels based on real-time demand updates. Implement inventory management software for efficient tracking and automation. These 5tips will surely help you out. Happy Merchandising ??
As a food buyer, I pay close attention to weather changes. Pulling the right inventory up, if it will be in higher demand with the pending storms, or pushing product away if the items are not relevant to customer needs during stormy times. Never having more days of supply than you code dates or shelf life allows is a critical point. Many of the same concepts should be observed for non-perishable goods, as well.
Inventory turnover is the ratio of how often you sell and replace your inventory in a given period. It measures how efficiently you use your inventory to generate sales. A high inventory turnover means you have a low inventory risk, as you are selling your products quickly and avoiding overstocking or obsolescence. To optimize your inventory turnover, you need to balance your ordering frequency, quantity, and lead time. You also need to monitor your inventory performance and identify your best-selling and worst-selling products.
For well optimized inventory turnover I try to Make strong relationships with reliable suppliers to minimize lead times. Maintain only necessary safety stock to prevent stockouts. Cassify items based on high-value, high-demand items. Negotiate favorable terms with suppliers for bulk discounts or better payment terms. & regularly review and refine inventory processes for efficiency gains. It will work for you too. Happy Merchandising ??
An additional understanding of inventory turns is the ability to sell the supplier's product multiple times before you ever have to pay for it. If you're Net 30, meaning you have 30 days to pay your supplier after delivery and receipt of goods, you want to sell through that inventory (or turn it) fast enough to use the sales dollars generated from it to pay for it. This is a common use of turns in the food buying but can also be used in other higher turning items.
Inventory control systems are methods or tools that help you track, manage, and optimize your inventory. They can range from simple spreadsheets to sophisticated software that integrate with your point-of-sale, accounting, and e-commerce platforms. Inventory control systems can help you reduce inventory risk by providing you with accurate and real-time data on your stock levels, sales, costs, and profits. They can also help you automate your ordering, replenishment, and pricing processes.
This can be as simple as Excel, which I have used in companies that were technically challenged. This can be accomplished with more advanced software such as some SAP offerings. The point is to have a comfortable system that delivers accurate information and makes your inventory control process work. You have to be able to trust your inventory report to give you a true read of inventory on hand, how much it cost, how much you're selling it for, how much you need to replenish and when, and if your inventory trends are holding up versus projections.
You should always evaluate current inventory processes and needs. Don't rush selecting appropriate inventory management software. Don't forget transferring existing inventory data to the new system. Categorize items using ABC analysis for prioritized control. Conduct routine physical inventory checks. Collaborate with suppliers for seamless replenishment. Try to utilize system-generated reports for insights and decision-making. Happy merchandising ??
Inventory reduction strategies are techniques that help you minimize your inventory risk by lowering your stock levels or costs. Just-in-time (JIT) inventory is a popular method of ordering and receiving inventory only when it is needed, thereby reducing storage and holding costs. Dropshipping is another way of selling products without keeping them in stock, relying on a third-party supplier to fulfill the orders directly to the customers, which can reduce both inventory and shipping costs. Alternatively, consignment is a method of selling products without paying for them upfront, relying on a consignor to provide the inventory and pay them only when the products are sold, thereby minimizing both inventory and purchasing costs.
Undoubtedly JIT is a popular method but with this I Prioritize items by value, focusing on high-value products. Adjust safety stock levels based on demand volatility. Try to work closely with suppliers to implement Just-in-Time (JIT) deliveries. Regularly auditing and reconciling physical and recorded inventory to reduce costs. These will help you too. Happy merchandising ??
No matter how well you manage your inventory risk, there will always be some uncertainties and surprises that can disrupt your operations. For example, you may face unexpected demand spikes, supply shortages, quality issues, or natural disasters. To prepare for these scenarios, you need to have a contingency plan that outlines how you will handle them. You may need to have backup suppliers, alternative products, emergency funds, or insurance policies. You also need to communicate with your stakeholders and customers and keep them informed of any changes or delays.
Uncertainty is everywhere, in our merchandising too. To stay protected : Compile a list of key contacts. Establish clear communication channels. Implement redundant systems for critical operations. Allocate resources for emergency response. Regularly backup and secure critical data. Ensure adequate insurance coverage for potential losses. Hope it helps! Happy merchandising ??