How Retail Inventory Management Can Help You Manage Your Warehouse System?

When working in retail inventory management, keeping an accurate count of your product and maintaining an organized item inventory is essential. Making out timely orders and maintaining regular deliveries is also important, so your inventory neither gets too low and forces you to lose sales, nor your inventory builds up too big, threatening you with an expiration date crisis, as well as time lost moving around excess product that’s in your way.

Floor managers need to be part of the process of ordering new inventory, even if they are only consulted. Good communication about poor sales from all your staff is important, to avoid inefficient new inventory orders. Beyond good communication and smart, informed supply orders, here are some other tips for retail inventory management.

Ordering in Retail Inventory Management System

Get a retail inventory management system that supports ordering in place that allows for precise ordering of sales items. If the person ordering the inventory doesn’t work the items onto the sales floor himself or herself, have this person consult with the manager in charge of the sales floor before every order. This allows communication, so you don’t double-order items that aren’t moving quickly or selling well out on the floor.

One major problem with many backrooms is that stock begins to build up of products that aren’t selling. I’ve noticed that, when the person ordering inventory is the one moving product onto the floor, orders are more accurate and tend to involve what you actually need. If that isn’t the reality at your store, they have a system for tracking which items are selling well and need to be reordered. Over-ordering means your supply room is going to get overstocked, which makes inventory hard to keep track of.

How to Use a Credit Card for Inventory Purposes?

It’s critical to keep a retail store well stocked with inventory. But as a retailer, what do you do when your cash in hand is not sufficient to purchase the inventory you need to stock your shelves? Often you will rely on a credit card to buy the goods. Over two-thirds of all small retail businesses rely upon credit cards to pay their expenses – including inventory purchases.

The mechanics of purchasing inventory with a credit card are simple enough.

First you contact your supplier or your supplier’s sales representative to make sure he or she accepts credit cards – not all do. Your supplier will need your credit card number, your expiration date and the three digit security code on the back of the card.

After your order is taken, confirm the amount of the order with the supplier. Often the total amount that will be charged to your card will not be known until the order is shipped when freight is calculated. Make sure that the total amount of your order does not exceed the available credit you have on your card.

If your supplier is in a different state or a different country and the inventory purchase is for a larger amount than you usually charge, consider calling your credit card company and informing them of the transaction so they don’t decline it as a security precaution.

The Credit Card Dilemma

Retail businesses are middlemen who buy inventory from suppliers at one price and sell it to customers for a higher price. A retailer’s profit is that price differential, less the amount that goes towards operational expenses.

The dilemma you face when paying for inventory with a credit card, however, is that the money you remit your wholesaler or producer no longer represents the true cost of the inventory you’ve just bought.

When you buy something with a credit card, the credit card company is essentially loaning you money and charging you interest on that loan. That interest, then, is also part of what you’re paying for your inventory. For retail merchants who operate on the margin with only a small difference between the cost of inventory and the price they sell it for, the interest they pay on credit cards can significantly undermine their profits.

Your suppliers who will have to pay processing fees in order to accept your credit card may also look upon credit cards with disfavor. Processing fees can run as high as 2% of the total amount charged.

So how can you incorporate the convenience of credit cards into your inventory purchases without sabotaging your profit margins? Read on for some suggestions.

Apply For a Small Business Credit Card

A business credit card is a revolving line of credit established in your business’s name. If your business is new or hasn’t established credit in the past, either through a bank or through paying suppliers, you will be required personally to guarantee the amounts charged to the business card. In general, the interest rates you pay on business credit cards are higher than what you might pay for other types of business loans. So why get a business credit card at all? Because if you use the business credit card prudently as a tool to help manage cash flow, it has advantages:

Pay Off Your Balance and Avoid Interest: Most business credit cards offer a 21-day grace period before your payment comes through. Pay off your balance within the first ten days after using card for your inventory purchase and the interest you pay will be minimal.

Build Your Business Credit: A small business credit card is your first step towards building business credit which will allow you to become eligible for business loans or credit lines at much lower rates of interest, essential when it comes time to expand your business.

Keep Personal and Business Expenses Separate: Keeping business expenses and personal expenses separate is a Herculean task when they’re both being charged to the same credit card – although when Tax Day rolls around on April 15, you and your accountant will wish you had. When you use a business credit card, your business expenses are automatically tracked separately. An added convenience is the year-end summary that most business credit card issuers provide with all your transactions neatly itemized by tax category.

Rewards Programs: Many small business credit cards are affiliated with rewards programs that offer discounts on a wide variety of business-related expenses including office supplies, software, and even phone expenses. A small business credit card affiliated with an airline will allow you to compile frequent flyer miles, becoming eligible for free air flights.

Buy Smaller Quantities

If your cash flow is variable – if, for example, you run a gift store in a seasonal tourist destination – and you know several cycles may elapse during which you will incur interest before you are able to pay off your inventory purchase, consider buying in smaller quantities.

Of course, the best inventory bargains happen when you buy in bulk. Often the supplier from whom you are buying the product will cut you a deal when you buy large amounts of a product. But even when he or she does not, the cost of freight is generally the retailer’s responsibility and there are savings to be realized when goods are shipped in bulk.

However, the discount you give up when buying or shipping a smaller quantity of product will almost certainly be less than the interest you will be charged over several cycles until you are able to pay your balance.

Adjusting Your Retail Prices

If you determine that you will be using credit cards regularly for inventory purchases then you will have to estimate the interest you are going to end up paying, and factor that into the cost of goods.
If you are using a competitive pricing strategy, this may affect your ability to price your products lower than your competitors.

However, it’s absolutely necessary because you cannot sell products below cost for any prolonged period of time. Whatever pricing scheme you use, it has to be in excess of your cost of goods and your operational expenses or else you will not be able to stay in business.

How to Rotate Inventory for Preventing it From Going Out Of Date?

A huge loss for businesses with inventory is items going “out of date”. One way to avoid this problem is to rotate product often. When you stock new deliveries of product onto the sales floor, you don’t want to simply replace what was sold with your new product. Instead, you want to place the product with the latest out-of-date numbers in the back of your display.

If you continue to place new inventory in the front of the display, you’re eventually going to have a lot of product pass its expiration date, simply by sitting in a spot no customer is ever going to put their hands on it. The same thing goes for the back room. You want your newest product behind or under your oldest product in the supply room, so you place your oldest product on the sales floor first.

You might think this is a huge headache, to continually pull product from the back and place the new inventory behind it. If that’s too much of a problem, consider pulling all your old product to one side of the display, preferably the one that gets picked from the most often, and building the rest of the display with the new product. If you have inventory that moves pretty quickly, this system works well enough, too.

What is Material Requirements Planning(MRP) In Inventory Management?

MRP Inventory Management stands for “Material Requirements Planning”, and is an inventory control system used by production managers to establish more efficient production, manufacturing and delivery processes while maintaining a low and therefore efficient stock of inventory. Though the MRP management style can be conducted by hand, most MRP systems use software to effect the better organization.

What Is Material Requirements Planning?

There are several phases to an MRP plan. One, MRP ensures a flow of products for manufacturing, while it also ensures products are quickly delivered to customers. Two, MRP allows you better organization, so your inventory doesn’t pile up, creating inefficiencies in the workplace. Three, MRP creates a framework where you can plan purchasing, manufacturing and delivering schedules.

The material requirements planning system was developed in the 1960s and perfected in the 1970s after several American manufacturers studied the manufacturing practices of the Toyota Company. By the mid-Seventies, over 150 corporations were using the MRP Method. That was just the start, though, because some 8,000 companies had adopted materials requirement planning just six years later, in 1981. By the end of that decade, MRP II software was a billion dollar industry, comprising (at the time) approximately 1/3rd of the business software.

How Does MRP Work?

The MRP system is a system of “inventory control” through simple planning. When a company orders more materials than it needs, that is wasted capital that could be used for better commercial purposes. Also, shipping unneeded supplies wastes on manpower and shipping costs, while an over-packed plant or warehouse means the workers are working around materials that are in the way, often forcing them to move the excess products and materials several times, instead of once. If orders for work materials are consistently short, this creates lag times in manufacturing, which loses the company money.

Therefore, establishing simple planning procedures, inventory efficiency and skilled used of elementary statistics allows a company to maintain peak production. MRP is about more than just getting orders right, though. MRP inventory management is about selecting the right time to begin production, so deadlines are met and peak production occurs.

What Does MRP Inventory Software Do?

When you start to calculate MRP inventory requirements, you’ll want to know things like the time required to manufacture, the shelf life of the materials you store, the net materials you have in stock, when you need more quantities to meet continuing demand, material production requirements, and a whole of lot of other data: testing standards, storage size, labor standards, quality testing, loss percentages and so on. Since there’s a whole lot of moving parts to keep track of, it’s generally better to have software that does a lot of the work for you.

What Are MRP Inventory Outputs?

After getting an overview of your resources, production challenges and deadlines, you’ll eventually arrive at a couple of output reports: a recommended purchasing schedule and a recommended production schedule. That is, you use material requirements planning to decide when new materials need to be at your plant (and what these materials are), and you then set up a peak production schedule that your company sets as its goal.

Are There Drawbacks to MRP Inventory Management?

The drawback of MRP is you need good data. As the saying goes: “garbage in, garbage out”. If your data isn’t close to 99% accurate, your production efficiency is going to suffer. As with most procedures, human error factors into the MRP.

When you create inventory data, this will produce a “bill of materials” or BOM. A bill of material is a list of all the parts, raw material, assemblies, components and sub-components you need to manufacture products. If the data you put into the MRP inventory software is flawed, then the BOM is going to be flawed, too.

If you’re in business, you already know how invaluable a good manager is, though. MRP Inventory Management helps a good manager become a better manager; it does not turn a bad manager into a good one, or at least not without a transformation through retraining and good understanding of the process.

Material Requirements Planning Inventory Management

That being said, MRP Inventory Management has made thousands of American corporations more efficient, which has helped make the overall economy more efficient. This is a technique that many companies have adopted, and some of your competitors probably use MRP principles. It’s worth your time to read more about MRP inventory management, to study the concept and determine whether it’s right for your business model.

Zaperp Provides MRP feature for its users, you can sign up for their 14-day free trial here: https://www.zaperp.com/inventory-management-system/

What are Some Common Problems in Retail Inventory Management?

Things are never going to be perfect in retail inventory, but some retail inventory managers are better than others. The best retail inventory management requires attention to details and good communication. Even then, resupply isn’t always perfect.

For instance, when I was a warehouse manager, if the central warehouse that supplied us with the product was having a space crisis with an over-ordered product, we would sometimes get extra pallets of unwanted product, no matter what we put on our order. Someone else’s problem became ours, despite our loud complaints. Only seldom did those complaints result in the product being shipped back where it came from – it was our problem.

That’s going to happen to a retail manager sometimes, so you have to get used to it. What you can do to make those retail inventory problems more manageable, is to handle you own business. Keep a good track of your inventory needs, order exactly what you want, don’t let salesmen talk you into something you know you don’t want, and when someone else makes a mess for you, you’ll be able to handle it.

In other words, in retail inventory management, the more problems you solve, before they become problems, the better retail manager you’ll be.