I’m not usually one for embracing those tired, overused management catchphrases that tend to get wheeled out by business gurus hoping to justify their inflated consulting fees.
But every now and then, one of these pearls of wisdom happens to ring true. For me, one that is particularly relevant is “you can’t manage what you can’t measure”.
At Newcastle Batteries, we run a bricks-and-clicks store with an extensive product range.
I’m constantly faced with the challenge of meeting demand from online shoppers throughout Australia, as well as Newcastle locals who make up the foot traffic in store.
As a non-manufacturing retailer, it is essential to be able to match stock levels with the demand cycle to effectively run the business. Unfortunately, working with a perishable product (yes, batteries have an expiry date!) means wastage is a real issue and can end up costing thousands of dollars if not managed properly.
Whether you are just starting out with a small online store as a hobby or as a sales manager for a nationwide retailer, poor inventory management is going to hurt your bottom line. Consider the following situations in the context of your business (or one you’ve worked for):
- Overstocking – too much inventory means valuable capital is tied up in your warehouse which could be used elsewhere in the business.
- Understocking – if there is insufficient inventory to meet demand, your customers are going to immediately go and spend their hard-earned money at your competitor’s sufficiently stocked store.
To accurately maintain stock levels in just about any industry or product category, you need to have unbelievable foresight to get it 100% right. What you must focus on is taking action to constantly improve, no matter how long you have been in business or how much experience you have.
Here are my tips for achieving more efficient inventory management.
- A static spread sheet like an Excel file (or similar) is just going to make more work for yourself. Avoid at all costs! We are in the age of automation and paying staff to manually update data is a huge waste of resources. In-store and online sales data must be in sync and automatically updated – the companies that do this well are the ones that make the most of the technology available to them.
- Consider how real-time sales affect your inventory management. Without a centralised system, you could sell out of a particular item in the morning and still be processing orders online for that same item in the afternoon.
- Ensure an inventory management system or plugin is configured and connected to your online store. If this sounds expensive or complicated, it’s actually much simpler than trying to manage things manually. Start with a Google search for ecommerce inventory management systems and explore your options.
- Develop a system for determining which models are the most popular in each particular category. It’s not overly helpful to know that you sold 400 t-shirts last month, BUT it is very helpful to know you sold 193 red and white striped, men’s, large t-shirts in that period. Drill down as far as you can to extract granular data insights for your business.
- Cross-reference your sales data with your marketing efforts. A sales spike can often be attributed to an advertising campaign your marketing team is running. If this isn’t identified, you run the risk of being overstocked the next time an order is placed and when the campaign concludes.
- Invest time in market research and website data analysis. This will help you spot new trends and keep your inventory inline with where the market is headed, as well as allowing you to gather insights into how your existing web traffic.
Having an ongoing management plan for inventory control is essential in an increasingly multi-channel retail environment. Investing the time and effort to measure and manage your inventory now will pay off in the long run.