Inventory management is an important part of a retail business, a branch off of retail accounting, and is essential to monitor to make sure you are optimizing your efforts. Here are some things to remember to prevent inventory issues, save time, and have a reliable system.

Understand Each Component of Inventory

There are four components, or levels of inventory, and each business is different in how much of each they need and where they are being stored. Raw materials come first and consist of the pieces that are used to make the product. Retail stores do not usually hold them there, but facilities such as refineries will. Next is unfinished goods which are parts that are made up of raw materials but are also needed in making the final product. Finished products are the final version of a product and can be sold as their own. This is what retail businesses sell directly in store or online.

Stay in Communication with Suppliers

Being in communication with your suppliers is very important because without them, you have no materials for your products. Make sure you build a good relationship with them. If you build that connection and trust, it will be easier to communicate if there’s a problem and it can be resolved. It is also important to understand each other’s processes so that there is a clear path from A to Z. 

Hire an Auditor

Having an auditor is a way to ensure that you are optimizing your inventory and what you can do to improve. The first thing they do is look at the inventory you have on hand versus what is showing up in the software. They will also look at historical trends and base performance metrics around that. This way you can know what is working or maybe what could be improved with inventory inefficiencies.

Have a Plan if you are Over or Understocked

Even if you perform a forecast or have an audit, things can happen outside of that control. For this reason it is always important to have a plan in place if something goes awry. If you are overstocked, bundle certain products together for a deal. If you are understocked, know for next time that that certain segment requires more inventory.  

Use Software to Forecast

Technology is becoming more and more advanced every day. You can implement a software system that can help gather data, track historical trends, predict seasonal trends, and give you a good estimate of the amount of inventory you will need. It can also help you calculate lead time demand. This will make it easier to be more accurate in letting your suppliers know when you will need certain items.

Conclusion

Keeping these tips in mind will help you tremendously with your inventory management. You are setting yourself up for success when you implement these right away and continually improve them as your business grows. If you are considering working in this industry, these tips will give you a leg up on inventory knowledge.