Streamlining is a word that we get to hear very frequently but what does it mean to streamline something? One of the oldest origins of the word ‘streamline’ is being free from turbulence and by going by that essence, ‘streamlining’ is to make something free-flowing or free from hiccups and disturbances.

Suppose that you have moved to a new city. It is not difficult to understand that life in a new place may take some time to adjust. One by one, we deal with all the important aspects to ensure certainty, ease of carrying them out, and be efficient and effective with them. Streamlining could be also understood as organising or giving shape and order to plans, policies, strategies, and working systems. The same essence of streamlining applies to inventory management in retail and eCommerce as well. Why – because inventory management does not come up in an organised or orderly state by default. For example, you may have a supplier whose quality of goods often fails to meet the quality standards required in your business. You will have to make sure that every piece of product that enters your warehouse or store must meet the established standards of quality. So, streamlining would require you to put in place QA and QC measures for all suppliers and for all goods. After you do that, you need not worry about inferior quality of goods entering your business systems. In reality, streamlining inventory management is a far more complex and extensive job often calling for an expert touch. This blog highlights five best practices for streamlining retail stock management in a contemporary context.

#1 Lend more accuracy to demand forecasting

Inaccurate assessment of market demand and trends brings more than one problem. To begin with, there will be unsold goods in storage. Holding and carrying costs have to be incurred on them. Then there are lost working hours and other resources in the handling of such inventory. Investments get stuck in the purchase of such inventory. Failing to predict demand levels also brings its own share of challenges of a similar nature. These disturbances make the streamlining of inventory management more challenging. They lead to a heightened focus on making adjustments for the day instead of giving shape and order to the overall inventory management. Some of the strategies to lend more accuracy to demand forecasting include the use of historical data, continuous market research, and the use of analytics software solutions.

#2 Optimise inventory levels

The essence of optimisation is to have nothing more and nothing less to manage and manage what is there to manage at that level with efficiency and effectiveness. In the context of inventory management, we are talking about the optimisation of inventory levels for better inventory management. Situations of excess or understocking make it difficult to achieve the objectives of inventory management. As highlighted in the previous point, excess stocking leads to many undesirable consequences like locked investment, additional carrying and holding costs, and working hours lost in handling excess stock. Low or under-stocking prevents businesses from fulfilling market demand and leads to lost sales and customer dissatisfaction. Such outcomes are not the hallmarks of streamlined inventory management. For retail inventory optimisation, some of the helpful strategies are robust demand forecasting, use of inventory classification methods, establishing EOQ and ROL points, maintaining buffer stock, and keeping control over the turnover rate.

#3 Get to real-time positions

Real-time awareness is of great relevance in the field of management. When you have the most up-to-date awareness of the state of affairs, you have a better shot at making the right decisions for the normal course of business or making the right adjustments if the situation is calling for. In the context of inventory management, this real-time awareness helps make timely purchase/return decisions, confirm orders more promptly, share information with other departments, raise complaints on time, manage resources more efficiently, reduce pilferage, etc. These qualities and capabilities make the inventory management function of an organisation not just efficient and effective in itself but also a great contributor to achieving the business goals and objectives. This is a top-notch indication of a streamlined inventory management. Some of the contemporary solutions in this regard are RFID, barcode technology, IoT sensors, POS integration, and cloud-based solutions.

#4 Emphasise the part of supply chain allies

The people you deal with also play a big role in your management capabilities. Their compatibility with you has a bearing on your performance. Think of your favourite eCommerce marketplace website on the grounds of UX. You prefer it because it has certain UX features that suit your browsing and purchase journey. Retaining the same essence, retailers should also emphasise the role of their supply chain partners in streamlining inventory management. This is possible in many ways. Addressing common interests and challenges should be one of the foremost prerogatives. It can include harmonising operations and the use of technological solutions. An important consideration should be setting mutually agreed terms and conditions for maintaining quality standards and inventory levels.    

#5 Technology and SOPs

Modern-day inventory management in retail and eCommerce has become quite complicated due to reasons like omnichannel sales, rapidly changing buyer behaviour, meeting the demands of localisation and hyperlocalisation, unconventional value chains, etc. Without technological solutions, streamlining retail stock management has become nearly inconceivable. Some of the relevant technologies include WMS, RFID, barcode technology, ERPs, IoT, AI and ML, cloud-based solutions, etc.

The next big requirement is the development and implementation of Standard Operating Procedures (SOPs for retail inventory management processes and operations). SOPs are extremely useful in streamlining complex processes and operations which is common in contemporary retail stock management. Developing SOPs should be made a prerequisite in the process of finding the best-fit IT solutions for retail inventory management. SOPs are to process definitions: what programming languages and coding are to software applications; the language of defining how it will be executed.

SOP-IT integration is another vital component in operations planning for retail inventory management. It is important to ensure that technologies with the help of which inventory operations are executed and the process requirements stay on the same page.

Summing up

Streamlining inventory management in retail and eCommerce is a complex and extensive task often calling for an expert touch. Five best practices in this direction have been highlighted in this blog.

Lending more accuracy to demand forecasting helps stay in control of costs and efforts. This has vital commercial implications which in turn is an indication of the quality of streamlining of an inventory management function.

A critical mission of inventory management is to also help meet and secure customer demand and customer satisfaction. Inventory management that cannot achieve these objectives also cannot be labelled as streamlined.

The third recommended practice is having access to real-time data and information pertaining to inventory management. The ability to make timely calls lends tremendous power to inventory management whether it is for routine operations, making corrections, or coordinating with other departments.

Often undermined is the role of supply chain partners in streamlining inventory management. Even if suppliers and vendors are outside parties, their working systems and performance play a supportive role in the quality of inventory management of an enterprise. It is important to keep their commitments aligned to secure the best results.

Last but not least is the role of technology and SOP-based operations planning. Given the complexities and demands of today’s expected inventory management capabilities, no modern-day day retail enterprise can think of superior inventory management without these two elements.

About Your Retail Coach

YRC is a retail and eCommerce consulting undertaking specialising in enterprise solutions for business setup, management, and growth. With more than a decade in the business, the team has worked with over five hundred clients in more than 25 verticals with an accomplishment ratio of over 94%. YRC is also an undertaking with a scaling international footprint.

For solutions to streamline and improvise the inventory management of your retail business,  please drop us a message and one of our retail consultants will shortly reach out to you. We engaged qualified and experienced inventory management consultants in service design and delivery.

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FAQs

How can small retail businesses keep track of their inventory?

The best approach is to use a suitable inventory management software application. The software must be connected to all those points where inventory is either received or sent. Every such point must be equipped with inventory reading devices like barcode scanners. The inventory data collected from such devices must automatically get registered in the software either locally or via the cloud/internet. The data entry to the software could also be manual but that would be more time-consuming. Physical inventory audits at defined times is a must.

What are some ways to avoid over and understocking in retail inventory management?

Over and under-stocking inventory can happen because of a myriad of internal and external reasons. It can happen when you do not have an updated awareness of inventory levels before placing purchase orders. It can happen when your understanding and anticipation of market demand and consumer behaviour is not accurate or timely. To deal with these internal factors, it is important to use reliable demand forecasting tools and inventory management software. There should be established policies and procedures for purchase management. ROL, ROQ, and EOQ levels should also be defined. The awareness and understanding of turnover rates across product lines also play a crucial role here. A prudent measure to deal with external disturbances is to maintain a buffer stock.

How to optimise stock levels in retail?

Optimising stock or inventory levels is a desirable objective for all enterprises. Even in our homes, the optimal stock level is an indicator of many things. It is an indication of our consumption patterns per cycle (say monthly). It indicates our inventory holding capacity. It indicates our budgetary limits. The same principles apply to business as well. You do not want to be holding more inventories than the demand per cycle. On the other end, you would want to ensure that market demand is met. You would have budgetary constraints.

For inventory optimisation in retail, some of the useful strategies include the use of strong demand forecasting tools and technologies, classification of inventory, defining EOQ and ROL points, maintaining safety stock, and keeping a watch over the turnover rate.

How to increase warehouse ROI?

The simple and straightforward answer is processing the optimal level of inventory per cycle. The logic behind this could be understood from this example. Imagine that you purchased an OTT subscription. If you do not use it all, the investment is a total waste. Of course, there is an optimal point of watching content on OTTs. Suppose that you have watched 10 movies in a month and paid 200 as a subscription fee then you are paying 20 for each movie. Is this okay with you? Similarly, in a warehouse situation, if you could bring up the level of inventories handled in a cycle close to the optimum level, your warehouse ROI would be better. Here are some focus areas to improve warehouse ROI:

  •         Warehouse layout planning
  •         Inventory management
  •         Technology
  •         Business process management, SOPs
  •         Waste reduction
  •         Quality control
  •         Safety and Security
  •         Audit and Control

Why is real-time information critical in inventory management?

Real-time information offers us the opportunity to make more precise decisions. There is a long list of everyday examples to support this. Take the fuel metre of your car as an example. Since this solution exists in cars by default, it is uncommon to be thinking about its significance. It tells us how much oil is left from which we can make sense of the distance we can cover with the available oil, if we can reach the next refill station on time, the speed we must maintain, etc.

In inventory management, this real-time intelligence helps make timely purchase/return decisions, place orders more punctually, share workflow details with other stakeholders, raise grievances promptly with more details, manage resources more efficiently, reduce wastage, etc.

To achieve this, you will have to rely on technological solutions.