Introduction
Managing inventory efficiently is vital for retail success. But understanding the differences between inventory management and inventory control is key. This guide will define inventory management and inventory control, outline must-have inventory processes, and detail the metrics you need to track. With the right foundations of inventory management and control, retailers can optimize stock levels and avoid costly outages.
Defining Inventory Management
Inventory management refers to the overall function of monitoring and maintaining optimal inventory levels in a retail operation. It focuses on the big-picture processes and strategies related to managing inventory over time.
The goals of inventory management include:
- Meeting product demand and avoiding stockouts
- Minimizing excess inventory by maintaining lean stocks
- Ensuring adequate supplies for sales and operations
- Optimizing inventory costs like storage and spoilage
With effective inventory management, retailers can maximize inventory turns, profitability and customer service.
Defining Inventory Control
Inventory control involves the detailed systems and procedures used to closely track inventory on an ongoing basis. This enables making sound management decisions.
Key facets of inventory control:
- Recording every transaction affecting inventory like sales, receipts, adjustments
- Performing regular cycle counts to verify inventory quantities
- Providing inventory visibility with reporting on current stock levels
- Identifying issues like dead stock, outages, losses with analytics
Robust inventory control provides granular data to optimize wider inventory management.
Key Inventory Management Processes
Strategic inventory management relies on end-to-end processes like:
Demand Forecasting: Predicting expected sales and inventory needs based on historical data, trends, seasonality and other factors provides a target for purchasing and production. Accuracy is critical.
Inventory Optimization: Using historical sales data and demand forecasts to determine optimal stock levels, reorder points, lead times, and inventory buffers. Minimizing excess stock while avoiding shortages.
Procurement: Working with vendors to purchase the right products at the right time for the best price to meet inventory requirements and customer demand.
Warehousing: Properly receiving, inspecting, tracking, picking, packing and shipping inventory for efficiency, organization and accuracy.
Inventory Tracking: Maintaining updated records of inventory quantities, locations and transactions via inventory control methods and stocktakes.
Reporting & Analytics: Regular reporting provides visibility into turnover, stockouts, dead inventory, and other metrics to make data-driven inventory decisions.
Omnichannel Integration: A unified commerce approach synchronizes inventory across all sales channels - online, in-store, mobile to leverage combined stocks.
When these core processes work together seamlessly, the result is lean, optimized inventory in step with demand.
Critical Inventory Control Metrics
Stock accuracy - The % of records matching physical counts shows reliability of inventory data. Goal of 95%+ accuracy.
Average inventory - The average units maintained in stock provides a snapshot of inventory investment.
Days of supply - How many days current inventory will last based on sales rate. Keeps stocks aligned to demand.
Stockout % - The % of inventory records showing zero quantity. Goal of 2% or less.
Excess stock % - The % of aged inventory exceeding safety stock targets. Aims to minimize dead stock.
Inventory turns - How often average inventory sells out and is replaced annually. Higher turns mean efficient stocks.
With real-time visibility into these key metrics enabled by inventory control, poor-performing areas can be quickly identified and addressed to keep inventory optimal.
Leveraging Technology
POS and inventory management systems automate and streamline many crucial processes:
- Integrated barcode scanning facilitates tracking.
- Inventory visibility in real-time.
- Automated reordering based on triggers.
- Analytics for maximizing turns and minimizing waste.
- Omnichannel inventory synchronization.
Robust systems enhance manual efforts to optimize inventory, costs and customer service.
Conclusion
Inventory management and inventory control go hand-in-hand for retail success. Strategic management oversees optimizing end-to-end processes. Meanwhile comprehensive control provides the timely, granular data to execute inventory strategies. Maintaining proper inventory levels and avoiding costly outages hinges on both. With insights powered by inventory control and supported by streamlined technological systems, retailers can keep customers satisfied and stocks primed for profitability.