Professional Documents
Culture Documents
question
1. List some products in your personal or family inventory,
how do you manage them?
two categories of “inventory” demands that I have at home,
independent and dependent. The items that have independent
demands can be TVs, laptops and furniture as the demand to
each other (Collier & Evans, 2013. p.256). Alarm clocks,
batteries, milk and cereal are examples of items that have
dependent demands as the battery requires replacing when it
runs out and cereal does not go well with water (Collier &
Evans, 2013. p.256). The trend I noticed about the various
demands of my household items is that, most items that have
independent demands will encounter a stockout or shortage
issue when it is damaged, whereas the opposite is true for
most items that have dependent demands mainly due to the
cost of the items. In fact, items such as batteries and cereal
usually have a safety stock level due to its relatively longer
shelf life and also to reduce stockout instances (Collier &
Evans, 2013. p.253).
Stockouts almost always make it to the “worst nightmare” lists of retailers, and for
good reason. Not only do they lead to lost sales, but out-of-stocks also result in
reduced customer satisfaction and lower loyalty levels. Shoppers often feel let down
when you don’t have what they’re looking for, and the last thing you want is to
disappoint customers.
Fortunately, though, there are a number of solutions to your out-of-stock woes.
Many causes of stockouts can be prevented by taking steps to better understand
your business and products, and by refining your store’s processes.
To give you a better idea of how you can accomplish this, below are 5 common
causes of stockouts and pointers on how you can sidestep them:
1. Inaccurate data
It’s very easy to run into inaccuracies when dealing with inventory. Between
shipment variances, misplaced products, returns, and stolen goods, retailers find
that the inventory numbers they have on paper (or on screen) often don’t match
what they have in their stores.
Such discrepancies can lead to merchants mistakenly thinking that they have an
item in stock when they don’t, so they end up re-ordering the wrong products or
quantities.
How can you address this? Consider the following:
a. Use a modern inventory system
The first step to avoiding discrepancies is to implement an electronic (ideally cloud-
based) inventory system. Keeping track of products using a pen and paper isn’t just
time-consuming, it can also lead to mistakes.
It’s best to use a point-of-sale or inventory system that automatically modifies
inventory levels as you ring up sales, so you won’t have to worry about
manually updating your database. Such solutions are also beneficial if you
have several locations because they allow you to manage multiple stores
from one place.
Not ready for a full retail management solution? Consider creating an inventory
management system in Excel. It’s easy, basic, and it can give you the data you
need to spot inventory inaccuracies.
b. Integrate your platforms
If you’re selling through multiple channels, be sure to connect all your retail
platforms. This typically means integrating your POS system with your ecommerce
site.
Doing so helps ensure that all your catalogs are in sync and that stock levels are
updated every time you make a sale. After all, the last thing you want is to sell
something online that isn’t physically available in your stores or warehouse.
c. Stay organized and vigilant
Modern inventory systems can only go so far. While a nifty solution can keep your
databases synced, it can’t deter shoplifters nor can it stop suppliers from delivering
the wrong quantities.
This is where your diligence and organizational skills will come in. Get to the
root of your inventory discrepancies. Is it an issue with your vendors? Are
you dealing with theft? Whatever the case, find the reasons why the numbers
aren’t adding up and take the necessary steps to stop them.
If it’s a matter of vendor discrepancies, for example, you may want to make
changes with how deliveries are handled in your store. Perhaps you need to
reschedule shipments to make sure that deliveries don’t happen all at once, or
maybe you need to assign someone to double check the packing slips.
Dealing with theft? It could be time to upgrade your security system or re-arrange
your store to make it easier for associates to keep an eye on shoppers.
(Image credit: NXP)
RFID enables merchants to monitor and search for merchandise using a handheld
scanner (see image above), making it faster and easier for them to track down
where each item is.
“People manually counting items in the supply chain take too much time; it is too
expensive and is also fraught with error,” writes Will Roche of Xterprise
on RetailSoulutionsOnline.com. According to him, RFID technology is the top
solution for inventory data inaccuracies, especially for apparel and footwear
retailers.
e. Conduct regular stock counts
You can’t have accurate numbers if you’re not tracking and updating them. While
modern inventory systems can do a great job at keeping your stock levels in check,
you still need a handle on the amount of physical inventory that you have.
That’s where physical inventory counts come in. Set aside time to count your
products and ensure that what you have on paper matches up with what’s actually
in-store or in your backroom.
Retailers typically have two options when it comes to stock counts: full inventory
counts or cycle counting.
With full inventory counts, you’ll need to set aside several hours to count every item
that’s in your store. You can choose to do it after you close for the day, but if that’s
not enough, you may have to halt operations for about half a day or so. (Be sure to
notify your customers beforehand!)
If you’re not keen on closing your store, then cycle counting might be a better
option. This method entails counting and checking just a small selection of SKUs
daily until you’re able to “cycle count” through your entire catalog. It allows you to
stay on top of stock counts without having to close your store.
The “right” method depends on each store, so see which practice works best for
you. But whether you decide to conduct full inventory counts or you’d rather
stick to cycle counting, aim to count all of your merchandise once a month, or
at the very least, once every quarter.
Avoiding stockouts requires you to have near real-time information on what
you have (or don’t have) on hand. You won’t be able to do that if you’re only
counting your merchandise once or twice a year.
2. Failure to re-order in a timely manner
This issue is pretty straightforward: products are flying off the shelves faster than
you can re-stock, and this results in you selling out of in-demand items. How can
you prevent it? Here are a couple of ways:
Have everything down on paper. Doing so will help you and your staff understand
the process and implement it correctly.
This is exactly what Chris Herbert and Christian Smith of TrackR did. In an article
on Entrepreneur, they talked about how documenting their inventory process —
from receiving a purchase to fulfillment — enabled them to stay on top of things.
They wrote:
We created our business flow chart Mad Men style — with no computers, email or
fancy software services. The end result? We had a document that detailed all the
different people needed to fulfill an order and all the necessary communications
between them. We then ushered this 1950s flow chart into the 21st century by
choosing some automated software.
Consider doing the same for your store. Be clear on how inventory flows in
your business, write down the process, and get your staff on the same page.
c. Technology
Arm yourself (and your team) with tools that’ll make inventory-centric tasks easier.
Planograms – A lot of retailers use planograms to create visual representations of
how products should be arranged in their store. Planograms are useful for
merchandising purposes and can help retailers execute appealing displays. They’re
also an excellent tool for staying on top of shelf inventory. By giving your staff a
planogram to refer to, they can easily see if they need to replenish store shelves
and if all the products are in the right place.