Whether you love to check boxes and make lists or organise things is the bane of your existence, one thing is for sure: an unorganised inventory is like a lead weight on your retail business. Love or hate it, you need to keep up with your inventory management to run your business optimally and—crucially—make more money.
We’re a team of retail technology experts at Grozeo. It’s why we built our retail technology system with robust ordering and organisational tools you can take advantage of to make your inventory work for you. And it’s why we’re excited to share some of our knowledge with you so you can take advantage.
What is Inventory Management?
Inventory management is every step involved in ordering, organising, storing, and selling inventory.
You know what your inventory is: it’s the products you stock to sell to your customers. And you know inventory management is keeping that stock in order.
However, inventory management is much more than just good organisation. It also helps you manage your inventory’s ordering, storage, and carrying costs so you get a better ROI from your stock.
Airtight inventory management gives you the information you need to:
- Increase your profit margins
Effective inventory management can significantly boost your profit margins. By closely monitoring your inventory, you can identify which products are the most profitable and adjust your sales strategy accordingly.
- Decrease excess stock
Dead stock is a retailer’s nightmare. It ties up your capital and takes up valuable space. With proper inventory management, you can reduce the risk of accumulating excess stock by accurately predicting demand.
- Cut down on your inventory costs.
Over-ordering and inefficient storage can lead to unnecessary expenses. Inventory management helps you optimise your ordering process and reduce storage costs.
- Work in a better, more efficient way.
Streamlined inventory management processes free up your time and resources, allowing you to focus on growing your business rather than getting bogged down in inventory-related tasks.
Warehouse Management vs. Inventory Management: What’s the Difference?
If you’re a retailer who operates a warehouse, you will need to approach your warehouse inventory differently than your in-store inventory.
Your in-store inventory exists to be sold. When you’re managing it, you’re looking to set it up so that you can examine sales data and see what your customers are responding to and what they aren’t.
Warehouse management is about tracking and controlling inventory storage in a warehouse, and while there are some overlapping functions with inventory management, they’re just different enough to require separate systems. Your warehouse inventory exists to be sent to stores (or to be mailed to eCom customers) and must be set up and managed in a way where you can track exactly where it is at all times.
If you’re operating a warehouse, you can make your life easier and use a warehouse management system to integrate your warehouse with your POS. While you’ll still need to keep the different needs of each kind of inventory in mind, integration means less potential for human error in the numbers and details.
What are the Four Common Types of Retail Inventory?
Not all inventory is the same. Inventory can be classified as raw materials, work in progress, finished goods, maintenance, and repairs. If you primarily resell products, produce your own or offer customers a mix of both, you might have a mix of the following inventory types you’ll need to account for.
- Raw materials
Raw materials are the building blocks of your products. If you’re involved in your inventory production, you’ll likely have some raw materials on hand. Keep them separate from finished goods in your inventory hierarchy.
- Work in progress
Work-in-progress inventory includes items that are still being processed or assembled. These should be tracked separately from finished goods and not intended for sale.
- Finished goods
You offer Finished goods for sale in your retail store or online. These may be products you’ve produced or purchased from vendors. This is the inventory that you’ll be focusing on for your retail inventory management plan.
- Maintenance and repair
If your business involves repairing or upgrading items, the inventory includes the tools and labour needed.Why is Inventory Management Important?
Good inventory management helps you!
- Maximise profits
Better inventory management means more money in your pocket. It helps reduce dead stock and focus on products that resonate with customers, increasing your ROI.
- The Economic Order Quantity Formula
You can use inventory data to calculate the Economic Order Quantity (EOQ) to determine the optimal order size that minimises storage and ordering costs.
- Avoid excess stock
Dead and slow-moving stock can drain your resources. Efficient inventory management helps you identify slow-moving stock and adjust your strategies before it becomes problematic.
- Just-in-Time Stock Management
Just-in-time (JIT) stock management ensures you have enough inventory to meet demand without excess or empty shelves. While JIT can save money and reduce waste, it requires a robust inventory management system to work effectively.
- Save Time
An ideal inventory management system uses technology, saving time on stock management tasks and allowing you to focus on growing your business.
- Inventory Valuation
Inventory costing is a crucial aspect of inventory management. It helps you determine how much your inventory costs you, guiding your purchasing decisions.
- Regular Reconciliation
Frequent inventory reconciliation helps you catch shrinkage and identify its causes before they become significant problems.
- Physical Inventory Counts
Performing complete physical inventory counts at least once a year ensures accurate inventory levels. Use tools like to speed up the process and reduce errors.
In conclusion, effective inventory management is essential for the success of any retail business. By implementing the right strategies and using inventory management tools, retailers can maximise profits, reduce costs, and stay ahead of the competition. Whether dealing with raw materials, finished goods, or anything in between, proper inventory management is the key to achieving your business goals. So, embrace organisation, optimise your inventory, and watch your retail business thrive.
Contact Grozeo if you need any help inorder to take your retail business to the next level with cutting edge technology solutions!
About Khaja Hussain
CEO of Grozeo
Khaja Hussain, CEO & Co-founder of Grozeo, is a visionary serial entrepreneur and the
Director of London’s Pride Ltd, a dynamic company overseeing diverse ventures. He has
expertise in Investment, Administration, and R&D and is instrumental in launching and
managing successful business endeavours. His latest venture, Techtadd, excels in digital
marketing and software development.