The Benefits of Automated Inventory Management

What do you think is the essence of retail? It is making the right goods available for sale at the right time.This means sourcing the right stock, taking it into inventory, and keeping track of inventory levels as the goods go out the door.

This principle holds true irrespective of the size of the company or the reach of their operations. In fact, effective inventory management is crucial to the success of any retailer—whether they operate brick-and-mortar stores or a webstore.

Unfortunately, many small businesses don't give inventory management the proper attention it deserves. They still use outdated systems and processes to track inventory—or in the worst cases, don't monitor inventory levels at all.

Good inventory management is fundamental to any retail operation. There are few practices that are as indicative of the success of a retailer, than how effectively they manage their inventory.

If you are a retailer, inventory management isn't something you can't skimp on. You have to get it right.

When you run a tight inventory management ship, you will always remain in control of your supply chains. You will also avoid the two most detrimental inventory management mistakes: overstocking on certain goods, while understocking on others.

In this article, we will look at the benefits of using a dedicated Inventory Management System in your business. We will also discuss how investing in a proper inventory management solution is worth the cost and time it takes to implement.

The benefits of Inventory Management Systems

As a retailer, you will only be able to fulfil orders for which you have the inventory. That is why you need an automatic system that keeps track of inventory levels as you make sales. This ensures that you never oversell a product or overstock on a product that doesn't sell.

You want an inventory management system that makes it easy for you to take in new orders from customers—irrespective of sales channel. And while those orders are being processed and fulfilled, the system needs to automatically adjust inventory tallies appropriately.

The system will ensure that your order fulfilment operations always run smoothly and successfully. You won't have to continuously track down lost or misplaced inventory. Additionally, you will always know when a certain item runs low and you have to order new stock to keep up with demand.

In the following sections, we will discuss some of the specific benefits that come with implementing a proper Inventory Management System in your retail operations.

1. Synchronise inventory levels with order fulfilment

As a retailer, you also want to have enough stock available to service customer orders. This means that you have to optimise your order fulfilment processes while at the same time synchronising order activity with your inventory levels.

This is where inventory management technology shines—especially for eCommerce operations. Since the system will automatically track inventory levels as orders are being processed, you will always have insight into your sales figures and know whether inventory is moving.

The result is that you will  always have enough stock on hand to fulfil all your orders. You won't have to turn down a sale and ruin a customer's day because of overselling an item.

Many inventory management systems will also allow you to set parameters for things like buffer stock. This is stock that is always kept on hand to fulfil orders, even while you wait for new shipments to arrive from your distributors.

Maintaining buffer stock is an effective way to ensure that you never run out of stock for any of your product items. Your shipping team won't have to search for inventory items when an order comes in, since there will alway be a buffer stock available of each item.

This smooths out your order management and makes it easier to fulfil orders on time. The result is an overall better customer experience—which will improve sales and boost your reputation in the market.

2. Lower inventory holding costs

No retailer can function without inventory. Holding inventory is at the core of their operations.

If a retailer fails to keep close tabs on inventory levels, you run the risk of taking in excess inventory. This will inflate your inventory holding costs and lower profit margins.

With a proper inventory management system in place, the system will give you a continuously updated, accurate picture of your stock levels. This is highly beneficial to keeping the appropriate number of items in stock to meet your current and future sales demands.

The system will also help you to avoid mistakes such as picking the wrong items to ship, or having to scout the warehouse for missing stock items—both time-consuming and costly mistakes.

Since the inventory management system tracks inventory numbers on a continual basis, your shipping and sales teams will always have the correct inventory figures at their disposal.

This is a tremendous aid when it comes to making strategic inventory decisions.

In other words, using inventory management technology is a practical and cost-effective way to minimise operating costs.

3. Achieve better inventory turnover

One of the key indicators to effective inventory management is Days Inventory Outstanding (DIO). This is a number that indicates the average number of days stock is held in inventory before it is shipped as a sale.

The higher this number, the more detrimental for the retailer. Stock that sits on shelves unsold tends to spoil, become less popular and desirable to customers, and turns into dead stock.

It is foolish for any retailer to continuously invest in new stock while old stock sits in the warehouse unsold. When you hold an unnecessary surplus of stock that remains unsold, costs will go up and profits will go down. This will have a negative financial impact on your company, both in the long-term and in the short-term.

This is easily solved by keeping a continuous, automatic tally of stock inventory levels. When you know you already have sufficient numbers of a certain item in stock, you won't order surplus stock. This will minimise wastage while keeping inventory costs low. In fact, it improves the entire efficiency of your inventory holding operations.

This allows you to move inventory before it turns into ageing stock, preventing stock spoilage. It will also help you to ensure that the goods you sell are always freshly stocked and in good condition.

4. Improve customer service

To really become successful as a retailer, you have to provide superior customer service. But how do you make your customers happy if you don't know the amount of stock you have of a particular product they want to buy?

You need to always have a firm grasp of the type and number of products you have to sell at any point in time. When you have the correct inventory numbers available at all times—with a system in place that automatically adjusts these numbers as orders are processed—you will be able to give accurate availability information to customers.

This is especially important when it comes to online retail. There is nothing worse than accepting an online order and then having to send an email to a customer cancelling an order because of a lack of stock.

And customers won't be happy if they have to wait an extra couple of days or weeks for new inventory to arrive on an item for which their credit card has already been charged.

Also, when customers phone or email your support services, you need to be able to give them accurate and clear answers to the inventory levels of an item they wish to buy. You must be able to tell them if an item is available for sale or not.

If a specific item is out of stock, your customer support team needs to be able to give them specific information as to when the product will be back in stock again.

With a good inventory management system in place, you will be able to meet your customer's expectations and serve them with confidence. You will have the assurance that the numbers you hand them are an accurate representation of what goes on in the warehouse and that you are able to address their concerns.

This will prevent unnecessary customer frustration. You cannot expect a customer to remain loyal to your brand if you continuously hand out erroneous availability information and give them poor service.

5.  More effective management of returned inventory

Many retailers underestimate the importance of correctly handling returns in terms of improving your overall customer experience. Close to 90% of shoppers in America surveyed state that they would be more inclined to shop at a particular retailer if the returns process was handled positively.

That is why it's important to establish a simple and effective way to handle customer returns in your retail operations. This is especially true when it comes to eCommerce. Customers would be much more inclined to do an impulse buy if they know that the returns process will be handled easily and promptly.

An Inventory Management System will simplify and speed up your returns and exchange processes. The system will guide your returns handling staff to receive return goods, check the condition of the goods, and authorise or deny a refund or exchange request.

If the goods are to be refunded, the inventory system will automatically add the items to the stock counts and register its location.

The same holds true for exchanges. The old stock is automatically brought back into inventory, and the new stock is automatically removed from inventory while all stock numbers are adjusted appropriately.

This speeds up the returns and exchange processes, ensuring that customers enjoy a smooth experience. Which means they will be more inclined to make a future purchase at your store.

Conclusion

Proper inventory management requires a systematic approach. No retailer will be able to remain in business for long if their inventory management is inefficient and careless.

There are a couple of ways that a retailer can track inventory. Companies used to track inventory with manual, paper-based systems. Many companies still used this type of process.

Others have progressed to using spreadsheets. But even spreadsheets rely on human operators to count stock and then adjust figures when sales are registered.

Fortunately, there are modern, automatic inventory management software solutions available that will both improve and simplify your inventory management tasks.

There are several packages available. Most offer a whole series of different features aimed at improving the efficiency of your inventory management. This would include automated workflows and business-wide inventory tally synchronisation.

An example here is barcode scanning which can be used to do real time inventory tracking. Other systems offer real-time accounting services.

More advanced inventory management solutions include Order Management Systems (OMS). This technology will not only keep track of inventory levels, but will also handle all your other order fulfilment functions.

When an order comes into the system, the inventory levels will automatically be adjusted as the order is processed. This gives you a real shot at providing a unified brand experience to your customers—both before and after they place the order.

The OMS technology will take charge of all your order-related customer interactions. It will manage all your sales channels, sync data with your shipping partners, place orders with vendors, and manage your warehousing.

In fact, when an Order Management System is properly implemented in a business, it becomes a type of nerve centre. It handles many of the time-consuming, manual, and error-prone processes and automates these workflows. This opens up new opportunities and allows you more time to pursue activities that will actively grow your company.

Since the system ensures that your inventory tallies are always updated, orders can be processed faster. This allows you to process higher sales volumes, removing a major barrier to growth. The system will also be able to scale your operations due to market and seasonal fluctuations.

The end result is that all your business operations will run smoother, lowering costs,  decreasing the workload on your staff, and boosting profits.

With the right system in place to manage your inventory management, you will be able to optimise your supply chains. You will also be able to predict future market and sales trends and manage your inventory more effectively. In fact, it will boost productivity and profit throughout your company.

Once you switch to automatic inventory management, it will revolutionise your operations. You will wonder how you ever did without the system to monitor and manage your inventory. In fact, for many modern retailers, automatic inventory management is the key to their success.