After advertising for weeks, prepping employees, and updating pricing in your POS system, the day of your big sale has arrived. The product is flying off the shelves when suddenly an employee comes up to you and whispers, with just a quiver of fear in their voice, “We’re running low on product.”
Inventory tracking is the process of monitoring all the inventory a business owns. It’s an important aspect of managing any retail or manufacturing business, as it can lower costs by as much as 20% by reducing instances of stockouts and overstocking. Tracking your inventory helps you assess the amount of stock you currently have against forecasted sales. From there, you can properly fulfill orders to ensure customers leave your store or website happy.
Read on to learn how an inventory tracking system can benefit your business, plus essential inventory tracking methods to begin tracking inventory efficiently.
An inventory tracking system helps keep a record of all inventory information through real-time tracking and updates. From information about the quantity and location of merchandise to sales trends, inventory tracking systems can monitor many facets of inventory management.
Inventory tracking systems monitor:
There are many different ways to track inventory. Some require significant hands-on work and calculations, such as using spreadsheets, while others may require far less oversight. Here are five examples.
Although it may seem old school, many organizations still favor using spreadsheets such as Excel or Google Sheets. This method of inventory tracking requires entering information manually. As expected, even if you’re using an existing inventory list template, spreadsheet management is labor-intensive and prone to errors. However, this method can work for small businesses with a low inventory volume to track.
Third-party logistics providers, or 3PLs, are a way to outsource all of your inventory management and tracking. A 3PL will handle the logistics of packing and shipping inventory and keep detailed records. This is a great option for retailers that are 100% online and don’t have brick-and-mortar locations, as the 3PL will handle product fulfillment from start to finish.
Some businesses may choose to utilize vendor-managed inventory (VMI), where the vendor is responsible for assessing supplies and continuously determining the amount to ship. The retailer shares stock information with the vendor and they then can handle all ordering and shipping.
Businesses with the resources (i.e., time, staff, money, knowledge, etc.) may choose to implement an in-house inventory tracking system. This means developing and executing a system specifically designed to manage the needs of a single business.
Large enterprises often utilize this inventory tracking option, as it allows them to have full control over their inventory management.
Inventory management software is a great solution for those looking to streamline their inventory management processes. The software tracks inventory automatically, ensuring accuracy. Users can also set an auto-refill threshold, automatically ordering more inventory when the stock falls below a certain amount, ensuring items never run out. The software will also provide a breadth of data and insight into consumer behaviors, returns, and inventory turnover.
There are many benefits to tracking inventory. Of course, keeping accurate inventory records is instrumental to proper decision-making when it comes to ordering. Tracking inventory can also provide valuable data about consumer habits, helping you better understand customer behaviors and increase satisfaction. Here are some benefits of inventory tracking:
Although there’s no reason a product seller should not be tracking their inventory, they may face some challenges. These challenges mostly concern determining the best and most efficient way to track inventory. Here are some examples:
There are many things to consider when trying to track inventory efficiently. The specific factors will depend on your business’s unique needs, but here are some things to consider:
Inventory tracking is critical to a product seller’s success, but it doesn’t have to be complicated when you use the right inventory management techniques. From keeping accurate stock level records to predicting consumer demand, a good inventory management system can improve operations, reduce costs, and increase customer satisfaction.
The best way to track inventory is to complete cycle counts every two weeks and compare it to sales. One of the most effective ways to do this is by using an inventory management system that automatically keeps track of inventory versus sales.
Inventory monitoring requires you to keep a count of all inventory and compare it against sales and financial records. Whether you track inventory manually or outsource it, keeping good records of everything and having clear processes outlined to ensure accuracy is important.
Tracking inventory gives valuable insight into sales. It can indicate products that are selling well or poorly, identify areas where certain products sell well, and identify selling trends.
Small businesses may choose to track their inventory manually, such as with pen and paper or by using spreadsheets. They can also implement other methods such as a 3PL, VMI, an in-house solution, or inventory management software.
Tracking supply inventory requires regularly checking stock levels and measuring it against sales. You can do this manually, or you might use inventory tracking software, a 3PL, or VMI.
Big companies typically outsource their inventory tracking, such as using a 3PL, VMI, or inventory management software. If they have the resources, they may also have an in-house solution specific to their business.