Oops. We’re out of stock on that item. Oops. We seem to have double ordered that. Oops. We gave a discount that actually charged the customer less than we paid for it. There are lots of ways to “oops” when you’re not on top of your inventory, and it can mess up everything from the front of store at the sales level, to the accounting work in the back office.
Oops Costs Money
Shrinkage is such a cute term for such an ugly reality. Shrinkage is essentially ghost inventory. It’s there and accounted for on the books, but due to a variety of factors, it is not actually on the shelves or in the stockroom. There can be a lot of different reasons for this such as theft (which the National Association for Shoplifting Prevention puts at $13 billion per year), damage, manual inventory errors, or data entry errors. Whatever the cause, the problem is pervasive. While there is no way to completely and definitively eliminate shrinkage, there are cost effective methods to get you on top of your inventory so that you can start patching the leaks before the “oops” sinks your ship.
Keep It Simple
There are a lot of barcoding systems out there and a lot of POS systems, and these are the first steps to getting on top of your inventory. While a consultant or sales rep might hype their own systems, you can still implement a perfectly workable system with a tablet, barcode scanner, and a barcode label printer. It’s hard to remember that more doesn’t automatically equal better, and that a simple, inexpensive system can equal or even top a complicated, more expensive system. Small companies with better information systems can raise their profits without raising sales, according to the Houston Chronicle, just by better controlling their inventory. Some eCommerce platforms such as Shopify even offer their own barcoding equipment to interface with their clients’ websites, bringing eCommerce and location retail together. Checking out your local Costco or Staples can also bring you the components you need. At best, you’ll need to spend $1,300 to $1,500 if you’re starting from scratch.
Barcoding your inventory will let you know what you have, where it is, and how to find it when you need to ship or restock. You’ll be able to order more accurately, receive, restock, and inventory your goods faster and more accurately with daily or even hourly reports about stock levels and sales. You barcoding system can also interface with your backend systems such as accounting software and your front of store cash wrap. Keeping your stock fine-tuned avoids the hazard of having either too much or too little, and by setting reordering alerts, you can time your purchases to that you never run out. Conversely, if you have a stock of items that are not moving, it could be time for a clearance sale to make room for a new product to take its place. The hardest part will be inventorying and then creating a barcode and SKU (Stock Keeping Unit) number for each item in stock. You will need to purchase barcodes, and create your own SKU numbers. However, once the system is in place and operational, you will find that the worst is over.
Stick to It
Create work practices for your staff in each part of your operation, otherwise you will have spent the time and money on your new inventory system for nothing. Here are some of the hard and fast rules that your staff will need to follow:
- Never add, remove, or change the physical location of anything without first recording the change at the cash wrap, in the stock room, or in accounting. Items must be physically scanned in and out, and moving stock to a new location must be noted.
- All items must be barcoded and have readable and scanable labels. While you can manually key in the numbers from a damaged label, there’s always the chance of user error. It takes just a moment to print a new label and replace the damaged one.
- Create permissions in the program to designate who is allowed to make what level of changes. At the front of store, create usernames and passwords for your staff that they must use to start a transaction on the POS system. For purchases over a certain dollar amount, or for discounts over a certain percentage, require an additional staff member such as you or a manager to verify the transaction. In the stockroom, create permissions for who is allowed to receive, count, and price goods and enter them into stock.
Remember, according to Inventory Management, your inventory is not the bad guy! Inventory is the stock you need to keep your customers happy and coming back for more. Improving your inventory practices will let you love your inventory again.