Inventory Management is crucial for all businesses, particularly as we moved predominantly into the e-Commerce marketplace. Inventory Turnover is an indicator of high growth, sales and customer satisfaction – all of which are needed for businesses that want to succeed.
Inventory turnover consists of stocking and selling products and evaluating the pricing strategies, POS reports, and real-time data from sale cycles to improve turnover and better customer satisfaction.
What is Inventory Turnover?
Put simply, inventory turnover tells a business how well products are selling based on their sell rate and profit margin above the costs of goods sold (COGS). By determining this ratio, businesses have a greater insight into what has been selling when it has been selling and where it has been selling, which enables greater forecasting abilities. Generally, the higher your inventory turnover is, the better your business is doing.
Ways to Improve Inventory Management
Look at your top 50 Gross Selling Products List
With an Acumen system, you have a standard report called Top 50 Gross Selling Products which identifies the top products for each store and highlights the profit margins and customer trends such as when and why they buy a particular product. This is a great report to start with when considering improving inventory management. It gives a clear insight into how fast the product moves and enables business owners to calculate their inventory turnover ratio. Businesses owners should review this report quarterly to ensure they are keeping up with customer demand. However, when viewing this report, businesses should also consider that high ticket items and seasonal products will appear higher because of the higher profit margin associated.
Unlike other inventory management systems, Acumen POS systems also have a standard report that identifies how quickly or slowly stock moves and compares to other products in your store. With this report, you can look further into new products to better forecast stock management and minimise orders on stock that moves slowly.
With POS Reports, businesses can identify best selling products, customer buying behaviours and forecast appropriately to decide inventory quantities for future orders.
Automate the Process to Keep Customers Happy
Inventory management also plays a vital role in customer satisfaction and retention. With a POS System that can provide employees and online customers with real-time stock information, best-selling customers can be satisfied that their purchase will be fulfilled. To reduce the number of products going out of stock or are unavailable for customers when they need them, businesses can implement an Auto Purchase order based on the current turnover rate. This means products and supplies are ordered in advance to meet demands and avoid delays or restrictions from suppliers. Auto purchasing also provides insights into customer buying patterns and what trends may be occurring or coming up based on historical data.
When implementing auto purchasing, businesses should check their reports monthly to see how else they can improve inventory turnover and better meet the demands of their customers.
Smarter Pricing Strategies
Inventory management also plays a vital part in a business’s pricing strategy as a high turnover means businesses can lower prices, and a low turnover rate means businesses need to evaluate their strategy. An inventory management system needs to work in sync with a business’s pricing strategy to assist in forecasting the business’s potential and accurately reporting on profits and revenue.
At Acumen Computer System, we recommend that our clients build their pricing strategy to our inventory management system. With pricing strategies, we advise our clients to avoid Flash sales and to use terms such as Premium and Exclusive to assist with their inventory turnover. This practice inadvertently teaches customers to buy the product at full price instead of waiting for a discount or a sale which may reduce the profit margin.
Keep Up to Date Product Files
One of the most underutilised elements of an inventory management system is the product file. A product file has all of the information, including materials, additional costs and prices stored for each product. These product files minimise inventory turnover and improve business processes when kept updated. Each product has a clear label, and employees can identify if it is in stock, quarry or sold.
Other benefits of having updated product files are that it enables employees to sell under correct SKU codes instead of selling under miscellaneous when there is no tag available.
Have Good Group Structures
Finally, inventory management would not be fully optimised with a group structure such as table and chairs or Christmas products. In your Acumen POS system, you are able to group products together under collections, categories and store availability which provides you with a more organised inventory list and a better idea of inventory turnover.
POS reports such as Group Sales give you a top-down view of which groups are performing the best and why. However, we recommend viewing the Top Grossing Products report as well to specify which products are outperforming others. Daily sales is also a fantastic group report to review as it indicates how each product did on a particular day. This report is handy for businesses that rotate their stock regularly because it enables them to predict when customers will buy a particular product. For example, if you are a hardware retailer and POS data showed Garden Beds sold best at Christmas, you would rotate stock to be at the front of the store and order more stock to encourage more sales for that catalyst event.
Need to Upgrade Your POS?
Acumen Computer Systems has an inbuilt inventory management system that provides real-time updates on stock and will sync your sales from your website and different terminals to one device. Our POS report system is second to none, and we provide on-hand support at every stage of your businesses success. Get in touch with our team to find out more.