Written by Whitney Sanchez, Posted on May 22, 2017, at Business.com
Properly managing your inventory ensures you have the right items in stock, with less waste. Here are the inventory management concepts to know.
When you run your own retail company, tracking inventory is one of your most important tasks. Inventory management helps you fully understand the ebb and flow of your inventory, including what items are hot sellers and which ones sit on the shelves for months, costing you money.
Here are five key inventory management terms you need to know when managing and tracking your inventory.
Product tracking is at the heart of inventory management. It is the process of tracking all your items while looking for very specific things: What items sell quickly? What items are seasonal? Answering the question of who your products appeal to and how quickly they sell is the first step in knowing when and what to order.
Unit of measure
The unit of measure will vary depending on what you are selling. For example, if you own a small clothing boutique, then you might use single items for your unit of measure. However, if you run a grocery store, you will have varying units of measure. When establishing your inventory management system, make sure that you are consistent when deciding which unit of measure to use.
This is the stock that you need to carefully watch because it does not stay on the shelves for long. You may need to set multiple alerts in your inventory management software so that you can place orders for specific items before they run out.
Dead stock is items that sit on your shelves and do not sell well. It is important to track dead stock so you are sure to not reorder it. Keeping dead stock to a minimum is essential for a healthy business, since buying it in the first place costs you money and it takes up valuable room in your store that could be occupied by a better-selling product.
This is the time when you look at your product tracking data and current inventory and decide to purchase more items. When you are determining when to reorder, it is important to consider the volume of items that you currently have, the current and future demands for the items, and the timeframe that it will take for a shipment to arrive at your store.
Inventory management is one of the most important functions of operating a retail business. By carefully tracking your inventory, you can minimize losses and maximize gains by pinpointing which items are your best sellers.
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