Understand the outputs to know how to adjust the inputs. Inventory Management is key to a retail store. Whether you are an online store or a physical experience outlet, if you are showing what’s new to your customers, they move far and away.

The retail business thrives on newness. If your customers who walk in see the same old stock, time and again, they will get bored and will prefer a store where stocks are always on the move. The art of having the right products in the right quantity for sale, at the right time is called inventory management. It is a part of the larger supply chain management. If done effectively, retail businesses can avoid carrying excess inventory and hence reduce inventory


  1. Fine-tune Forecasting: Planning too aggressively can have disastrous effects on profits. Your projected sales calculations should be based on factors such as historical sales figures, market trends, predicted growth and the economy, promotions, marketing efforts, etc.
  2. Answer the question of ‘Who is taking the risk’? If you are taking the risk then be conservative on your sales forecast. It is okay to be aggressive if your supplier is taking the risk.
  3. Use the FIFO approach (first in, first out): Goods tends to be around if you do not prioritize to push it out. Goods should be sold in the same order as they were bought or created. This is especially important for sleeping products. This approach is called FIFO method which stands for First In First Out. The best way to apply FIFO in a storeroom or warehouse is to add new items from the back so the older products are at the front.
  4. Identify the low-turn stock: If you have stock that hasn’t sold at all in the last six to 12 months, it’s probably time to stop stocking that item. You might also consider different strategies for getting rid of that stock — like markdowns or special promotion — just get rid of old stock.
  5. Track your stock levels at all times: Have a solid system in place for tracking your stock levels, prioritizing the most expensive products. Effective software saves you time and money by doing much of the heavy-lifting for you.
  6. Don’t forget quality control: No matter what your specialty, it’s important to ensure that all your products look great and are in saleable condition.
  7. Set Stocking up versus sales Benchmarks: Do this by Category and against the best player in that category. Benchmarks should not be on your own best periods.
  8. Always prefer selling unsold, old stock to your own customers at a bargain price to that of returning it back to the supplier. The former gains you happy customers and the latter gains you unhappy suppliers.
  9. Consider drop shipping: Let your supplier into your business like a partner does. Amazon does this effectively. A wholesaler or manufacturer is responsible for carrying the inventory and shipping the products when a consumer buys from your store.


Cost while maximizing sales. The best inventory management practitioners believe that stock-turn equals profit. The only reason to have stock around is to support the sales levels.

The best strategists will tell you that stocks or inventory do not sell in “turn.” You cannot invest in stocks and wait for them to sell. Good stocks sell fast, and new things will sell faster. The old stock will get older. Inventory management is part-art and part science. One has to indulge in the art to understand the science behind it. Here are a few tips to manage inventory better.

Systems for Better Inventory Control

In the retail industry, the most successful players adopt the principle that Order-lead times affect order accuracy, which affects sell-through which, in turn, affects profits. If you are able to shorten the order-lead time and improve your accuracy then you will be in a position to offer your customers better prices and higher quality. In order to achieve this, you will have to invest in better systems, processes and technologies in your business.

A smile of Profitability with Better Inventory Management

  Here are 7 essential things you can do

1. Organize Product and Vendor Information

The first step in organizing your inventory is to set up your stock and supplier information in a reliable and accessible system. Some businesses use manual-tracking methods, such as spreadsheets. However, the best option for retailers is to use a point of- sale (POS) system.

2. Create and Submit Accurate Purchase Orders

Purchase orders (POs) are the easiest way to manage your inventory purchases. They let you track every stock purchase efficiently, from placing the order to receiving the shipment to paying the bill. POs are essentially financial transactions, so create them when you have time to review your cash flow and realistically forecast your stock needs.

3. Receive Inventory Order Accurately

Even if you are purchasing stock accurately, not properly receiving shipments can leave your business open to loss due to error and theft. To receive inventory correctly, businesses should receive and unpack all boxes in the same space, count each box, and check the items received against original purchase orders.

Not having a system and process in place to accurately receive inventory is one of the most common small business inventory management mistakes. A whopping 28% of inventory shrink is attributed to supplier mistakes that aren’t caught during the stock-receiving process. A sound process that includes checking all stock receipts against purchase orders minimizes these losses.

4. Tag and Label Inventory

Once your products are in your store or warehouse, we switch from product ordering and forecasting to inventory control

5. Track Inventory as It Sold

Tracking sales is a must for any business operation, and it involves more than just tallying up the totals at the end of the day. A good inventory management system records every sale in detail, including items sold. A POS system helps streamline this process over a manual spreadsheet system by adjusting your inventory records in real time with each sale.

6. Reconcile Inventory Differences

Ideally, after performing your physical inventory count, all of the expected numbers will match your actual numbers. However, that is not always the case. If you have more or less of a product than anticipated, you will need to investigate the problem and reconcile the difference.

7. Organize Your Stockroom and Warehouse

Whether you have a retail store with a small stockroom in the back or an expansive warehouse for your e-commerce business, organizing your inventory is key to smart management. Even if you operate in a tiny space, it’s good to have an organized overstock space so you can take advantage of discounts and deals on bulk wholesale orders.

Retail is a business where you can never get it right 100% right, say retail experts. You can only make it better and better. Your customers will keep changing. Your suppliers have a business to run too and the government will keep tweaking the rules. So there is no point in agonizing over things that are not in your control. The best way to win the game is to plan to make the plan better.