How to prevent financial loss and boost sales with accurate inventory data.
It’s enough to bring any retailer out in a cold sweat. A customer comes into store expecting to find the item they’ve set their heart on, only to discover it’s sold out.
And it keeps happening, undermining consumers’ trust and damaging your reputation.
Research suggests this scenario is more common than most retailers would like to admit, with more than 60% of inventory records containing inaccuracies. And stockouts are only half the problem. If stock records are incorrect then you’re almost as likely to have too much stock on hand as too little, meaning you might be stuck with items you struggle to shift taking up valuable shelf space.
Inaccurate stock can have many causes, from data entry errors and incorrect manual counts and adjustments to employee or customer theft, and damage or spoilage. But the result is almost always the same and shows up in your bottom line. When looked at globally, the results are truly staggering, with one study putting the cost of incorrect stock levels at $1.7 trillion a year. What’s more, as IHL Group put it, “despite two decades of digital transformation spend, retailers are still losing 6.5% of sales to the same problem.”
So, how do you stop yourself from falling into this costly trap? Here we look at five ways to address stock inaccuracies, both by addressing human behaviours and by improving the technology that supports your business.
Experience suggests that the payoff is worth the effort, with improvements to stock accuracy driving 4% to 8% increase in sales — not from selling more stock, but from having the right stock, in the right place, at the right time.
1. Count, count and count again
Conducting periodic stock counts is one of the simplest but most effective ways to address inaccuracies. Regular stock takes give you a valuable insight into your stock and can quickly point up discrepancies.
To minimise disruption, carry out counts on a department-by-department basis, or use stock take technology that lets you count stock while you’re still trading. Whichever way you decide to go, make sure you use standard, consistent procedures and that counts are conducted by well-trained staff.
On top of these regular counts, consider running random checks for an extra layer of vigilance and as a way of spotting what might otherwise go unnoticed and discouraging misconduct.
What can look like an onerous operational effort has the potential to increase your revenue, not only by reducing losses but by enhancing your reputation for reliability, with one study finding that “stock counts are actually more than a cost-intensive necessity; they may rather play an important role in increasing a retailer’s sales as well.”
2. Foster an accuracy culture
There’s no getting away from the fact that human error can compromise stock accuracy. From data entry mistakes to incorrect scans at the checkout, your people can be a key factor in undermining precision.
While these mistakes will always occur, you can minimise them by fostering a culture of accuracy. That means addressing the underlying attitudes and behaviours that your team bring to work every day, whether they be customer-facing or warehouse staff. Cultivate a feeling of ownership so they don’t assume that someone else is responsible for accurate data and grow a willingness to be accountable for getting things right while discouraging blame and recrimination.
Back up these attitudinal changes with clearly documented inventory procedures that can be applied across your stores and become the basis for training. That way, accuracy is seen as flowing from the top down and your people can be confident that everyone is being held to the same standard.
Encourage staff to see accuracy as a team goal and something they can contribute to and take pride in.
3. Get your returns processes right
Having robust returns processes in place is one of the most impactful ways to improve stock accuracy. If returns aren’t handled properly you can end up with stock that goes missing, is miscounted or mis-shelved, or is lost in a logistics chain, leading to a cascading litany of problems.
In fact, this factor is so important that IHL Group found poor returns processes contributed to stock inaccuracies in 70% of retailers. At a time when the value of returned goods has reached $1.9 trillion worldwide, tracking returned goods can be a key to boosting available stock and mitigating financial loss.
4. Use barcodes, electronic labels and RFID tracking
In addition to training and clear processes, you need to give your people the technology that will support them in doing their jobs.
A good place to start is with the simple, everyday barcode. Accurate barcode scanning at regular stages of the stock lifecycle, from receipting to stock takes and at the point of sale, is an effective way to keep your records up to date.
Look at implementing electronic shelf labels so that your stores keep current with price updates while not burdening your team with the task of manually maintaining shelf pricing.
You could also consider RFID as a way of accelerating high-volume, fast-moving inventory tracking. IHL Group has identified RFID as “the highest single-technology impact on inventory distortion reduction. Retailers using RFID show 71% higher sales growth than non-RFID peers, with the accuracy improvements from RFID directly reducing both out-of-stock and overstock conditions.”
5. Audit your inventory management system
Make sure your inventory management system is fit for purpose. That includes confirming it can automate many of the tasks that underpin stock accuracy. For example, can you set maximum and minimum stock levels and automate ordering when stock is running low? Can you schedule regular stock counts?
Data insights are also key. Make sure your inventory platform can provide you with near real-time data and analysis so you can keep on top of stock coming in and going out of your business and spot discrepancies before they grow into problems. Does your system maintain your stock in a central location so it can be actively managed for optimal results and without double-ups?
Embed the platform’s capabilities into daily workflows so you are getting the most from your investment and so your technology supports the culture of accuracy you seek to foster.
Looking for a retail management system that delivers these benefits and more? Get in touch or email sales@triquestra.com. We’d look to explain how the Infinity retail management platform can help you get your stock in order and improve your bottom line.
Infinity unified commerce is powered by Triquestra, an Auckland-based retail software company.
