As many as 39% of customers in the U.S. have left a store empty-handed as a result of out-of-stock items. Shoppers experience out-of-stocks as often as once every three shopping trips, and retailers are missing out on as much as $22 billion in sales as a result, according to a report from the Grocery Manufacturers Association.
Looking at these statistics, it’s clear how critical having an effective inventory management system is in the retail world. Many retailers have yet to take full advantage of the inventory capabilities of their existing software—and they recognize that. According to our data, 74% of retailers that are searching for a point of sale (POS) system also want it to support inventory management.
Inventory management is a way of keeping track of the quantity and components of your stocked items (e.g., color, weight). The goal is to know how many are in stock, what to reorder and when, and minimize the cost of holding extra inventory by knowing when to restock products.
Why is inventory management important?
Inventory management is key to ensuring you have enough stock to meet customer demand. Failing to have enough inventory can cause loss of money on potential sales from a customer going to a competitor or wasting money by stocking excess or unnecessary inventory.
Applied correctly, inventory management can:
- Avoid spoilage and unexpired/out-of-season stock
- Help to save money on any skyrocketing warehousing costs as inventory grows
Here are three steps to get you started doing inventory management with your POS system:
- Organize and count existing inventory
- ID each product and upload inventory data to your POS
- Set inventory tracking alerts and other automations
We’ll take a look at each in detail below.
1. Organize and count existing inventory
Whether you’re counting your inventory items for the first time or just want to start fresh, that initial count is a first step to ensuring the accuracy of your inventory data.
Details are also especially helpful when you want to know what your top performing items are. With detailed item descriptions, you’ll be able to see which specific product variant is selling the most and the least, which will help to guide your future inventory orders.
How to do it
Create inventory item descriptions while being as detailed as possible. Having precise descriptions for your items makes managing your inventory that much faster and easier down the road. List all variants (e.g., brand, style, color, size, material) that define your product.
For example, instead of “30 shirts, 40 pants, three hats,” provide more details such as “five large red shirts, five medium red pants, and five large blue hats.”
Why do this? Say a customer wants a particular hat in red, but you only have blue ones stocked at the store they’re visiting. You can easily do a quick search on your system to see whether other locations have red hats in stock and have inventory transferred to the store where you are located.
The more details you include, the more impactful your POS inventory capabilities will be.
2. ID each product and upload inventory data to your POS
Once you’ve organized your inventory items with updated, detailed item descriptions, it’s time to input all that information into your POS system.
Most POS systems today provide the option to import your entire inventory catalog as a Microsoft Excel comma-separated values (CSV) file upload. It should look something like this:
[Click here to download the Excel inventory template]
Manually entering each product into the system makes it prone to human error. Uploading all that product ID data into your POS system keeps your inventory process detailed and accurate. It will also make ordering, restocking, and adding new products much easier.
How to do it
Assign stock keeping unit (SKU) numbers to every product. This internal inventory coding system identifies all your product features, making it easier to find products in your POS system. This means you’ll know the exact location of all your items and employees can easily look them up on your system.
We’ve included a SKU creator in the downloadable Excel template above that generates a detailed SKU based on the product name and details you would want to include. Our template is just a start; you can also add details such as manufacturer suggested retail price (MSRP) and tax. Make sure to check with your POS vendor to determine what format your inventory data needs to be in before uploading your data.
Ensure clean and detailed inventory data is uploaded into your POS system from the get-go.
3. Set inventory tracking alerts and other automations
Having insufficient inventory translates to lost sales, time-consuming back orders, and an unsatisfactory customer experience. You don’t want to wait until an item’s inventory reaches zero before reordering.
How to do it
Set alerts to receive notifications whenever a product falls below a certain level. For your most popular products, you might want to consider automatically reordering whenever stock gets below a certain threshold.
Implement a barcode-based product categorization for your POS. Doing so reduces the likelihood of human error and gives you better visibility of the stock levels in your warehouse.
Set automatic reorder alerts on your POS to ensure your most popular items are always in stock. Talk to your vendor about what capabilities they have to automate existing manual processes.
The above tips are examples for how you can automate, streamline, and make the inventory management process more efficient with your POS system. As customer expectations grow, these are some of the ways you can take action to stay one step ahead of your competitors.
- Need help finding a POS system with inventory management that’s right for your business? Take a look at the user-submitted reviews your peers have provided about their POS systems.
- Schedule a free consultation with one of our expert retail advisors to discuss what the best inventory management and POS system will be for your store.