To manage inventory is related to the control and supervision of the quantity, cost, and location of stocks; it is also related to aiming to establish perfect order time and quantity. This is a vital element of a supply chain that serves the customers efficiently by balancing supply against customer demand by ensuring that the right product is readily available in the desired place and at the right time. Effective inventory management examines the whole product lifecycle from ordering, stocking, distribution, and sale to its resupply.
Retailers must find the appropriate level of stock to satisfy customer demand and avoid the holding of overstocked inventory, which incurs rent, transportation, and acquisition costs. This can be ensured using advanced tools that propose real-time insights and automation. Dynamics 365 for Retail helps retailers drive efficiency in inventory optimisation, lowering carrying costs. This solution drives good decision-making and enhances inventory management accuracy. In this article, we’ll explore how can you manage inventory in a retail store effectively.
Inventory Valuation
Inventory valuation is the process of assigning a monetary value to the stock of the retailer. This valuation represents the cost of producing and procuring items, considering all possible discounts, taxes, and storage charges. This inventory valuation is necessary for tax accounting and for financial reporting purposes. This gives a snapshot of the worth of the inventory impacting financial statements and the profit of a business. Different methods that retailers use in valuing inventory include First-In, First-Out, Last-In, First-Out, and Weighted Average Cost. All these methods report different values of inventory and cost of goods sold. FIFO assumes that the oldest items in inventories are sold first, while LIFO assumes that the newest items are sold first. This method of Weighted Average Cost calculates the average cost of all items in the inventories.
Regular Reconciliation
Regular reconciliation is a process in which inventory counts from many different systems are checked for accuracy against some actual physical count. It is a process crucial for keeping inventory records current and up-to-date, otherwise, discrepancies may start showing up over time. Discrepancies can result from simple errors in data entry, theft, or damage; regular reconciliation will ensure that these are noticed and resolved quite quickly. Most retailers can allow inventory management systems to automate their inventory reconciliation processes. The process will print system reports that compare the system records to the physical count, thereby easily catching errors and correcting them.
Physical Inventory Counts
Physical inventory counts involve an accurate examination of all items in inventory stored across various warehouses, stores, and other locations. The process of physical inventory counting is labor- and time-intensive; hence, it usually causes a short-term disruption of normal activities. Given that inventory counting requires much effort, retailers normally have a yearly schedule usually at the end of the financial year for reconciliation between the inventory records and actual stock. In a physical inventory count, staff count items individually and then match the count to the records in the accounting system.
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Cycle Counts
Cycle counts are ongoing inventory audits where samples or sections of inventory are counted periodically throughout the year. Cycle counting differs from physical counts because the latter occur annually. Cycle counts entail counting small percentages of inventory at a time, which causes less disruption and allows for the identification and correction of discrepancies more frequently. The cycle counts could be daily, weekly, or monthly, depending on the retailer’s needs and the inventory size. Counting parts of the inventory on a cyclic basis enables the retailer to identify and solve problems as they happen and maintain inventory records more accurately.
ABC Analysis
ABC analysis is one of the inventory management techniques that targets determining which items in an inventory are of higher importance, mostly by financial value. Retailers usually do this inventory classification into three classes:
Class A:
High-value items with high sales impact, risk, demand, or cost.
Class B:
Moderate-value items with only moderate impact and importance to sales.
Class C:
Low-value items that contribute very little to sales impact and, therefore, are relatively of less importance. In, fact class A items form the basis for setting cycle count frequencies and management priorities by retailers. This is because it ensures that the deployment of resources starts with attending to the most important items of inventory in the first instance.
Spot Checks
Spot checks are a simplified form of cycle counting where items in the inventory are randomly selected by a retailer and cross-checked against accounting records. This will help detect discrepancies and inaccuracies in inventory records without having to go to the trouble of a full count. Such spot checks may be conducted regularly or at will, depending upon the retailer’s inventory management strategy. They offer a glance into the accuracy of the inventory and thus act to maintain data integrity. By conducting regular spot checks, retailers can ensure that their inventory records are accurate and current, and problems are arrested before they get out of hand.
Conclusion
Effective inventory management shall therefore be a mix of accurate valuation, regular reconciliation, and strategic counting methods. Counting techniques assure precise inventory levels within retailing by applying methods such as physical counts, cycle counts, ABC analysis, and spot checks to reduce discrepancies and ensure optimised operations. This is an integrated approach in support of efficient inventory control, which again transforms into better overall business performance. Visit classroom6x for more informative articles.
