Every day, millions of people purchase products. For this to happen, the retailer has to have a stock of the product that people want. Retailers must know how to manage their stock because it will prepare them to meet the needs of customers. If retailers know exactly how much stock they have, compared to how popular it is with consumers, they will be able to stay ahead in the market.
Recently, e-commerce has become commonplace in the retail world. Consumers can now make purchases over the computer. Retailers have responded to this change by customizing their business to suit the customers. For example, they might launch an online website, and incorporate customer feedback to make the site better. They could also opt for models (like dropshipping) where they don’t assume all the stock costs.
Despite their potential innovations, having too much stock becomes very expensive. Obtaining the correct stock level is crucial for retailers to optimize their margin.
- Reduce Replenishment lead times
Replenishment is when supplies or products are replaced after they have been sold or thrown away. There are three steps of replenishment; the review period, the manufacturing time and the transportation time. The review period is the first step. If the stock has gone below a certain level, then a new order is placed to replace it. Second, the manufacturing time is the amount of time it takes for the new order to be created. Finally, the transportation time is how long it takes for the order to reach the retailer.
Depending on the product, the manufacturing step will typically be the most time-consuming. This is because so many delays can affect the process, including a lack of materials, workers’ strikes, and machine malfunction.
To reduce the lead time of replenishment, it might be beneficial to try different suppliers. Maybe one of them is more efficient in producing a certain product than others. For example, one supplier may be closer in location to where they can obtain the materials needed to make the product.
- Improve forecast accuracy
It is important to be as accurate as possible when considering stock and inventory, as well as staying aware of what consumers are buying. By understanding what is likely to sell out quickly, retailers can prepare by having a larger stock of that item, and review it more frequently. Similarly, products that are not selling well can be identified, so that they are not restocked as regularly. This is named Inventory Management. We advise you to check this excellent article from Entrepreneur.com on the topic.
- Negotiate with your partners
Long-term relationships with suppliers are immensely beneficial. Suppliers and retailers can have a symbiotic relationship; both of them thriving off the other. If the retailers continually return to the same supplier for the same order, they should eventually be able to strike a deal about the price. The retailer will be able to make deals with them about price, lead time, minimum deposits, etc.
- Watch Your SKU
A SKU (stock keeping unit), is an item or product with an identifying number. These are useful for tracking changes in inventory, and reviewing what products need to be replenished. SKUs are assigned to different products of the same category. This is so consumers can compare different prices and stats of products.