Note to retailers

With the rapid pace of change in today’s retail industry, it is often easy to forget about the importance of getting the basics right. Inventory and how it is managed is a fact of every retailer’s life and the common denominator of all retail businesses. Yet despite the lack of hype and glamour, any retailer, regardless of size, scope, and specialization, has the potential to be world-class at inventory management. Furthermore, managing inventory well can mean the difference between a retailer making money and losing money.

There are certain inventory management basics that can greatly improve processes, reduce inventory-related errors, and contribute to the bottom line. Focusing on the basics offers the opportunity for any retailer, no matter how big or small, to greatly improve operational efficiency and gain competitive advantage through world-class inventory management practices.

* While many retailers purchase merchandise from between 50–499 vendors, almost 80% of their purchases come from fewer than 20 vendors. For these retailers, strong relationships with key vendors are critical.

* Retailers order inventory centrally (32%), at the store level (23%), or at both the store and central levels (29%). The smallest retailers, order inventory centrally, while the larger group allows stores to order direct or utilizes both methods. When it comes to reordering inventory, 42% of retailers do so manually, again most likely a consequence of small size, while almost half (48%) use a semi-automated system with human judgment, and less than 10% use a fully automated system. Ensuring that the right decisions are being taken at this step is critical.

The perception of shopping is changing from a leisure activity to a more purposeful chore that requires an inventory balance that satisfies shoppers quickly. To achieve this, retailers have to build upon existing processes and systems to extend their reach beyond the enterprise. Reach will most likely come with real-time data, often carried over the Internet, and retailers will use that capability as a stepping stone to better collaboration.