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When I was young, I worked in a store where my boss put money on the shelves to teach me the importance of inventory management. I’d be cleaning a shelf, and I’d say, “Hey, there’s a $5 bill here!” And he’d say, “That represents product on the shelves. Boxes on the shelf equal dollars. It’s not product; it’s money.”
I’m always surprised at how many businesses don’t have an inventory management system. I respect people’s gut sense of what they have, but if you have more than $20,000 in inventory, you need an inventory tracking system -- especially in a retail store, where people are walking in and out, and where things can go missing. At the end of the year, if you have five fewer items, you may not know if you sold them or if they were stolen.
Here are a few things to remember when considering getting your own product inventory system:
1. A product inventory system saves you labor costs.
I just had a conversation about this the other day with a store owner. He said his company had $70,000 in inventory, all of which was little trinkets. I don’t think there was an item worth more than $30 in the whole store. I asked him how he knew he had $70,000 in inventory, and he said, “We counted it all. It took us a week.”
I said, “If you could know by pushing a button on your computer how much inventory you had, wouldn’t that make more sense?” Having an inventory system quickly pays for itself when you take labor into account.
2. The best product inventory system is the one you’ll use.
We use LightSpeed POS for Apple Mac. But really, the best inventory management system is like the best backup system -- the best one is the one you’re most likely to use every day. The fewer the clicks and hoops you have to jump through, the better. Usability is key.
In our store, we have between 5,000 and 10,000 line items at any given time. I have LightSpeed set to recommend reordering each product when it falls below a number. We can then send the order to the vendor with a couple of clicks.
3. Your product inventory system can act as a sales predictor.
You also need to see what the trends are and how things are changing. That’s the management side of inventory management. Of course, some changes are impossible to predict. Who could have guessed that a retailer who’d invested $1 million in iPads in May would have come out as the king of the world in December?
The most important thing is that you never want to run out of your most popular product. And if you sell one of an item every month, you don’t want to stock 12 of them. A good inventory management system can help you avoid both these situations.
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