Effective inventory management is crucial to retailers because it ensures that they have enough product on hand to capture every possible sale, it keeps costs down, and it helps retailers improve their understanding of customers and buying patterns. Sound inventory management also helps prevent retailers from overstocking products that expire or become obsolete, such as perishable foods or medicines, and products prone to obsolescence, such as fashion and holiday items.
In addition, having accurate inventory data across sales channels helps retailers get products to consumers faster, improving customer satisfaction and reducing stress on staffers. It also helps reduce inventory shrinkage—inventory that a retailer should have but doesn’t because of internal theft, incorrect recording of inventory on intake, miscounted inventory, goods damaged or spoiled on arrival, misplaced inventory, or other reasons. Moreover, without strong inventory management, retailers can’t return damaged goods to suppliers because they won’t know how or in what condition those goods were delivered.
Having a firm grip on inventory and sales trends helps retailers manage their supply chains better. Whether using just-in-time ordering to minimize carrying costs or putting in fewer, bigger orders, retailers can better determine economic order quantity—the ideal order size that minimizes the costs of holding inventory.