Retailers have long faced challenges with inventory accuracy. While developments in technology have improved retailers’ ability to count reliably, the importance of inventory accuracy and its alignment to reduced costs and higher sales volumes is greater now than ever before.
Prior to the pandemic, the retail industry was already seeing the emergence of the need for omnichannel strategies. This was led by a seed change in consumer behavior. Shoppers wanted the flexibility and convenience to purchase merchandise online and have it either delivered or be available for in-store pick up. The impact of COVID accelerated this behavioral change to the point where a sophisticated omnichannel strategy is now a base requirement.
In addition to retailers having to respond to ever evolving consumer demands, they have experienced two other recent significant additional challenges: major supply chain interruptions and a labor shortage at the store level. Both factors directly affect inventory management and highlight the need to maintain perpetual inventory accuracy. Having the right products in the right store at the right time is a critical factor for the profitability of retail brands worldwide.
Retailers with omnichannel strategies need to consider the impact of maintaining accurate inventory on a number of key factors in order to optimize inventory management and, most importantly, drive sales.
- Increased sales and margin: An extensive study by the ECR Retail Loss Group found that improving inventory accuracy by counting more often lifted sales by 4-8%. Accurate records can also prevent overstocks which can result in out-of-season markdowns.
- Customer Satisfaction: Maintaining an accurate inventory ensures the right products are available in the right quantities when customers need them. Orders can be fulfilled promptly leading to higher customer satisfaction levels. Conversely, inaccurate inventory can result in lost sales, backorders, delays and customer dissatisfaction.
- Cost Reduction: Inventory accuracy helps to minimize costs associated with either excess stock or stockouts. With accurate inventory data, businesses can optimize their stock levels, reduce overstocking, and avoid understocking. This reduces holding costs, eliminates the need for emergency orders or expedited shipping, and prevents lost sales.
- Operational Efficiency: Accurate inventory data allows businesses to streamline their operations and improve efficiency. It enables better demand forecasting, production planning, and order fulfillment. Employees can locate items quickly, reducing time wasted searching for misplaced or missing inventory. This improves productivity and overall operational efficiency.
- Financial Accuracy: Inventory represents a significant asset for most businesses. Accurate inventory records ensure that financial statements reflect the true value of inventory on hand. This is important for managing profitability and making informed business decisions. Inaccurate inventory data can lead to financial discrepancies, incorrect valuation, and financial loss.
- Supply Chain Management: Inventory accuracy is crucial for effective supply chain management. Accurate data ensures that replenishment orders can be more accurate and helps identify potential issues in the supply chain, such as delays or discrepancies. This allows for proactive measures to be taken, reducing disruptions and maintaining a smooth flow of merchandise.
- Loss Prevention and Fraud Detection: Inventory inaccuracies can mask inventory shrinkage due to theft, misplacement, or errors. Accurate inventory records enable businesses to identify and investigate discrepancies promptly, reducing the risk of inventory loss and internal fraud.
Datascan partners with retailers worldwide to ensure their merchandise counting procedures are accurate and reliable. Both our barcode and RFID counting solutions support the need for accurate, perpetual inventory at the store level, driving profit for retailers and satisfying the customer. While the retail industry is ever evolving, one factor remains the same. Inventory accuracy is essential for maintaining customer satisfaction, reducing costs, improving operational efficiency, ensuring financial accuracy, optimizing inventory levels, and facilitating effective supply chain management. In an omnichannel world, it is a critical component of successful inventory management and has a direct impact on the overall performance and profitability of a business.
