How to Conduct Store Inventory Effectively

Is Inventory something you DO or something you OWN?  First, remember that the goal of inventory is to satisfy customers: in a perfect world, every customer who enters the store would find enough stock of the desired SKU’s for sale.  Retailers who manage their inventory well have less chance of running out of stock and losing sales or holding too much stock of low-selling goods that require deep discounts to reduce to reasonable levels. Taking inventory is a practice well-run retailers do regularly to account for store stock, ensure that books accurately reflect the saleable goods and to identify and prevent internal or external theft.  It is a critical step in inventory management called Inventory Control.

Your stock or inventory of goods reporting should show the amount of products you have in the store for every SKU.  As products travel into and out of your store, there are several points where there should be an accuracy check.

The first point is in receiving goods.  As vendors or distribution centers ship products into the store, there should be a process of thoroughly counting the goods received and verifying the receipt against the purchase order quantities.  Any abnormalities should be directly noted and addressed with the shipper immediately. This addition to stock should be reflected within the day on the store’s inventory reports.  The other way that product can be added to store inventory is when customers return sellable goods.  When a customer returns a product previously purchased and it is in reasonably good shape for sale to another customer, it must be added to the store’s inventory ledger.  Damaged goods should be entered into a damage/destroy account or a “return to vendor” (RTV) account.

Products are typically deducted from the inventory as they are sold.  Most retailers have a daily reconciliation of the inventory in the store with the day’s sales deducted.  Products that hit a critical inventory level trigger a re-order to keep shelves full.  Retailers who conduct e-commerce sales, usually process inventory reconciliation in real time and do not postpone it until there is a nightly batch report.

The daily processing of receipts and sales creates a live inventory stock ledger that accurately reflects the stock on hand in the store.  To conduct an inventory count, print out the inventory stock ledger and count the physical goods to verify the ledger’s accuracy.  To prepare for an inventory count (usually conducted when the store is closed) it is a good practice to prepare by doing the following steps:

1)   Conduct a merchandising sweep of the sales floor moving all products to their “home” location.  If products are in multiple locations (on a shelf and at the till or on an endcap. note the secondary location at the home location.  The best method: old fashioned pen and paper.

2)   Conduct a backroom sweep moving all products from the backroom to the sales floor, if possible.  Otherwise, organize the backroom into logical segments with all similar SKU’s grouped together and accessible.  Count all backroom stock and move the backroom counts onto the pieces of paper at the home locations.

3)   Organize the inventory counting by assigning employees to specific product lines or sections of the store.  Provide them with the live ledger and have them note the physical counts on the live ledger.

4)   Double check inventory count accuracy by randomly selecting SKU’s from the ledger and conducting a second count.  Use any discrepancies to teach employees better methods for maintaining inventory accuracy.

5)   Conduct second counts on any SKU’s that deviate from the live ledger.

6)   Once you are certain that all inventory counts are fully accurate, reconcile the live ledger and stock on hand reports by deducting or adding stock to the variant SKU’s.  Delve into discrepancies and look for root causes such as: improper intake processes when receiving goods, damaged goods improperly deducted from inventory, theft, improper accounting for returned goods.  Use inventory counts to look for ways to improve training and accountability among your staff.

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