Straight talk on how a perpetual inventory system can dramatically improve store operations efficiency

By following best practices around data maintenance, direct store delivery receiving and stock counting, retailers gain a more accurate view of perpetual inventory

In a recent study completed by EIQ Research, 43% of retailers indicated that they “lacked visibility into supply chain inventory.” As retailers look to compensate for the rising cost of goods – a true and accurate perpetual inventory becomes more important.

One of the most common concerns I hear about implementing a cost saving tool –  such as computer-assisted ordering at the store level – is the high-touch requirement for managing inventory. While some intriguing options are being developed utilizing robots, cameras and RFID to optimize the process for managing inventory, most retailers throw extra labor at the problem, without getting much in return. By following inventory best practices, retailers can reduce the overall labor required and can re-allocate team members to higher value tasks and delivering improved customer service.

Access the survey results

Data garbage in – inventory garbage out

The path to success in inventory management starts before product hits the back door of the store. One of the highest causes of inventory distortion occurs during item set up, for example, when items have a pack size change, seasonal or bonus packages. In fact, 32% of retailers surveyed by EIQ Research cited a lack of clean data inputs as a challenge to their current supply chain environments.

Retailers must ensure that all changes or additions to the product catalog trigger a link/relationship to the correct items. This critical step ensures that when the product is received at the store back door, it is accurately processed and reported correctly, providing a true picture of inventory across the business.  Product relationships should be audited on a regular cadence, which acts as a backstop, ensuring that stores are not overladen with excess work.

Additionally, retailers should remove the point-of-sale quantity key, which is the enemy of perpetual inventory. While it can add some effort on the front end, requiring cashiers to scan each item provides not only correct inventory, but gives category managers the visibility into which flavors or styles are selling best

Validating vendor receipts for direct store delivery

EIQ Research also reported that 58% of retailers identified the rising cost of goods sold as a key business challenge. Following best practices, while receiving product can help ensure each store is getting the products they ordered at the correct cost. While each vendor should be evaluated based on its individual performance, they can be put into 2 basic categories: trusted or non-trusted.

  • For trusted vendors, especially large ones, retailers may explore doing an auto-receipt. This is a scenario where a vendor can provide an Advance Ship Notice (ASN) with line-item details, regarding the quantity of each item to be received. The receipt can be automatically processed and the items inventory updated.
  • For non-trusted vendors, a retailer should either audit the ASN provided or do a complete receipt – scanning and capture the details for each item on the receipt.

With errors caught at the back door of the store, focus on other inventory practices is alleviated significantly. Further, a retailer should institute a policy where damaged or out-of-date products are scanned out at the end of each shift contributing to the maintenance of an accurate perpetual inventory.

Making counts count

Even the best-operating retailers need to audit their inventory via stock counts. A retailer’s focus should be on optimizing the counting procedure to squeeze as much productivity out of each employee. One of the best methods for manually counting is the ‘ones, tons and nones’ count – where a user counts an item’s inventory when they find an out-of-stock condition, a single unit on the shelf, and if there are excessive amounts of inventory on the shelf. This count is great at identifying errors in inventory by manually focusing on key exceptions.

In addition to the manual exceptions caught by the ‘ones, tons and nones’ count, utilizing exception-based counting is a critical way to optimize the counting process. Exception-based counting tools provide retailers with a recommended count list, driving store users to items that have inventory abnormalities like a negative balance on hand or when sales deviate significantly from normal patterns.

By following best practices when it comes to data maintenance, retailers can adopt a perpetual inventory approach, and in doing so, move from quarterly to bi-annual audit counts, reducing the cost outlay required by the accounting department, as well as improving on-shelf availability for the customer in both digital physical channels.

Read Strengthening the Retail Supply Chain: Results from the survey of supply chain professionals at leading U.S. retailers.

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