From restaurants to retailers, businesses that offer goods and services need an efficient way to monitor product usage and inventory. While many small businesses may be tempted to use manual tracking methods, this can lead to costly human errors.
By implementing a point-of-sale (POS) inventory solution, companies can improve their ordering, counting, and order fulfillment accuracy. POS inventory software also significantly improves operational efficiency, saving businesses overhead, storage, and labor costs.
Why is Inventory Management Important?
As inventory is the primary source of income for retailers, proper inventory management is essential for maintaining profitability. Even businesses that do not have a designated inventory solution can use their POS system to improve their management practices.
By utilizing a POS system to track inventory, companies can-
Promote Customer Satisfaction
Inventory management ensures that businesses maintain healthy stock levels so customers can purchase their desired items without fear of stockouts or backorders. Stockouts can not only lead to unsatisfied customers but also cause organizations to lose potential sales to competitors.
A POS system automatically tracks inventory through transactions and purchase orders, updating all integrated systems. Therefore, when the stock volume falls below a healthy level, the software will alert management to place reorders. Solutions can generate reports on sales trends to determine each item's demand, allowing businesses to restock ahead of busy seasons.
Retailers can also use POS systems to pinpoint items within the supply chain. Therefore, companies with various stores can easily track items across multiple locations or trigger orders from distribution centers. This enables stores to efficiently transfer items between facilities to fulfill customer orders.
Decrease Storage Costs
While businesses may be tempted to stock up on inventory items due to the "better safe than sorry" ideology, housing excess products can lead to high storage costs. By optimizing stock levels, retailers can fulfill orders while minimizing unnecessary handling expenses.
Analyzing data reports from the POS software allows businesses to determine which product lines underperform in sales and have less demand. Pinpointing slow-moving stock enables companies to decrease reorders, significantly reducing storage costs and freeing up valuable storage space. The vacancy can then be used to house items with high profit margins and turnover rates.
Eliminate Unnecessary Overhead
Aside from storage expenses, inventory requires several additional costs, such as insurance, taxes, and the risk of damage. There are also indirect expenses, such as marketing campaigns and advertisements needed to promote items and drive sales. Therefore, the longer products sit on the shelf or in a warehouse, the more overhead the business incurs.
By taking advantage of the POS solution's functionality and data analysis, retailers can determine where they can reduce costs and improve their inventory management.
How Businesses Can Use POS Systems to Manage Inventory
While different POS solutions have various features and levels of functionality, businesses need to know how they can utilize the software to improve their inventory management practices.
To maximize the use and value of POS inventory reporting, retailers need to-
1. Organize and Tally Inventory
First and foremost, businesses need to count and compare the items they have on hand with existing lists to check the accuracy of their inventory data. Employees taking inventory should also note product variances, such as size, color, and model. This enables retailers to determine which item variants have high and low demand.
Noting product variances also improves ordering accuracy and customer service. For example, if a retailer counts clothing items by general terms, such as pants, shirts, and ties, they cannot check if a specific variant is available. Therefore, if a customer orders a medium, red shirt, the business may find they only have blue shirts available.
To avoid these situations, management should create detailed descriptions of each item before counting inventory. Once this information is uploaded into the POS solution, employees can quickly refer to the system to check stock quantities, locate items, and answer customer questions.
2. Identify Each Item and Update Systems
Every POS solution has a different method in which businesses can input information. Some systems enable retailers to upload inventory data via digital spreadsheets, while others require manual entries.
However, manual methods have an increased risk of human error. Therefore, retailers should designate an ID to each item to streamline cycle counts, ordering, restocking, and adding new product lines.
First, managers need to assign each product a stock-keeping unit (SKU), which is a series of digits that identify an item and its features. Using SKUs makes it easy to input and locate items in the POS system. Once the codes are entered into the solution, employees can quickly update quantities with every inventory count.
3. Set Automated Tracking Alerts
Dipping below healthy inventory levels can lead to stockouts, backorders, lost sales, and, ultimately, unhappy customers. Rather than continually checking stock quantities, retailers can program their POS system to send alerts whenever inventory runs low. This enables management to place reorders, promoting ordering accuracy and maintaining optimal stock levels.
Businesses can further enhance their inventory management by integrating their POS solution with their stock control software. This automatically updates product quantities with every reorder, transaction, item transfer, and addition, saving significant time and labor costs.
By implementing barcodes and portable scanners, businesses can also automate standard tasks, such as cycle counts and data entry, improving overall accuracy and efficiency.