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Best Practices for Inventory Management for Small to Medium Retailers

April 15, 2024 / 8 minute read / By Nick Borowitz

Learn how to save time and stay stocked from purchase orders to receiving, store transfers to physical inventory counts.

Inventory management, in its most basic form, is straightforward. Retailers must have inventory to sell to customers while ensuring they have more to replace the purchased inventory.

But what about getting new inventory, seasonal products or expanding your offerings? How do you keep track of how many products you have or when you need to know how many variations of a single product you have? And every retailer’s favorite task: the complete physical store count.

What are the best practices for inventory management for small to medium businesses?

We will look at simple strategies retailers can use to know their inventory performance at multiple touchpoints, while using the right inventory management POS system.

Optimizing Inventory Receiving and Incoming Count Accuracy

To start, we will explore getting new inventory into your store for retailers with one storefront, multiple brick-and-mortar locations, or even a warehouse.

When a business receives new merchandise, it must record each item to reflect the current inventory count. Suppose there are two units of a product, and two more arrive. The record needs updating to indicate a total of four units available.

But in what format do you want to update that record in your retail inventory management system?

Manual Entry: A person must update the record by hand. They will check a box on a sheet of paper, hit a keyboard button, or, worst case scenario, attempt to keep count in their head.
Scanner Entry: A device that uses a scanner hits a barcode, and then, depending on the setup, it either automatically updates in a central system or has to be uploaded at the end of the count.

Each method has its respective advantages and drawbacks:

Method Type	Pros	Cons
Mobile Scanner	Quick scanning Data stores in device Easy to upload data	Device malfunctions Connection interruptions
Manual Entry	Creates physical record Suitable for smaller inventories	Overly time consuming Relies on memory for large counts Risk of losing or misplacing documents

There are various mobile inventory scanner device types if a retailer opts to use them.

Scanner Type	Pros	Cons
Portable Data Terminal (PDTs)	Sturdy and built for wear-and-tear Ideal for high-volume inventory Data transmission via wireless connection Advanced data entry functionality	Prohibitively expensive for small businesses Needs device updates for proper functionality Can be costly if repairs are needed
Mobile Devices	Affordable for most businesses Suitable for small to medium inventories Scanner attachment choices are plentiful Fast uptime since only need to download an app to get going	Often have to attach device to computer to upload data Consumer-grade devices have less durability Limited functionality to only basic duties

Counting the Physical Inventory in your Store(s) and Warehouse

Maintaining an accurate count of your inventory is essential, which is a given. From the start of this blog, a retailer needs to know how much they have when selling products and how much they have to replace when they sell.

Retailers need to know how much inventory they have when placing vendor purchase orders in their POS system. Overbuying is a waste of money because it means an excess supply may need to sell more quickly to justify the cost. Underbuying means that a retailer cannot restock fast enough.

There are several ways to counter these issues that, while not a quick fix, can mean the difference between trying to hide excess supply in the corners or rushing to stock shelves.

Physical Count:
Retailers thoroughly count every product within their store or warehouse, typically done when the establishment is closed, and usually completed at least once yearly. Employees manually scan or track each item, comparing the count against inventory records in the retail POS system to identify discrepancies. This method ensures comprehensive accuracy but requires significant time and resources.
Cycle Count:
Cycle counts involve counting specific sections or areas within the store or warehouse throughout the year, even during regular operating hours. This approach offers insights into the daily performance of product categories or sections, with seasonal products sometimes influencing priorities. Retailers using comprehensive inventory POS management systems can efficiently reconcile their numbers using the rollback function within the retail software after completing cycle counts.

The frequency and importance of inventory counts vary by industry. Some businesses may only need to conduct counts a few times a year. Others dealing with regulated goods may require, at minimum, weekly counts to ensure compliance with federal regulations.

Pro Tip:

Businesses should conduct inventory counts at least twice yearly, with each retailer determining the necessary cycles, such as once at the end or start of the year. This practice enables businesses to close the books with accurate inventory values.

Creating Purchase Orders Using Inventory Management POS Systems

Creating purchase orders that are accurate and timely is necessary to maintain a consistent flow of merchandise for your retail business. They can be time-consuming to develop when a retailer does not use a modern point of sale and inventory management system.

There are many ways to create purchase orders to replenish inventory. The manual or scan methods above can work fine. However, a retailer can also build on the scan method by using additional technology.

Here are the four primary ways a retailer might create a purchase order:

Manually tabbing and browsing through the product grid of an inventory management software and within the program will likely be tools that allow the retailer to build a PO from the vendor’s product catalog.
Physically walking the floor space of the retail establishment and visually looking for low item counts or empty spaces, then scanning the barcode with a handheld inventory device to either send to a central retail system or create a record in the device to upload later.
Using retail software or programs that actively monitor product counts as they come into and are sold through the point of sale software, the data is sent to the store’s retail system, where it automatically updates internally.
Using more advanced retail management software, a retailer can set minimum/maximum inventory levels and receive notifications to alert them of inventory needs. With advanced retail systems, options are available to set up auto-ordering directly from the vendor’s catalog for fast moving products to ensure shelves stay stocked.

A retailer using integrated software to manage her products

Pro Tip:

Save time when receiving products that might still need to be created in your POS system database by creating new products on-the-fly when you receive them. Scan and update your system based on vendor/supplier catalogs within your point of sale.

Transferring Inventory Between Store Locations or from Warehouses

While it is not creating a purchase order or using pre-distribution shipping, retailers with multiple locations and/or a warehouse often move inventory across stores and locations.

These inventory adjustments could be necessary due to shrink/loss, damaged products, store volume, upcoming sales or promotions, etc.

When this is the case, the retailer would determine what products are on hand and their current stock levels. Simplifying this process would be if the retailer’s system has a 3-D product matrix, allowing them to more easily browse their merchandise based on product size, color, and style.

For the reverse reason, a retailer may want to move merchandise back into the warehouse from the store. This is a unique case and usually would be solved with a clearance sale, store discounts, or promotional opportunities.

Reasons for sending products back can include:

Discount sales and in-store promotions didn’t clear the desired quantity
The product is too valuable to discount but only sells seasonally
May need to be re-sorted at the warehouse and distributed elsewhere
Retailer drew too many units and has excess that is taking up floor space

Explore: Utilizing the Made4net Integration to Optimize Distribution

Learn More About Better Inventory Practices and Point of Sale Optimization

While some of these tips and insights may seem obvious, retailers should remember simple methods when accounting for inventory control.

Becoming lax with inventory, neglecting supply levels, or failing to actively monitor items within your business at any given time can have far-reaching consequences, severely hindering or even outright shutting down operations.

However, more precise control is easy when a retailer employs simple inventory counts on regular schedules. Pair that with the right point of sale, inventory management software, and mobile scanning devices, and it almost feels like it automates itself.

Be sure to visit our Learning Center for the latest educational content and more on inventory management.

Learning Center: Inventory

Best Practices for Inventory Management for Small to Medium Retailers

Learn how to save time and stay stocked from purchase orders to receiving, store transfers to physical inventory counts.

Optimizing Inventory Receiving and Incoming Count Accuracy

Counting the Physical Inventory in your Store(s) and Warehouse

Physical Count:

Cycle Count:

Pro Tip:

Creating Purchase Orders Using Inventory Management POS Systems

Pro Tip:

Transferring Inventory Between Store Locations or from Warehouses

Learn More About Better Inventory Practices and Point of Sale Optimization

Retail Resources You May Be Interested In…

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Template vs. Custom-Built eCommerce Websites for Retailers

5 Benefits of Integrating Accounting Software with Your POS System

About Celerant

Learning Center

Partners

Best Practices for Inventory Management for Small to Medium Retailers

Learn how to save time and stay stocked from purchase orders to receiving, store transfers to physical inventory counts.

Optimizing Inventory Receiving and Incoming Count Accuracy

Counting the Physical Inventory in your Store(s) and Warehouse

Creating Purchase Orders Using Inventory Management POS Systems

Transferring Inventory Between Store Locations or from Warehouses

Learn More About Better Inventory Practices and Point of Sale Optimization

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Retail Resources You May Be Interested In…

SGE Is Changing the Way Your Website Ranks on Search: Here’s What Retailers Can Do

Template vs. Custom-Built eCommerce Websites for Retailers

5 Benefits of Integrating Accounting Software with Your POS System

About Celerant

Learning Center

Partners