Inventory management is an art, not a science, and is a serious challenge for even the best retailers in the world. The permutations of items and stores every week are nigh on impossible to manage without a sophisticated inventory management system. Given that a significant portion of a retailer’s capital is tied up in inventory, a retailer’s return on investment (ROI) depends critically on the ability to turn that inventory over as quickly as possible. That can be facilitated by an inventory management system that ensures that the right products are on shelf in the right stores, and that there is sufficient stock cover to support ongoing sales.

It is notoriously difficult to measure the cost of out of stocks. Not only does it result in a potentially lost sale, but it can also result in a lost customer, who will choose to take their custom elsewhere next time. But there are other more subtle consequences of out of stocks. For example, if a substitute product is bought instead, it can result in an artificially inflated average sales figure for the substituted product and an artificially understated average sales figure for the out of stock item.

Automated replenishment systems (another name for an inventory management system), which mainly utilize average weeks sales as a basis for replenishment, tend therefore to adjust the stock accordingly, resulting in insufficient stock of the original item, and surplus stock of the substituted item. This is a simplistic example, but played out over tens or hundreds of thousands of SKUs, in hundreds of stores every week, it generates inappropriate allocations of stock over time.

This is where inventory management is so important, and why inventory management software is so critical in maintaining appropriate stock levels in store. A good inventory management system can help reverse the vicious cycle (where lost sales drives lower stock, which in turn drives lower sales) into a virtuous cycle (where better allocations drive higher sales on lower stock holding). Close attention to inventory management increases sell throughs, and ultimately drives higher return on investment for all stakeholders in the supply chain.

Krunchbox is an example of a retail inventory management software application.

Krunchbox will help you understand what is selling, what is not selling, and what you could be selling more of, if you had the right stock in the right store locations, by focusing on the details of inventory management. Where am I out of stocks of my best sellers in my best stores ? And being web based, Krunchbox can sit alongside and complement your ERP and POS system, to help you derive valuable insights into better inventory management from raw retail scan data.