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Optimizing inventory cycle counting: 5 tips for every retailer

There is one fundamental concept that every retailer with physical stores is clear about: every customer who enters the store wants to find the products they are looking for. To do this, retailers orchestrate myriad activities, both inside and outside the store, intending to present the right product in the optimal quantity in each instance. On the one hand, knowing the number of available units of each product in a store is the starting point for effectively offering it to consumers. On the other hand, it will lead to the store’s replenishment management process. Unfortunately, the retail world’s speed makes this challenge increasingly complex.

Although stock-outs in physical stores average 8%, consumers are becoming less tolerant of an eventual stock-out, especially if they have been to a store in person to make purchases. The growth of online commerce and hyperconnectivity have empowered shoppers, who expect faster and more accurate responses. These demands are exacerbated by the new modalities of click&collect or buy online pickup in store (BOPIS). Today more than ever, inventory accuracy and management are critical for customer satisfaction.

With all the above, it is surprising that GS1 US studies indicate that the average U.S. retail operation has an inventory accuracy of only 63%. These results urgently call for the optimization of cyclical stock counting processes that allow to obtain and maintain greater accuracy of the inventory available in each store, and in turn, feed a proper replenishment process. Here are 5 tips that every retailer can follow to optimize their internal inventory counting processes.

Consider engaging your own associates

Some retailers choose to hire third-parties services to carry out inventory counts on a cyclical, semi-annual, or annual basis. However, it is worth stopping to validate whether performing the process with in-store personnel would be more effective. Unlike internal associates, external personnel is unfamiliar with your products, which can slow down inventory counts or lead to inaccuracies, reducing efficiency and increasing costs. On the other hand, by incorporating your own staff into the inventory counting process, you empower them with new responsibilities, merchandise handling, and a clear understanding of the organization’s protocols.

Use digital systems

Many retailers have adopted new platforms to optimize and digitize their processes. However, studies show that 43% of small and medium-sized companies in the United States still do not track inventory or use a manual system. Technology tools have deepened in all industries, and retail inventory counting is no exception. Digitizing cyclic counting reduces human error, provides real-time results, and allows to consolidate data effectively and securely. Today there are multiple ways available that will contribute to the daily operation of your stores through tools that digitize processes and results.

Efficiently segment the counting

Cyclic inventory count allows a healthy control without stock-outs or overstock surprises. The ultimate goal is to completely corroborate all the merchandise in each store, but this task involves staff time, night work, or closing the store. To reduce the strain on the store, the cycle count can be segmented efficiently, avoiding sweeping the entire store in one instance. For example, you can define counting by aisle, store area, or product category and schedule it so that one section is checked each week. The resources required on each occasion are diluted by dividing the products into smaller groups, making the task less strenuous for everyone involved. Once all segments are counted, all merchandise will have been controlled, obtaining the same result but avoiding the intensive use of resources.

Prioritize according to the needs of each store

As the name implies, a fundamental part of cyclic counting is its periodicity. The retail world’s speed brings challenges, such as constant product changes, promotions, seasonality, and must-have products. In addition, each store has its own reality and needs depending on the segment, geographic area, and climate, among others. This implies that the inventory counting process should be flexible enough to incorporate these characteristics in its programming and prioritization. Each store should have a prioritization coherent with its own product assortment, considering the high seasonality, image changes, or other individual urgencies.

Always analyze the results

Once again, it is emphasized that what you don’t measure, you can’t improve. Cycle counting inventory is vital to measure. Then, analysis of the results will be the basis for identifying improvement opportunities and making intelligent decisions. The information will maintain inventory accuracy, highlighting deviations to available stock, exceptional situations, and trends. With digital tools, other metrics can be easily obtained, such as productivity, audit accuracy, and compliance percentage, among others, while giving visibility to store, zone, and central office managers.

At Frogmi, we know that inventory management is a constant challenge for every retailer. In our experience, maintaining an optimal cycle count greatly supports inventory control and management to achieve high on-shelf availability and have the right products at the right time and place. Some leading-edge retailers are already investing in technology solutions to streamline in-store execution at the product level to maintain inventory accuracy and go a step further with shelf availability management. Finally, inventory is not only the most significant investment for a retailer, but its management is critical to driving sales, loyalty and delivering the best customer experience.

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