In 2022, US businesses faced the highest-ever increase in logistics costs, with a staggering jump of 19.6%. Carrying costs, a major challenge in inventory management, contributed to more than half of these additional expenses. If you are still using basic inventory tracking methods, you are likely managing fine for now. However, as your business grows, you will need a more robust system to keep pace with demand and maintain competitiveness. This is where real-time inventory management becomes essential. It allows you to see what products are selling at the moment, fulfill orders faster, and keep customers satisfied regardless of which channels they use to shop.
1. Consolidate Your Inventory System
While elementary POS systems can handle store stock, they often falter with multi-channel operations spanning physical shops, online stores, and storage facilities. This often compels businesses to perform daily manual counts to ensure online inventory remains accurate. The remedy is a POS system that integrates effortlessly with your e-commerce platform, centralizing all inventory into one system.
Steps for implementation:
- Transfer existing inventory data into a unified platform.
- Ensure your e-commerce and POS systems operate on the same platform.
- Set up inventory protocols for each store or stockroom.
- Establish clear guidelines for stock movement.
- Configure automatic updates across all sales channels.
When all inventory data is centralized, businesses can operate more efficiently and reduce the likelihood of stock discrepancies. For example, Danish tea store TeSelskabet needed a sophisticated inventory management system to track different ingredients in its tea blends, create categories, and manage the product catalog of both its online and physical stores. By using Shopify POS, Shopify Payments, and Shopify-certified apps, TeSelskabet could share its product categories, tags, and bundles bi-directionally between its POS system and e-commerce platform, allowing for automatic inventory updates and avoiding overselling. This integration led to a 25% increase in sales.
2. Use Real-Time Data Synchronization
Once your centralized inventory system is operational, ensuring seamless data syncing across all channels becomes imperative. Real-time data synchronization makes it possible to update inventory instantly across multiple platforms, eliminating instances of over-selling or stockouts. The following steps will help you achieve seamless data integration:
- Enable instant updates for newly arrived stock.
- Set up automatic adjustments for sales and returns.
- Schedule regular automated checks to verify continuous synchronization.
Real-time data syncing ensures that both store employees and customers have access to the most accurate stock information. For example, Shopify synchronizes key metrics in real-time, including sales transactions across channels, product returns and exchanges, inventory restocks, shipments, and stock transfers between locations. When products are sold or returned, the system updates inventory quantities automatically, so no manual intervention is required. This helps minimize errors and ensures product availability is accurate whether a customer is shopping online or in-store.
Physical inventory counts are still essential for preventing shrinkage and maintaining reliable reports, but Shopify’s real-time syncing helps reduce the frequency of these counts. The system supports both full and cycle counts, allows for quick reconciliation when there are discrepancies, and maintains a history of quantity adjustments for audit purposes.
3. Employ Scanning and Tracking Technology
The distinction between profitable operations and cost inefficiencies often lies in how swiftly and accurately inventory movement is tracked. Implementing scanning and tracking technology can help manage stock efficiently across multiple locations. Technologies like barcodes, RFID tags, QR codes, and sensors can streamline inventory management.
Barcodes assist in quick product identification and tracking in stores and warehouses. They contain information like SKUs, prices, and descriptions, which can be instantly accessed when scanned. This method automates inventory updates during the receiving and selling processes, removes counting errors, and keeps physical and digital stock levels synchronized. For example, barcodes help prevent stockouts through low-stock alerts and reorder notifications.
RFID tags offer simultaneous scanning of multiple items without needing direct line of sight. They are more durable, offer enhanced security through encrypted data, and expedite inventory counts. QR codes can store more extensive data and can even be read by smartphones. These codes update centralized inventory databases in real-time and facilitate secure transactions without storing sensitive information. Finally, IoT sensors track inventory conditions and movement. Smart shelves equipped with weight sensors can detect low stock and trigger reorder alerts, while temperature sensors monitor conditions for perishables and send alerts as needed.
4. Activate Inventory Alerts and Automation
Manually tracking inventory across various channels poses risks and consumes valuable time. Implementing smart alerts and automation can help prevent stockouts, minimize errors, and allow your team to focus more on business operations and customer service. Shopify Flow, for instance, allows for the creation of custom workflows that trigger specific actions based on inventory conditions.
This degree of automation ensures that essential tasks are performed without constant manual intervention. For example, you could create a workflow to monitor inventory levels across different locations, send Slack notifications when stock drops below a set threshold, generate purchase order drafts, and email suppliers with order details automatically. This level of efficiency allows you to maintain optimal stock levels and keep essential items in stock at all times.
For example, a clothing store looking to maintain stock levels for its bestselling t-shirts could use Shopify Flow to set up an automatic alert and reorder workflow. If any t-shirt variant drops below 20 units, the system would notify the purchasing team via Slack, generate a draft purchase order for additional units, and email the supplier with the specific SKUs needed. This setup prevents stockouts and ensures a consistent supply of popular products.
5. Study Trends and Predict Future Needs
Effective real-time inventory management goes beyond tracking current stock levels; it involves using data to make informed decisions about future inventory requirements. A unified system allows businesses to leverage both historical data and real-time analytics to optimize inventory planning. Shopify POS simplifies this process with built-in demand forecasting reports that suggest products for your next purchase order based on factors such as gross sales, turnover ratio, and seasonality.
Steps to take:
- Set up regular reporting cycles for critical metrics like sell-through rates, channel performance, and stock turnover.
- Configure an analytics dashboard to monitor patterns across sales channels.
- Create automatic alerts for significant trends or deviations.
- Utilize Shopify’s analytics tools to analyze detailed online and in-store sales data.
By analyzing historical trends, businesses can make more accurate forecasts about future inventory needs. This approach can significantly reduce overstocking or understocking issues. For example, regular reporting on key metrics can help identify which products may soon require reordering, or which items are likely to be in high demand during specific seasons.
6. Instruct Your Staff on the System
In 2022, US companies experienced an unprecedented surge in logistics costs, which skyrocketed by 19.6%. A significant portion of this increase was due to carrying costs, a critical issue in inventory management. If your business still relies on basic inventory tracking methods, you might be managing adequately for now. Nonetheless, as your enterprise expands, you’ll need a more sophisticated system to keep up with demand and stay competitive.
That’s where real-time inventory management becomes crucial. This technology allows you to monitor which products are selling at any given moment, enabling you to fulfill orders more quickly and keep your customers happy, no matter the shopping channel they use. With real-time data, you can identify trends and make informed decisions about stock levels, drastically reducing the risk of overselling or stockouts.
Moreover, a more advanced inventory management system can integrate with other aspects of your supply chain, ensuring smoother operations and better communication between different parts of your business. Efficient inventory management not only enhances customer satisfaction but also can lead to cost savings by minimizing unnecessary stock and reducing warehouse expenses.
In today’s fast-paced market, maintaining a competitive edge is more important than ever. Investing in real-time inventory management can provide the tools necessary to adapt to changing customer demands and improve overall efficiency, setting your business up for long-term success.
