4 Tips for Effective Inventory Management

Jun 30, 2012 2:00 AM  By

Inventory management is a pain point that plagues many retailers. Without an effective strategy, companies can make critical mistakes: tie up capital in excess inventory, create picking errors in the warehouse, and even miss sales opportunities due to out-of-stock products. Here are four tips to help retailers develop an inventory plan that works.

Make a plan, and then execute
Inventory management is a continuous, concentrated effort – and a process that shouldn’t be handled solely at the operations level. A successful inventory plan should also involve your marketing, catalog, ecommerce, and merchandising departments.

By managing your inventory against a master promotional calendar, everyone wins: your purchasing team understands when and how much product to buy, your fulfillment provider knows when to prepare additional warehouse space, and your contact center staff can anticipate increased call volume.

Add previous years’ sales forecasts to your inventory calendar to be even more prepared for seasonal spikes in demand.

Use multiple vendors
Inventory management also means vendor management. If you have a high-selling item that’s difficult to keep in stock or are planning a promotion that will significantly increase demand, it often makes sense to commission a second vendor for the product as a back-up plan. This helps prevent long lead times and out-of-stocks when issues arise with the primary vendor or inventory doesn’t arrive at the warehouse at all.

Consistent, constant communication
A good relationship with your vendors is crucial to your company’s success – especially if you outsource any part of your retail operations. Your fulfillment provider becomes your brand in the eyes of the customer, so it’s important that they understand your plans for your inventory as well as you do.


This means constant communication of your promotional plans, product information, and upcoming releases. Every retailer wants a flexible, trusted fulfillment provider – but a retailer should also be flexible and trusting in order to make the relationship work seamlessly.

Create compliance policies
Standard operating procedures are critical to making your day-to-day warehouse operations a uniform process. Develop policies that vendors, merchandisers, and fulfillment staff adhere to; that way, your products will be shipped, received, stocked, and picked efficiently and accurately without upsetting your inventory count. This can include shipping guides, product specification sheets, packaging and stock instructions, billing guidelines, and so on.

For example: If you sell a product in packages of five, it’s critical to let your order fulfillment provider’s receiving staff know so they don’t spend precious time breaking down the items into individual units, only to have the pick and pack staff re-kit the items before shipment. When you have guidelines in place, you can assure that your inventory management system is reflecting the most up-to-date information and can react with confidence.

Steve Warren is vice president, business development at outsourced order fulfillment provider Fifth Gear.