Thank you for joining us in part two of this blog series. If you haven’t read Managing Inventory: Tips for Keeping Your Stock Balanced and Profitable (Part 1) yet, be sure to do that first.
Picking up where we left off, let’s dive into the 4 types of inventory management.
What are the 4 types of inventory management?
The four types of inventory management are perpetual inventory management, periodic inventory management, ABC inventory management, and just-in-time (JIT) inventory management. Each of these methods has advantages and disadvantages, and the best approach will depend on your business needs and goals.
Perpetual
Perpetual inventory management is a system in which inventory levels are tracked in real-time, typically using inventory management software. This allows retailers to have an up-to-date view of their inventory levels at all times and make adjustments as needed to ensure that they always have enough stock on hand.
This approach is particularly useful for retailers with high sales volumes and a large number of SKUs.
Periodic
Periodic inventory management, on the other hand, involves manually counting inventory at regular intervals, such as daily, weekly, or monthly.
This can be a more time-consuming approach, but it can be effective for retailers with smaller inventories or lower sales volumes. Periodic inventory management may also be a good option for retailers with limited technology resources.
ABC
ABC inventory management is a system in which inventory is classified into three categories: A, B, and C.
- Category A items are high-value items that make up a small percentage of total inventory but generate a large percentage of revenue
- Category B items are moderate-value items that make up a moderate percentage of total inventory and revenue
- Category C items are low-value items that make up a large percentage of total inventory but generate a small percentage of revenue
By focusing on managing the inventory for category A items more closely, retailers can ensure that they always have enough of these high-value items on hand.
Just-in-time (JIT)
Just-in-time (JIT) inventory management is a system in which inventory is ordered and received only when it is needed for production or sales. This approach can be effective in minimising waste and excess inventory, but it requires careful planning and coordination with suppliers.
JIT inventory management may be particularly useful for retailers with limited storage space or a high volume of products with short shelf lives. However, it also carries a higher risk of stockouts if suppliers are unable to deliver inventory on time.
What inventory method is best?
There is no one-size-fits-all answer to this question, as the best inventory method will depend on your business needs and goals. However, many retailers find that a combination of perpetual and JIT can be effective in balancing inventory levels and minimising waste.
It’s important to regularly analyse your inventory data and adjust your approach as needed to ensure that you’re managing inventory effectively.
Managing your inventory can be a breeze with the right approach
Managing inventory is a critical aspect of running a successful retail business. By keeping your stock balanced and profitable, you can ensure that you always have enough inventory to meet customer demand without overspending on excess inventory.
By taking the time to manage your inventory effectively, you can ensure that you have the right products in stock when your customers want them, which can lead to increased sales and customer loyalty.