POS Inventory Management

What is inventory management?

Inventory management means keeping enough products or materials in stock to meet demand and having them available in the correct location when they’re needed. 

For retail operations, this means ensuring every location has what it needs to serve customers without over-ordering and eating up storage space. You’ll lose sales if you don’t have enough of an in-demand product. Your customers will start shopping with your competitors, and your customer satisfaction and reviews will suffer. 

For manufacturers, it means ensuring all necessary raw materials are on hand and ready to use so the production process can go forward, as well as properly storing and tracking finished products until they’re sold. 

When thinking about inventory management, consider these key components.

• Visibility: Know what you have, and be aware of where your products are located.
• Inventory: Make an educated guess about how much of each item you’ll need to meet demand within a specific time period.
• Purchasing/replenishing: Know when stock must be purchased in order to arrive in time to meet business needs.
• Storage: Figure out how much room you have to store inventory, and send your products to an appropriate storage area if necessary.
• Analysis: Understand the data that gives insight into how to order inventory more effectively in the future.
• Multichannel tracking: Allocate inventory levels among physical locations and fulfillment centers for e-commerce orders, and shift inventory as needed.

Inventory management techniques

Business owners use several inventory management techniques to optimize inventory levels. The most basic technique is perpetual inventory management, which means counting inventory as soon as it arrives and subtracting when items are sold or lost to damage or theft. This system is often combined with demand forecasting, which uses past sales data to anticipate future demand and quantities that should be ordered. 

Some companies use just-in-time inventory management to minimize storage costs. This works well when the supply chain is consistent but can cause problems when there is a problem along the way. 

To avoid stock-outs, some businesses use safety stock inventory, where a little extra inventory over expected demand is ordered to have in reserve. Another technique used when sales of certain products are consistent over time is the reorder point formula. With this method, reordering is triggered when stock levels fall to a certain point or in advance of a high-demand period based on previous sales data.

Who needs inventory management?

Among small and midsize businesses, retailers and restaurants typically have the most need for inventory management. Retailers usually carry various products, many of which have differences in size, material and color. Keeping tabs on all these items – and making sure they’re available when customers are ready to buy – is critical to a business’s success.  

Restaurants have a somewhat different issue because their inventory includes ingredients. If one ingredient is missing, the chef can’t make a particular dish, and customers will be disappointed. The same goes for bars that serve mixed drinks. Many restaurants also have to deal with ingredient seasonality. A good inventory management system can ensure all necessary ingredients are on hand.

POS inventory management

While inventory management can be complicated and error-prone when done manually, inventory management software solutions can streamline the process significantly. In particular, small businesses can benefit from the inventory management functionality built into some POS systems.

What is a POS system?

A POS system is a combination of hardware and software that a cashier uses to process payments for sales. Although there are third-party POS systems, most POS systems are purchased directly from payment processing companies. 

POS hardware costs range from less than $100 to over $2,000, depending on the company and the components. POS software costs between less than $30 and over $280 per month, and the cost increases based on the number of registers using the software.

POS hardware typically includes a touch-screen device on a stand, credit card reader, cash drawer, receipt printer and (for retailers) a handheld scanner. 

At its most basic, POS software accepts various payment types and allows the cashier to select items being sold from a product list. It displays the items’ prices, calculates sales tax, and implements discounts, promotions and additional charges. Many modern POS software systems have more advanced capabilities, including inventory management.

How a POS system can help with inventory management

When you set up a POS system with inventory management features, you’ll need to load information about your current products and inventory into the system, including product names, descriptions, categories, supply prices, retail prices, SKU numbers, barcode numbers, quantities and suppliers. 

Every time you ring up a sale, the software will automatically adjust the items’ inventory levels. This gives you a number of advantages.

• Automated inventory tracking: This reduces the time employees need to devote to checking on stock and the need for error-prone inventory hand-counting.
• Report generation: See your sales and inventory levels by location or time period to know when to reorder or run a promotion. Valuable POS sales report insights include information on your bestsellers, your slow-moving products, your most profitable products and items that are running low.
• Quick visibility: The system allows employees to quickly see if an item is in stock, providing an easy way to monitor inventory levels and avoid stock-outs.
• Remote management: If your business has multiple locations or channels (e-commerce and brick-and-mortar), the system will allow you to see inventory levels for products in each location and channel without having to go there physically.
• Dynamic inventory management: Better information allows businesses to use inventory management techniques like just-in-time, perpetual inventory, and reorder point to minimize costs and maximize sales.

Improve your inventory management with the right POS system

Accurate, real-time inventory management is essential to keeping business running smoothly. From streamlining daily operations, to cutting inventory costs, to keeping customers happy, your inventory levels impact the success of your business in just about every way. 

Improving inventory management doesn’t have to be a burden. A good POS system with robust inventory management features can do the heavy lifting for you. Choose a system suited to your business size and inventory needs, so the status of your inventory levels is always just a few clicks away.