By Jude 
Want to say goodbye to dead stock and stockouts?
Every retailer has been there at one point or another. You start the day with 58% of businesses running an inventory accuracy below 80% and an average of $142,000 worth of excess stock you never wanted in the first place.
The reality:
The majority of retailers don’t know what they have in stock. If they do, they’re either massively overstocked with things nobody wants to buy or they run out of your best sellers at the worst possible time.
But it doesn’t have to be this way…
Retailers that have experienced consistent growth over the last 10 years know that inventory optimization software is not a luxury, but rather a competitive necessity.
Leading retailers use inventory optimization software to gain complete visibility over stock levels. These solutions are using modern data analytics and machine learning algorithms to help you identify slow-moving stock, understand replenishment needs, and use data to know exactly how much to order and when.
What you’ll discover:
- Why Inventory Optimization Software Is Critical For Retailers
- Essential Features That Actually Move The Needle
- How To Choose The Right Solution For Your Business
- Implementation Strategies That Work
Why Inventory Optimization Software Is Critical For Retailers
Retail has never been more competitive or more data-driven than it is now. With inventory management software markets predicted to grow at a 9.6% CAGR and reach $4.79 billion by 2032, forward-thinking retailers are spending millions to keep their inventory optimized.
Here’s why:
Traditional methods of inventory management are no longer effective. Spreadsheets, manual inventory checks, and intuition create errors which can cost you a lot of money in the long run.
Retailers that are still profitable today and will be in the future use advanced inventory optimization software like Netstock to automate their replenishment planning and demand forecasting. It’s not just about having the latest tech, it’s about survival.
Imagine this: Your competitor can forecast demand 95% accurately while your old way of forecasting can only get it 60% right. Who do you think is going to have better cash flow and customer satisfaction?
Reduce Carrying Costs
You don’t want your capital stuck in inventory that nobody wants. Inventory optimization software allows you to understand which products are not selling as you expect.
These solutions automate the process of analyzing sales data, lead times, and seasonality to recommend accurate inventory levels. This means you can make necessary changes to slow-selling products and keep appropriate stock levels to meet customer demands.
Eliminate Stockouts
One of the most stressful things as a retailer is running out of popular items. Not only do you lose the immediate sale, but your customer might never return. It’s costly and it’s a hit on your reputation.
Inventory optimization software takes the guesswork out of determining which items need to be restocked and when they need to be reordered.
The best solutions will use predictive analytics to not only track patterns in historical sales data, but also accurately forecast demand spikes before they occur.
Improve Cash Flow
If you have better inventory management, you will experience a better cash flow.
Inventory that is not over-ordered (slow-selling) and reduced stockouts (popular items) means more working capital. You have more freedom with your cash and can spend that on other business opportunities, advertising or new product lines.
Essential Features That Actually Move The Needle
Not all inventory optimization software is created equal. You need a solution with features that make a tangible difference to your retail operations and profits.
Demand Forecasting
This is where most of the work happens. High quality demand forecasting algorithms use historical sales, seasonality, and market trends to predict future demand with impressive accuracy.
Look for software that can adjust and consider complex scenarios like promotions, markdowns, and new product introductions. The best software will also use sales results to continuously learn and improve forecasting models.
Automated Replenishment
Manual reordering is not only time-consuming, it’s very easy to make errors. Automated replenishment modules take the hard work and calculations out of the when and how much to reorder process.
Inventory optimization software tracks your inventory levels in real-time and automatically places purchase orders when inventory levels drop to a preset reorder level.
Multi-Location Management
Managing more than one retail location or warehouse is common. You need software that can optimize inventory across multiple sites. This includes recommendations to transfer stock between locations in order to balance inventory.
ABC Analysis and Product Classification
Inventory is rarely balanced across a number of different products. ABC analysis and product classification is used to automate the process of categorizing products into A, B, or C-level inventory.
ABC analysis can help retailers easily identify where to apply tighter controls and which products should be given the most attention. A-items are usually high revenue products that require close monitoring and tight controls, while C-items have a low revenue that can be managed with simple processes.
Safety Stock Optimization
Simple methods of calculating safety stock usually result in too much or not enough buffer stock to cover variations in sales. Optimization software is built to accurately calculate optimal safety stock levels based on historical demand variation and lead time uncertainty.
This approach allows for minimal stockouts while not wasting excess capital on unnecessary safety stock.
How To Choose The Right Solution For Your Business
Selecting the wrong inventory optimization software can be worse than not having any software. Follow these steps to make the right choice.
Assess Your Current Pain Points
Ask yourself and your team what is the biggest issue in terms of inventory management. Is it too much stock, stockouts, manual processes or poor forecasting?
Different inventory optimization solutions excel in different areas, so knowing your most painful issues will help you narrow down the options.
Consider Integration Capabilities
Your inventory software needs to integrate with your current ERP, POS, E-commerce platform, and accounting software. Look for inventory solutions that are API enabled and have experience integrating with your tech stack.
Evaluate Scalability
Choose software that can scale as your business grows. Tools that work for a single store may not work for a multi-location business.
Review Support and Training
The best software is useless if your employees don’t know how to use it. Evaluate potential vendors based on the quality of their training and support.
Implementation Strategies That Work
A good piece of software is only half the battle. You also need to implement inventory optimization software properly.
Start With Clean Data
Garbage in, garbage out. Make sure that your existing inventory data is clean and up to date before implementing any optimization software.
This means accurate product descriptions, categorizations, and trusted sales history. Your new software will likely have a better chance of success if the data being put in is correct.
Begin With Pilot Programs
It’s rare that any business can optimize everything at once. Choose a small selection of products and or locations to try the new software and processes.
This lets you work out the bugs and take the time to understand the new system without risking the entire business on an unknown solution.
Train Your Team Thoroughly
It’s important that your employees understand how to use the software and have a good idea of why the software is making recommendations.
This builds trust with the software and ensures better adoption of the new solution.
Wrapping It Up
Inventory optimization software is not a luxury, it’s a competitive requirement for retailers to stay in the game. With market growth over 8% and tangible ROI for businesses that implement these software solutions correctly, there is no longer a question on whether you can afford inventory optimization software.
The only question is can you afford to not have it.
Begin by recognizing your biggest inventory challenges, research the solutions available and tackle one process at a time with the right training and support. The retailers who are able to master the skills of inventory optimization now will be those reaping the rewards in the future.