CURRENT
PRACTICES IN RETAIL
INVENTORY
MANAGEMENT
Gaurav Pandey
33
Procedures employed by different retail establishments were found to
range from informal mechanisms employing visual checks and
elementary documentation, to computer-based
systems for tracking purchases and sales, and for supporting re-ordering decisions and overall inventory control.
Improved systems result in fewer ad-hoc decisions and fire-fighting by the owner-manager.
Another is the lack of awareness of the various options available to retail
organizations as they seek to improve the efficiency and effectiveness of their
inventory management and control procedures.
There is a lack of understanding of the costs and benefits of these options,
and of what needs to be done to move to the next level of sophistication.
The study strongly suggests that there is a need for training retailers
on inventory management issues. Further
research needs to be conducted to understand and document the practices, problems, and needs of
different segments of the retail and wholesale sector. Training material needs
to be developed which, through case histories of successful (and
failed) implementations of inventory management and control systems,
illustrates the options available to
retailers for improving their operations.This was particularly valuable in
cases where the store did not follow formal, organized, and well-defined
inventory control procedures. The third objective of this phase was to develop
and test a questionnaire which would serve as a research instrument during the second
phase of the study.
Sales & Sales Documentation:
Sales are seasonal in nature. They are typically higher during winter months
(October to December); on Thursdays and on Saturdays during a typical week and
between 5 and 8 p.m.on a typical day. On average there are over a thousand
business transactions a day. Only a few of these are on credit. All sales are documented
in cash registers. There are four automated cash registers which maintain daily
sales records.
Inventory Reordering
& Recording: The process of reordering a product initiates at the salesman
level. On finding a shelf partially depleted, the salesman checks the inventory
for that product in the stock room. If there is nothing stored, he writes a
purchase order which is handed over to the department head. The department head
accumulates all such orders from his department and gives them to the store
purchaser. The store purchaser groups all purchase orders received from various
departments into 'Store' and 'Market' purchases. Store purchases are conducted via telephone
and are delivered at the store by the manufacturer, while market purchases are
made by a market purchaser who is always accompanied by one of the directors.
Inventory Process: Purchase
documentation is handled by the accounts staff. When a purchase consignment
arrives at the store, it is checked against the invoice. Supplies received from
local suppliers are returned if found damaged, but imported items or those.
Inventory Checking: Store wide inventory checking takes place once
a year but inventory of high cost products is checked regularly inventory
Control . Sometimes the store is stuck with a product as a result of changes in
fashions and trends (especially in the dresses and cloth department). The
placement and display of such slow moving items are improved in order to
attract customers. There is, however, no regular procedure to monitor the
volume of sales of a particular product. The owner believes that formal organized
inventory control management system would streamline the process and clean up the mess in inventory
management". He expects that an improved system will speed up the sales
transaction, improve store image and even increase revenue. Computers have been bought for streamlining the store
operations, but have not yet been installed.
INVENTORY MANAGEMENT: The
owner considers checking purchases and
performance of salesmen to be the key strategic control issues. A major
obstacle faced by the retailer is the effort required to prepare for switching over to the new system. Coding
systems have to be developed for organizing the various product items being
handled; prices and other data needs to entered. Store
personnel need to be trained to understand the new procedures and to
maintain the new system. Other problems encountered are due to the general lack
of experience in developing software (both within the retail organization and
also, to some extent, among software developers).
A more general obstacle is the
lack of awareness of the various options available to retail organizations as
they seek to improve the efficiency and effectiveness of their inventory management and control procedures.
The costs and benefits of these options are unclear, and there is a lack of
understanding of what needs to be done to move to the next level of sophistication. There is even less
awareness of how information technology is revolutionizing retailing in the
economically-developed countries, and the possibilities which are opened up by
the use of these technologies .
The study strongly point towards the need for more training. Given the
size of the retail sector in the economy, the impact of improved systems can be
wide-ranging. Further research needs to be conducted to understand and document
the practices, obstacles, and aspirations of different segments of the retail
and wholesale sector. Based on this research teaching material needs to be
developed which, in simple language and illustrated with easy-to-understand
case histories, explains the options available to retailers for improving their
operations.
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