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5 Companies Who Best Manage Inventory [and what we have learned from them]

When 20-30% of your business budget is spent on maintaining your inventory, it’s time to take a step back and ask whether it’s being efficiently done. A recent study shows that 43% of small businesses track their inventory manually, or don’t track it at all. Inefficiencies like this can leave a lot of money on the table.

Ordering, product processing, returns and billing information impact how your inventory is managed and businesses have worked on evolving and perfecting these functions over time. Understanding the challenges the following businesses faced, and how they overcame them can help your business allocate the budget needed for efficient inventory management.

Amazon

What They Did

As a digital disruptor of the retail space, it’s no doubt that Amazon leads in inventory management. Before digitization, manual labor was needed for most of the work in the store, which was arduous and subject to human error. Doing a stock check manually took up a lot of time, and due to the limited automation, sharing information was difficult as well.

Amazon adopted robots, to do most of the work that humans do. Back in 2012, Amazon bought its own robotics development company – Amazon Robotics for $775 million. Today, they’re in the lead of automation logistics for this bold move.

What We Learned

By using technology to improve techniques, Amazon is the success story of streamlined inventory management. Even if your business can’t buy its own robotics company, you should stay updated on the latest developments and technology to include it in your own retail store. 

UPS

What They Did

Georgia-based UPS is one of the largest logistics companies on the planet. What worked for them, was simply improving their supply chain. Initially, businesses kept spare inventory in a warehouse either behind the shop or even in a separate building near the store. A lot of time was spent in going back and forth to find something a customer needs. Strategically positioning inventory to minimize space and labor costs was something that UPS did by keeping boxes and packing material close at hand. During a recent holiday season alone, the company shipped over 750 million packages.

What We Learned

Organizing your store can go a long way. Reduce the time taken to find something and bring it back by keeping the best sellers nearby. Eventually, when you deal with thousands of products and clients as UPS does, this can add up to make your store more efficient.   

FedEx

What They Did

In 1974, just three years after FedEx (then called Federal Express) began, the company was losing more than $1 million a month. This was because at that time there were several restrictions on the routes that all-cargo airlines took. Despite this, the company made a major financial investment of $11 million dollars into the business which turned the business around. A 1977 legislative change also removed the route restrictions. FedEx immediately capitalized on this to purchase Boeing 727-100s which were much larger than the aircrafts they were currently using and saved them a lot of time and inventory space.

What We Learned

Inventory management isn’t restricted to inventory alone. A lot of outside factors can affect your business. Stay updated on government rules and regulations that can affect your business and other industries you interact with. Understanding economic shifts, and the role technology and other investments can play to overcome this can help you keep your neck above the water and your business ahead of the competition. Don’t be afraid to make big decisions and investments for your business if you’re really sure it will go a long way. This is where an immediate and alternate financing option can help.

Target

What They Did

One of the biggest fears of a business, both big and small is running out of stock and having to turn customers away. The larger your store is, the more inventory you have to handle and that’s where management gets tough. With over 2000 locations across the United States, complex supply chain and huge inventory distribution across its stores, Target faced the danger of sending its customers away to competitors. The primary pain point for customers was a lack of stock, and the retail chain struggled to stay on top of its inventory. This was when they realized they have to cut down on the inventory they handle, with only limited brands for certain products. Trimming the fat, helped reduce the cases where they ran out of stock by 40%.

What We Learned

If you’re not able to monitor what you have, and how much of it you have, it’s highly probable your customers will just find someone else who can. An inventory management software can also help up to do so much. Maybe you don’t need three brands of polo shirts or four brands of frozen peas. Cut down on repetitive inventory, to make the organizing more efficient and easy.    

Tesco

What They Did

Every business owner knows that data is incredibly important. From inventory predictions to customer behavior and purchasing patterns, data can reveal so many insights about the business. While initially, data was collected using excel sheets and feedback forms on sales cycles and customer reviews, data analytics has evolved tremendously both online and offline. That’s where Tesco in the UK kicked in by taking their data analysis beyond the store, to the outside. Almost quite literally.

Tesco began collecting data on the weather, and the correlation with that to how they stocked up on inventory. The weather in the UK constantly fluctuates and this was one of the main factors that impacted customer purchases. For instance, when the meteorological report showed sunny weather, they would stock up more on food items for a barbecue, and if it was colder weather, they stocked up on cat litter for people whose pets would stay inside.

What We Learned

WIt doesn’t necessarily have to be related to the weather, but creating predictive models can help you better predict and plan your store’s stock levels. No data is insignificant or irrelevant, so think about how your customer would plan their purchases even before they enter the store. Creating buyer personas and understanding the pain points of your customers can help you narrow down which data points you may be missing out on to gauge your inventory requirements better.

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