How to optimise your inventory management if you are a fashion brand
Good inventory management is critical both for the organisation and for providing a great customer experience
Inventory management is an essential part of a fashion company's operations, especially in retail. In fact, every company needs to ensure it has the right products in stock at all times, in particular in the case of limited-edition or seasonal items, as it can be difficult to predict demand and order accordingly.
What is inventory management?
Inventory management is the process of overseeing and organising physical products, order management, and inventory storage. It involves tracking stock levels, and order numbers, processing orders, updating order status, managing returns, managing inventory storage locations, and more.
Simply put, it helps businesses identify which and how many goods to order and when, avoid stock-outs, and streamline order processing and order tracking. In this way, companies can improve order accuracy, thus improving customer service with faster order fulfilment times. Moreover, inventory management helps with analysing order trends and forecasting demand, which can lead to improved customer satisfaction and better pricing strategies.
But proper inventory management also brings several direct economical benefits. In fact, while a shortage of goods prevents customer orders from being met and generates lost revenue, excess inventory represents a cost. In this regard, one metric that tells us if we have good inventory management is inventory turnover, or how often stock is sold in a given period. Low stock turnover means unsold and therefore costs.
Main benefits of good inventory management:
- Reduced order processing costs: Streamlined order processing and order tracking can decrease order processing costs.
- Improved order accuracy: By properly monitoring stock levels, order accuracy will be improved, resulting in better customer service.
- Increased inventory turnover: Good inventory management practices help companies reduce excess inventory and increase stock turnover rate, thus increasing profit margins.
- Enhanced pricing strategies: Good inventory management allows businesses to analyse order trends and forecast demand in order to better price their products.
- More accurate forecasting for better order planning: By understanding order trends, businesses can more accurately forecast orders to order the right number of products.
- Improved cash flow: By understanding order trends, businesses can better manage order fulfilment and reduce inventory storage costs.
- Satisfied customers: By ordering the right number of products, companies can improve order accuracy and order fulfilment, resulting in better customer service and higher customer satisfaction.
Main consequences of poor inventory management
Poor inventory management can have disastrous effects on a fashion company.
It can lead to order delays, order cancellations, product shortages, excess inventory, or stock-outs.
This not only impacts order fulfilment and customer service levels but also affects the bottom line with lost sales opportunities.
How to improve inventory management
There are several ways fashion businesses can improve their inventory management. The most common ones are:
- Utilising cloud-based order management systems: a cloud-based inventory management system can provide an efficient way to manage large inventories with multiple warehouses in different locations. It can also provide better visibility in order processing, inventory levels, and order status. In fact, cloud order and inventory systems allow companies to track stock levels in real-time and order the right amount of goods. As we have seen, this helps businesses save on order costs and optimise order fulfilment times.
- Adopting order optimisation strategies: Businesses can use order optimisation strategies such as order batching or order consolidation to reduce order costs and increase stock turnover rate.
- Implementing Just-in-Time systems: Just-in-time systems allow businesses to order the right amount of stock when it is needed, reducing excess inventory and order costs.
- Introducing automated order tracking: Automated order tracking can help brands better understand order trends and demand forecasts to better manage inventory storage costs.
- Utilising warehouse management software: Warehouse management software allows businesses to better manage order fulfilment, inventory storage, and order tracking.
- Product traceability: By using product traceability, companies can track order histories and order status to better manage order fulfilment. This is possible by equipping products with their own IDs that facilitate tracking. However, in doing so, companies must pay close attention to security and data protection regulations.
How to improve inventory management
What is a product ID?
A product ID or product identifier is a unique code assigned to each product. It is helpful in tracking order histories and order status, allowing companies to better manage order fulfilment. Indeed, product IDs provide information about a product's origin and destination, thus making it easier to deliver the products on time and in the right order.
Product IDs are usually generated by the inventory management system and can be printed on product labels or order documents. However, today, digital product IDs -such as QR codes- are becoming increasingly popular.
The value of traceability for transparency
In addition to facilitating inventory, product IDs have another value: they give consumers transparency.
The growing interest in sustainability is driving consumers to want to know more about the origin of the materials, production processes, or the company's social responsibility. Through product IDs, brands can give customers access to content, data and information about these topics.
This same system is also useful in giving consumers reassurance that the items they are buying, especially luxury ones, are original and not counterfeit. This is applicable to both brand-new and second-hand products.
In this way, companies can extend the value of their investment in Product IDs, using them as a tool to increase customer engagement and brand reputation.
For it to adequately fulfil its role of a communication channel, product ID must be not only efficient but also secure, so that both corporate and consumer data are properly managed. Certainly, this is something that companies could address at a later stage. However, even when a company decides to have IDs just for inventory management purposes, it is preferable to start from the beginning with a solution that can support secondary purposes and, most of all, that can provide data security.
To learn more about how to turn items into secure connected products, visit Certilogo's website.