Let’s discuss the different types of retail inventory, provide specific examples, and offer strategies to address each type. We’ll also touch on inventory segmentation methods and how they can be used to improve inventory management. As always, a good retail supply chain strategy and merchandise planning system can greatly improve retailers’ bottom lines with improved inventory management. Here are the typical types of retail inventory that companies manage:
1. Raw Materials Inventory
Raw materials inventory is the stock of materials that a retailer uses to create its products. Examples of raw materials include fabric for clothing, leather for shoes, and wood for furniture. Raw materials inventory is important because it allows retailers to control the quality of their products and ensure that they have the necessary materials to create their products.
To address raw materials inventory, retailers can implement just-in-time (JIT) inventory management. JIT inventory management involves ordering materials only when they are needed, which helps to minimize excess inventory and reduce costs.
2. Work in Progress Inventory
Work in progress (WIP) inventory refers to items that are in the process of being manufactured or assembled but are not yet complete. Examples of WIP inventory include unfinished clothing, partially assembled furniture, and half-finished electronics.
To address WIP inventory, retailers can implement lean manufacturing principles. This involves identifying and eliminating waste in the manufacturing process, which can help to reduce lead times and improve product quality.
3.Finished Goods Inventory
Finished goods inventory refers to items that are ready to be sold to customers. Examples of finished goods inventory include clothing that is ready to be put on store shelves, furniture that is ready for delivery, and electronics that are packaged and ready for sale.
To address finished goods inventory, retailers can implement demand forecasting and retail planning. By accurately predicting demand for their products, retailers can avoid excess inventory and ensure that they have enough stock to meet customer demand.
4. Safety Stock Inventory
Safety stock inventory refers to the stock that retailers keep on hand to meet unexpected demand or supply chain disruptions. Examples of safety stock inventory include additional inventory stored in case of a sudden surge in demand or a delay in receiving raw materials.
To address safety stock inventory, retailers can implement inventory segmentation methods such as ABC analysis. ABC analysis involves categorizing inventory based on its importance to the business. High-value items are given more attention and often have higher safety stock levels, while lower-value items may have lower safety stock levels.
TL;DR – understanding the different types of retail inventory is critical for retailers who want to improve their inventory management practices. By addressing raw materials, work in progress, finished goods, and safety stock inventory, retailers can minimize excess inventory, reduce costs, and ensure that they have enough stock to meet customer demand. By implementing inventory segmentation methods such as ABC analysis, retailers can improve their inventory management practices even further. As a Millennial retail professional, I encourage all retailers to take a proactive approach to inventory management and stay ahead of the curve in this ever-changing industry.
