November 17, 2023 • 21 mins
In episode two, we share the fundamentals of mastering retail inventory management. Discover proven best practices and real-world case studies like why did Forever 21 go bankrupt? What happened to Kmart and Sears? And how does Walmart stay as one of the top retail giants?
Get ready to be educated and entertained with insights on inventory management. Subscribe to stay tuned for more!
0:00 – Teaser
0:10 – Intro
0:57 – What is Retail Inventory Management?
3:25 – Types of Retail Inventory
6:39 - What are the Benefits of Effective Retail Inventory Management?
10:31 - Best Practices for Business Owners
12:48 - Real-World Case Studies
12:57 - Forever 21: The Rise & Downfall
14:21 - Walmart vs. K-Mart: Price War in 1990s
16:30 - Why Sears
18:09 - Walmart RFIDs: Radio Frequency Identification
18:55 - Uniqlo RFID Tags and Check-out System
19:49 - Decathalon RFID Check-out System
20:03 - Amazon Go RFIDs
20:35 - Outro
Try inFlow to manage your inventory and make sure you never run out of stock:
https://www.inflowinventory.com/
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Retail inventory management isall about having what you need
to meet customer demands,but not having too much of it
that it's going to eat intoyour cash flow and your
carrying costs and all that.
Right.
So.
Hello everybody I am Jared.
Hi, I'm Melinda, and.
Welcome back to The SecretLife of Inventory.
(00:21):
This is a showwhere we talk about
everything inventory related.
And in today's episode we aregoing to be talking about
the retail space.
So anyone who's working eitherif you got a brick and mortar
or you're workingin e-commerce, doesn't matter
if you're working in retail,we're going to be talking about
all the different types ofinventory that you're going to
be dealing with, some of thethe benefits of having good
inventory management and someof the best practices that you
(00:43):
can do to get your businessrunning at an optimal speed.
We'll also be exploring somereal world examples of good and
bad inventory management,and in future episodes will
also be interviewing businessowners to learn more about
their tips and tricks.
So be sure tostay tuned for more!
So, for those who want tounderstand the basics, can you
explain to us what exactly isretail inventory management and
what does that entail?
So retail inventory managementfor the most part you're
(01:06):
dealing with two differenttypes of inventory.
So you're dealing with eitherfinished goods or you're
dealing with packing materials.
Now before we get into those Iwant to start off by saying
that there there are certainretailers who actually do
manufacture the products thatthey're that they're selling
to their customers.
Those are kind of rare cases.
It doesn't generally amanufacturers tend to,
you know, they make bigquantities of things and they
(01:26):
sell thosethings to wholesalers.
Right.
But there are certain likefor example, we have a
customer organic chocolates.
They're based out of California.
And what they do,their business model is they
have an online store and theircustomer purchases the
chocolates from that store,and then they manufacture the
chocolates and they shippedthem directly to the customer.
So someone like thatis they're a retailer,
but they're also manufacturers.
(01:46):
They have a lot of likeraw materials, a lot of other
things to to worry about,not just the finished goods and
not just the packing material.
So for this episode, we're onlygoing to be focusing on people
who are working in theretail space only.
So people who are buying,you know, buying their products
like wholesale, either from awholesaler or a distributor
or something, andthen selling those products
to their customers.
(02:06):
Right.
So when we're talking aboutfinished goods, that's what
we're talking about.
We're talking about things thatare ready to go.
They're on the shelf.
They're ready to goto the customers.
Right.
So those areyour products obviously.
And then we're talkingabout packing materials.
They're equally as important asyour finished goods.
Right.
So we're that's your boxes yourto your tissue paper
your bubble wrap.
If you're bundling sometimesyou'll have like a special
(02:27):
packaging that you'd usefor your bundling.
All that stuff is is veryimportant because ultimately if
you're selling somethingto a customer.
So if you're selling,say you're selling something
that's really fragile,you know, like a,
like a camera, for example,and you, you, you have the
great sale and yousell way more cameras than
you expected.
But you have the cameras,which is great, but you don't
have thepacking materials, right?
(02:48):
So you don't have the thespecial bubble wrap that you
use to make sure that cameragets to the customer safe
and sound, not broken.
Exactly.
5000, $10,000 dollars.
Pretty important.
Pretty important.
So it's not like you can justsend that camera off with the
packing material, right?
So then your shipment getsdelayed and you have to wait
for your packing materialto come in.
So one way or another,you're not the customers not
(03:08):
getting the camera.
Even though you havethe camera, they're still not
getting it right.
So that's why packing materialdon't sleep on packing material.
You know, that'sit's very, very important.
That's true.
Even when you're shopping.
It's not just the shirt orpants that you're buying.
It's also the bag that theshirt and pants go into that
the retailer has tokeep track of.
Yeah, absolutely.
Are there any other types ofretail inventory that people
should be aware of?
So I guess the best way tothink about it is, is breaking
(03:31):
your finished goodsdown and kind of
into different categories.
So there's five main categoriesthat you want to want to think
about when you're dealing withyour finished goods.
The first one is theready for sale.
So that's all yourstuff that's on the shelf.
It's ready to go.
Customers can buy itwhenever they want.
It's available forpurchase right now.
It's pretty obvious when you'rea brick and mortar store if
it's ready for sale, because ifit's not ready for sale,
(03:51):
it's gone.
The customer is taking itto the door.
They pick it up offthe shelf, they take it,
and then it's gone.
Right?
So it's more for e-commerce.
When something is ready forsale and someone's
purchased it, it moves intothe next category.
The second onewhich is allocated.
So it's it may be on the shelfand you may have it in your
actual facility and your inyour space, but it's actually
not really there, so to speak,because it's already been sold
(04:13):
to a customer.
So it's allocated to a sale.
Right.
So you can't sell that again.
You've got to make sure thatyou're not just looking at your
inventory and saying like, oh,I have this thing,
I can sell it.
You don't know that youreally have it.
Even if you're tracking yourinventory on, say,
a spreadsheet or I think thisentire podcast is me, just talk
poorly about spreadsheet PTSD.
(04:34):
Exactly, exactly.
Right.
So if you're if you're using aspreadsheet or manually or
whatnot and you forget to,maybe there's a lot of
different salespeople that areworking on something, and one
of them forgets to update thespreadsheet saying that they
sold this item, you seeit on the spreadsheet, oh,
I have this.
So then you sell it, then youfind out, oh no, I actually
don't have that thing.
So that's why it's reallyimportant to make sure that
(04:55):
you're labeling these things asthey go down the process,
you know, ready forsale into allocated.
And then into our next one,which is in transit.
So in transit is essentiallyall of your products that are
actually in transit.
And it's in the name obviously.
So when it's when you send itout from your facility or your
storage warehouse or whatever,you've shipped it off as it's
on the way until it gets toyour customer, you're still
liable for that thing, right?
(05:15):
That's still important to makesure that you understand that
it's out there.
It's still technically a partof your inventory, right?
Until it reachesthe customer's hands.
The sale is not complete, right.
So those are in transit.
And again, you should betracking ready for sale to
allocate it to in transit.
And then the next one,of course is actually the next
two are pretty closely related.
And those are safety stockand your seasonal.
(05:36):
So first safety stock issomething that you should
always have right.
Because things willare going to happen
inevitably in business.
We all know thatthings are going to happen.
So it's important to have likea cushion, like a backup plan.
Yeah a parachute.
You don't want to jump out ofthe plane without a parachute,
right?
So that's what he's talking.
Yes.
And your business willdie without safety.
So maybe not, but it could.
(05:58):
So it's more likely to.
We'll say that for sure.
So yeah it's very important tohave that on hand just in those
what if moments those justin case moments.
Right now seasonal isa lot like safety stock.
Except it is.
It's more for those momentsthat you can plan for.
Right.
It's not that just in case it's.
On day Black Friday.
Exactly.
Yeah.
Yeah.
Seasonal I mean so seasonalthings and can even just be
(06:19):
like if you have if you'redoing a really good demand
forecasting and you see that,oh, this time of March,
I usually sell a lot of thisparticular product, then you
can prepare for them, get someextra seasonal inventory
for that moment.
Yeah, right.
So those are, I guess, the fivemain categories of your
finished goods if you want tobreak them down further.
So now that we know what retailinventory management is,
(06:40):
what are the benefits exactlyof effective retail inventory
management I know okay.
So it just it doesn'tseem like a big deal.
Like whatever.
Like why is itso important right now?
Lots of people actually care.
Yeah.
Why should people care.
Right.
But it is important because itcan save you so much
time and money.
But, um, just retail inventorymanagement is all about having
(07:01):
what you need to meetcustomer demands, but not
having too much of it that it'sgoing to eat into your cash
flow and your carrying costsand all that.
Right?
So it's going to save you money.
Ultimately, at the end ofthe day, good retail
inventory management, first andforemost, it's going
to save you money becauseyou're going to be reducing
your carrying costs,because you're going to be
keeping just the right levelof inventory, and you're also
going to prevent yourself fromactually getting dead stock,
(07:22):
you know, and we'llget more into dead stock
in future episodes.
But for now, the TLR of it isproducts that essentially
aren't going to sell productsthat you have that just people
aren't buying anymore.
They're sitting on the shelf.
Maybe you're selling like 1 or2 a year or something,
but they're just eating upshelf space, right?
And ultimately eating up intoyour carrying costs, eating up
into your cash flow,all that stuff.
(07:43):
Right?
So you want to avoid deadstock from, you know,
sometimes you can't avoid it.
Sometimes you think something'sgoing to sell really well and
you get it.
And then just noone really wants it, right.
And then other people, you try.
Yeah.
Exactly right.
Dead stock is like it's goingto inevitably happen,
you know, like when you'rebuying something the next best
thing is going to come outand then, you know, like when a
new version of something, a newversion of a cell phone or a
(08:05):
new version of like a bag or ajack or whatever, that last
version is going tobe less desirable.
People aren't going to really.
Be chasing the new thing.
Exactly.
Only the hipsters are going tobuy that old thing, right?
So and there's only so manyhipsters out there, right?
So you got tojust like to avoid it.
You can use forecasting to kindof see what's selling to
avoid dead stock.
So you know, things like thatyou're going to save a
(08:26):
lot of time.
Ultimately that's a big one too.
I mean, time and moneyare related, but good retail
inventory management is allabout time savings, right?
Um, you don't think aboutit like, much like, how much
time are you going to say?
But it it is crazyhow much time you save.
Like think about here'sa great example.
So say I, I love to cook andI'm really quick and I'm a
(08:47):
great chef in my own kitchen.
Right.
I know where everything is.
I'm, you know, I'm justa kind of a whirlwind in
my own kitchen.
And I create something inlike 20 minutes.
I got a great meal.
Awesome.
I want to go over to myfriend's house, and I want to
make that meal for themin their kitchen.
I have all myingredients and everything.
Same setup, except I getanother kitchen and I don't
know where anything is.
I got to spend half my timelooking for where's that pot?
(09:08):
Where's those utensils?
So it takes me twiceas much time to do that.
Yeah, inventory management isthe same thing.
If I know where things are,if I know if everything's
well organized, whatnot,it's going to create a
really smooth flow.
And you're going to see exactly.
You're going to saveso much, so much time.
So that's that's a bigone is the time saving.
And ultimately like it's goingto simplify the process.
(09:29):
The process is simple andyou're saving a lot of time.
That means you can scale andyou can grow your business
which is huge.
I mean isn'tthat everyone's dream?
Make more money?
I don't think.
Everyone's you know, you startoff selling like $20 a day in a
product and you're like,I'm happy with it.
Yeah, I think I canretire on that.
No, you want to.
You want to grow.
You want to build an empire.
That's what we'rehere for, right?
We want to build an empire.
(09:50):
And how do you do that?
You have to have aprocess and processes in place
that are there.
Good to scale.
You know, essentially,that's what it's all about.
And I guess lastly,the thing about.
Great.
Battery management in theretail space is
better forecasting, right?
It's all about knowing whatyou need, when you need it.
And if you have the data toback up what you know,
what you've been selling,what like how much of it you've
(10:12):
been selling, you're going tobe able to kind of, again,
get what you need when youneed it, buy the right products,
understandyour customers better.
Right.
So you're going tojust be a well-oiled machine.
You know?
Yeah, there's that popularsaying if you can't
measure it, you can't manage it.
So exactly.
Yeah, that's exactly whatit's all about.
It's all about the numbers.
So now that we know allof that, what are some best
(10:32):
practices that business ownersshould keep in mind?
The biggest thing is what Ialways tell people is to invest
in aninventory management system.
It's huge.
It's going to saveyou a ton of time.
Everything can like oursystem inflow, for example,
you can dopurchase orders, sales orders.
You know, you can pick,pack and ship right in the app.
You can use barcodes.
And so you're just basicallyyou're scanning out your items
(10:53):
as you're picking them andpacking them and shipping them
off to your customers.
So like doing that, all thatstuff is going to save you so
much time, right?
A couple other big ones thatare just kind of like very
common in something thateveryone should be doing,
especially in theretail space, is is
carrying safety stock.
We talked about it beforehaving it's all about having
that stock at the right timewhen you need it in
(11:13):
case something happens.
You know, we've seen supplychain issues in the last
couple of years.
So I think a lot of people arenow understanding that you
can't always expect things tohappen when they're
going to happen.
Things are going to always comeout of the blue and messy up.
So it's good to have thatsafety stock on hand for sure.
Another big one,which is like, if people
hate it, people hate it.
Start a cycle count program andit's like it's very important.
(11:35):
And even if you're using thebest system in the world,
there's going to bediscrepancies between what you
have in the system andwhat you have on the shelves.
Right.
So starting a cycle countprogram is really great to just
kind of keep up on that,making sure those numbers are
matching and whatnot.
So doing that is great.
And there's ways to doit that it's not so horrifying.
The bigger the business,the more you don't want to
do it, but the more youkind of need to do it right.
(11:58):
So you can kind of do it inbatches and sections if you
really want, you know, kind ofsplit it up into areas
of your warehouse.
So maybe do like thiswing of your warehouse one day,
this wing another day.
Because when you're doing acycle count program, you kind
of have to shut down everything.
The operations kind ofhave to stop that way.
You know, there's nothing kindof we talked about how things
are allocatedin different buckets.
(12:18):
Right.
So your finished goods aren'tmoving from ready for sale into
allocated while you're doingyour cycle count, because it's
just going tomess everything up.
Right.
So yeah, the cycle counts isall like scanning and keeping
track of inventory levelslike that, right?
Yeah.
It's just it's basically justcounting all of the things that
you have on your shelves andmaking sure that those numbers
match what you havein your system.
So it's just yeah, it's just.
Faster too, like beep, beep,beep instead of like one, two,
(12:39):
three, four and then youlose track again.
Wait, what was that again?
You're like marking things off.
You're like you're in aprison cell, you know,
which ticks.
I never really thought abouthow much goes on behind the
scenes with retailinventory management, but I was
doing some research on why somemajor retailers failed.
And do you rememberforever 21 I.
Yeah, I shopped thereall the time.
(13:01):
No of course, yeah Iremember forever 21.
Yeah.
Well, back when I was in highschool that was one of
my favorite stores.
And remember itwas super popular.
So I was researching intoforever 21 and it's actually
interesting.
Backstory.
Forever 21 started with twoSouth Korean immigrants who
only had $11,000 in savings,and they opened their first
store in LA.
And the original plan was totarget younger people who
(13:22):
didn't have a lot of money butwanted the latest looks.
So they realized that theycould capitalize on the fast
fashion business model becausethey could mass produce a bunch
of clothes at avery inexpensive rate.
And how quick turnovers.
So in 2015, they actuallypeaked in $4.4 billion
in sales, and they hadlike 480 stores.
But long story short, in 2017,they didn't anticipate the
(13:45):
retail apocalypse, which isbasically when e-commerce
started to likedominate the market.
So because of that,like they didn't stop to
evaluate their plan.
They just keptexpanding and expanding.
And if you think aboutit forever, 21 is as big
as department stores.
They're huge.
Right?
And because their focus was onfast fashion, they just had a
bunch of excess inventory.
And that led to them having tolike markdown, the prices.
(14:08):
And eventually they had to filefor bankruptcy in 2019.
Yes.
He access inventory.
It kills you.
It kills you.
And I mean, a lotof that probably would end up
being deadstock, too,because it's fast fashion.
The style was outbefore they can sell it.
So yeah, 100%.
So actually I have an exampleof a really great company who
doesamazing inventory management.
I'm sure you've heard of them.
Walmart.
(14:29):
Have you heard of ofcourse you have.
Everyone's heard of Walmart.
And the reason for that isbecause they have dominated the
retail landscape over the lastcouple of decades.
They actually putan entire retail juggernaut
out of business.
Kmart.
So back in the 90s, there wasbasically what they called the
the price wars thatwas going on.
And essentially what washappening was all these big box
(14:50):
stores were trying to competeto have the lowest prices to
draw in those customers,because a lot of them were
selling the same brands,the same products.
So it was all about getting thelowest price to the.
Customer because they're goingto go where the lowest
price is, obviously right.
They want the best deal.
It's good.
Everyone wants the best deal.
It's I mean that'sthat's a no brainer, right?
So at the time Walmart actuallyimplemented just
(15:12):
in time inventory.
Right.
So it's a system allabout lean, being lean,
getting everything you needjust in time right when
you need it.
So nothing's sitting on theshelves for too long.
And it was a hugeadvantage to them.
It gave them more visibilityinto what was being purchased
by their customers, so it gavethem a lot better insight.
It also gave them more cashflow because they're not buying
too much of things andstoring them, eating up,
carrying costs and all that,all that stuff.
(15:34):
Not wonderful stuff,all that stuff.
Right?
And they reinvested all themoney that they're saving back
into the business.
Right.
So now they're able to expandand whatnot and they're,
they're lowering their overheadby doing this as well.
So they pass that savings ontothe customer, which is great
because it gives them thenthe lowest prices.
Right.
So they're starting toabsolutely clobber Kmart.
And it's all in the numbers.
(15:54):
You can see it.
And I think in the course oflike 5 or 6 years,
Kmart's stock dropped by like60% while Walmart's like rose
by like 80%.
You could just see this reallydive like in the
opposite directions, you know,and it was all basically
attributed to their just intime inventory management.
So like it was huge.
And they essentially Kmart justdidn't change while Walmart did.
(16:17):
They just kept up with the sameinventory management techniques
that they were using,and it crushed them and
absolutely crushed them.
They end up having to selltheir company to Sears,
I think in 2005.
Yeah.
And that was the end of Kmart.
I was actually looking toSears as well.
And why it failed, because Iremember Sears was really big
when I was young, twoand one day just disappeared.
And apparently one of thebiggest mistakes that Sears
(16:39):
ever made was buying or mergingwith Kmart, because back then
Sears held like a uniqueposition in the market.
But as soon as they mergedwith Kmart, which was known as
a deep discount brand,it lowered their value and that
put them into directcompetition with
Walmart and Target.
And at the same time,other specialty upscale stores
like gap posed a huge threat toSears because, you know, no one
(17:00):
really brags about, oh,I'm wearing like,
Sears clothes or whatever.
But like back then when youwore gap was more exclusive and
more like cool.
So because the company salesdropped like crazy,
the suppliers straight up juststop supplying like TVs, books,
toys and everything to Searsbecause they're worried that
the retailer won't beable to pay its bills.
So yeah, towards the end ofthe day, they got cut off.
(17:21):
Yeah, they got cut off hard.
Yeah.
Just like suppliers.
Just stop sendingstuff to Sears.
And then the inventory wassuper low and empty,
like just poorly stocked.
And that's why series died.
Yeah.
I mean, yeah, they pickedup a sinking ship, you know,
and you're saying that it itput him it pitted
them against Walmart.
Don't do that.
Don't don't do that.
Walmart's inventory managementis on point.
(17:42):
You know it's just interestinghow like your reputation how
that affects your business too.
Like even if Searshas good products.
But people see you as like alow discount or like you're
kind of like you'restuck in the middle,
like that's a danger.
You're not you're not likebudget enough for like people
who want good deals.
But then you're also not, like,expensive enough to be like,
trendy, a bit ofan identity crisis.
Yeah.
Just like in the middle.
Like, who am I?
Yeah, who am I, where am I?
(18:04):
What is the meaning of all this?
Yeah.
Exactly.
Yeah.
So I mean, another example ofWalmart's great inventory
management is that they useRFID stands for radio
frequency identification tags.
So what it is essentiallythey're barcodes that are like.
In the air, in the clouds,the radio frequencies.
Right.
So you can actually scan itemswithout having a line of sight.
(18:26):
And it's great forobvious reasons, for,
for Walmart.
So they've mandated that comingup in February for like a whole
bunch of they've had somemandates on some
product types, but they'remandating it for almost just
about every product type comingup in February.
So they're not messing aroundwhen it comes
to inventory management.
If you want to sell your itemsthrough Walmart, you better,
(18:46):
you know, get it.
You better hop on the inventorymanagement bus because,
you know, we're headed toOrganization Town, baby.
Yeah.
I remember talking to oneof my friends.
They work at Uniqlo, and I'lljust ask them like, oh,
how does Uniqlomanage their inventory?
And they mention RFID as well.
Like they just havethis RFID gun.
And if you're looking for aspecific size and color, like a
dog finding drugs, oh.
(19:08):
Yeah, it's like boop boop.
Boop.
Yeah, finding metal on aon the beach kind of thing.
Yeah.
No, I love Uniqlo too.
They actually utilizenot just for their
inventory management.
They actually utilize the RFIDfor checkout too.
Yeah.
You just go to the checkout andyou dump all your stuff
into a box.
Yeah.
And it justsome like, magic, baby.
Just like all ofit gets rung up immediately,
(19:28):
which is super, super cool.
Need people to manage it.
Just all self-checkout.
Yeah.
It's, uh, people are just gonnabe obsolete soon, you know?
But no, it's great for.
It's a dual purpose, right?
So it's greatfor inventory management.
And it's also great for, like,actually checking out
the whole process.
It kind of can take a,take a, a pardon, which is
pretty really, really awesome.
Yeah.
(19:48):
The first time Isaw that shackle system was
actually in Singapore.
There's this huge sportinggoods store called decathlon,
and they use that samecheckout system, and they
recently opened up storesin Canada too.
I don't know why everyonedoesn't do it,
to be perfectly honest.
I would love, uh, you know,I think, um, the Amazon store,
if they have those Amazon Gostores where you go in and it
makes you feel like you'restealing everything because you
(20:09):
just kind of walk in and youpick things up off the shelf,
and then you walk out,and then it just charges your,
your card because, uh, yeah,I think that I think I'm pretty
sure they use RFID for that.
So they're like basicallytracking what you're picking up.
And then as you leave it kindof like, you know, puts it onto
your Amazon bill or whatever.
Yeah.
So it does make you feel likeyou're stealing though for sure.
Yeah.
(20:29):
It's kind of weird, like,don't I need to talk to someone
about this, but yeah,you just leave in the
everything's all good.
So.
Yeah.
So that wraps up our episode.
Thank you guys so much fortuning in and interested in
learning moreabout inventory management?
Make sure to subscribe onApple Podcasts, Spotify,
YouTube, or wherever you listento your podcasts.
Yes! Thanks somuch for listening.
Watching.
However you're consumingthe content, please share with
(20:51):
your friends, your family,your coworkers, your pets,
whoever you thinkwould be interested.
Leave a comment down belowif you want.
If you have an idea for afuture episode, please leave a
comment down below and we willdo our best to get into that in
a future episode.
Okay, bye.
Retail inventory management isall about having what you need
to meet customer demands,but not having too much of it
that it's going to eat intoyour cash flow and your
carrying costs and all that.
Right.
So.
Hello everybody I am Jared.
Hi, I'm Melinda, and.
Welcome back to The SecretLife of Inventory.
(00:21):
This is a showwhere we talk about
everything inventory related.
And in today's episode we aregoing to be talking about
the retail space.
So anyone who's working eitherif you got a brick and mortar
or you're workingin e-commerce, doesn't matter
if you're working in retail,we're going to be talking about
all the different types ofinventory that you're going to
be dealing with, some of thethe benefits of having good
inventory management and someof the best practices that you
(00:43):
can do to get your businessrunning at an optimal speed.
We'll also be exploring somereal world examples of good and
bad inventory management,and in future episodes will
also be interviewing businessowners to learn more about
their tips and tricks.
So be sure tostay tuned for more!
So, for those who want tounderstand the basics, can you
explain to us what exactly isretail inventory management and
what does that entail?
So retail inventory managementfor the most part you're
(01:06):
dealing with two differenttypes of inventory.
So you're dealing with eitherfinished goods or you're
dealing with packing materials.
Now before we get into those Iwant to start off by saying
that there there are certainretailers who actually do
manufacture the products thatthey're that they're selling
to their customers.
Those are kind of rare cases.
It doesn't generally amanufacturers tend to,
you know, they make bigquantities of things and they
(01:26):
sell thosethings to wholesalers.
Right.
But there are certain likefor example, we have a
customer organic chocolates.
They're based out of California.
And what they do,their business model is they
have an online store and theircustomer purchases the
chocolates from that store,and then they manufacture the
chocolates and they shippedthem directly to the customer.
So someone like thatis they're a retailer,
but they're also manufacturers.
(01:46):
They have a lot of likeraw materials, a lot of other
things to to worry about,not just the finished goods and
not just the packing material.
So for this episode, we're onlygoing to be focusing on people
who are working in theretail space only.
So people who are buying,you know, buying their products
like wholesale, either from awholesaler or a distributor
or something, andthen selling those products
to their customers.
(02:06):
Right.
So when we're talking aboutfinished goods, that's what
we're talking about.
We're talking about things thatare ready to go.
They're on the shelf.
They're ready to goto the customers.
Right.
So those areyour products obviously.
And then we're talkingabout packing materials.
They're equally as important asyour finished goods.
Right.
So we're that's your boxes yourto your tissue paper
your bubble wrap.
If you're bundling sometimesyou'll have like a special
(02:27):
packaging that you'd usefor your bundling.
All that stuff is is veryimportant because ultimately if
you're selling somethingto a customer.
So if you're selling,say you're selling something
that's really fragile,you know, like a,
like a camera, for example,and you, you, you have the
great sale and yousell way more cameras than
you expected.
But you have the cameras,which is great, but you don't
have thepacking materials, right?
(02:48):
So you don't have the thespecial bubble wrap that you
use to make sure that cameragets to the customer safe
and sound, not broken.
Exactly.
5000, $10,000 dollars.
Pretty important.
Pretty important.
So it's not like you can justsend that camera off with the
packing material, right?
So then your shipment getsdelayed and you have to wait
for your packing materialto come in.
So one way or another,you're not the customers not
(03:08):
getting the camera.
Even though you havethe camera, they're still not
getting it right.
So that's why packing materialdon't sleep on packing material.
You know, that'sit's very, very important.
That's true.
Even when you're shopping.
It's not just the shirt orpants that you're buying.
It's also the bag that theshirt and pants go into that
the retailer has tokeep track of.
Yeah, absolutely.
Are there any other types ofretail inventory that people
should be aware of?
So I guess the best way tothink about it is, is breaking
(03:31):
your finished goodsdown and kind of
into different categories.
So there's five main categoriesthat you want to want to think
about when you're dealing withyour finished goods.
The first one is theready for sale.
So that's all yourstuff that's on the shelf.
It's ready to go.
Customers can buy itwhenever they want.
It's available forpurchase right now.
It's pretty obvious when you'rea brick and mortar store if
it's ready for sale, because ifit's not ready for sale,
(03:51):
it's gone.
The customer is taking itto the door.
They pick it up offthe shelf, they take it,
and then it's gone.
Right?
So it's more for e-commerce.
When something is ready forsale and someone's
purchased it, it moves intothe next category.
The second onewhich is allocated.
So it's it may be on the shelfand you may have it in your
actual facility and your inyour space, but it's actually
not really there, so to speak,because it's already been sold
(04:13):
to a customer.
So it's allocated to a sale.
Right.
So you can't sell that again.
You've got to make sure thatyou're not just looking at your
inventory and saying like, oh,I have this thing,
I can sell it.
You don't know that youreally have it.
Even if you're tracking yourinventory on, say,
a spreadsheet or I think thisentire podcast is me, just talk
poorly about spreadsheet PTSD.
(04:34):
Exactly, exactly.
Right.
So if you're if you're using aspreadsheet or manually or
whatnot and you forget to,maybe there's a lot of
different salespeople that areworking on something, and one
of them forgets to update thespreadsheet saying that they
sold this item, you seeit on the spreadsheet, oh,
I have this.
So then you sell it, then youfind out, oh no, I actually
don't have that thing.
So that's why it's reallyimportant to make sure that
(04:55):
you're labeling these things asthey go down the process,
you know, ready forsale into allocated.
And then into our next one,which is in transit.
So in transit is essentiallyall of your products that are
actually in transit.
And it's in the name obviously.
So when it's when you send itout from your facility or your
storage warehouse or whatever,you've shipped it off as it's
on the way until it gets toyour customer, you're still
liable for that thing, right?
(05:15):
That's still important to makesure that you understand that
it's out there.
It's still technically a partof your inventory, right?
Until it reachesthe customer's hands.
The sale is not complete, right.
So those are in transit.
And again, you should betracking ready for sale to
allocate it to in transit.
And then the next one,of course is actually the next
two are pretty closely related.
And those are safety stockand your seasonal.
(05:36):
So first safety stock issomething that you should
always have right.
Because things willare going to happen
inevitably in business.
We all know thatthings are going to happen.
So it's important to have likea cushion, like a backup plan.
Yeah a parachute.
You don't want to jump out ofthe plane without a parachute,
right?
So that's what he's talking.
Yes.
And your business willdie without safety.
So maybe not, but it could.
(05:58):
So it's more likely to.
We'll say that for sure.
So yeah it's very important tohave that on hand just in those
what if moments those justin case moments.
Right now seasonal isa lot like safety stock.
Except it is.
It's more for those momentsthat you can plan for.
Right.
It's not that just in case it's.
On day Black Friday.
Exactly.
Yeah.
Yeah.
Seasonal I mean so seasonalthings and can even just be
(06:19):
like if you have if you'redoing a really good demand
forecasting and you see that,oh, this time of March,
I usually sell a lot of thisparticular product, then you
can prepare for them, get someextra seasonal inventory
for that moment.
Yeah, right.
So those are, I guess, the fivemain categories of your
finished goods if you want tobreak them down further.
So now that we know what retailinventory management is,
(06:40):
what are the benefits exactlyof effective retail inventory
management I know okay.
So it just it doesn'tseem like a big deal.
Like whatever.
Like why is itso important right now?
Lots of people actually care.
Yeah.
Why should people care.
Right.
But it is important because itcan save you so much
time and money.
But, um, just retail inventorymanagement is all about having
(07:01):
what you need to meetcustomer demands, but not
having too much of it that it'sgoing to eat into your cash
flow and your carrying costsand all that.
Right?
So it's going to save you money.
Ultimately, at the end ofthe day, good retail
inventory management, first andforemost, it's going
to save you money becauseyou're going to be reducing
your carrying costs,because you're going to be
keeping just the right levelof inventory, and you're also
going to prevent yourself fromactually getting dead stock,
(07:22):
you know, and we'llget more into dead stock
in future episodes.
But for now, the TLR of it isproducts that essentially
aren't going to sell productsthat you have that just people
aren't buying anymore.
They're sitting on the shelf.
Maybe you're selling like 1 or2 a year or something,
but they're just eating upshelf space, right?
And ultimately eating up intoyour carrying costs, eating up
into your cash flow,all that stuff.
(07:43):
Right?
So you want to avoid deadstock from, you know,
sometimes you can't avoid it.
Sometimes you think something'sgoing to sell really well and
you get it.
And then just noone really wants it, right.
And then other people, you try.
Yeah.
Exactly right.
Dead stock is like it's goingto inevitably happen,
you know, like when you'rebuying something the next best
thing is going to come outand then, you know, like when a
new version of something, a newversion of a cell phone or a
(08:05):
new version of like a bag or ajack or whatever, that last
version is going tobe less desirable.
People aren't going to really.
Be chasing the new thing.
Exactly.
Only the hipsters are going tobuy that old thing, right?
So and there's only so manyhipsters out there, right?
So you got tojust like to avoid it.
You can use forecasting to kindof see what's selling to
avoid dead stock.
So you know, things like thatyou're going to save a
(08:26):
lot of time.
Ultimately that's a big one too.
I mean, time and moneyare related, but good retail
inventory management is allabout time savings, right?
Um, you don't think aboutit like, much like, how much
time are you going to say?
But it it is crazyhow much time you save.
Like think about here'sa great example.
So say I, I love to cook andI'm really quick and I'm a
(08:47):
great chef in my own kitchen.
Right.
I know where everything is.
I'm, you know, I'm justa kind of a whirlwind in
my own kitchen.
And I create something inlike 20 minutes.
I got a great meal.
Awesome.
I want to go over to myfriend's house, and I want to
make that meal for themin their kitchen.
I have all myingredients and everything.
Same setup, except I getanother kitchen and I don't
know where anything is.
I got to spend half my timelooking for where's that pot?
(09:08):
Where's those utensils?
So it takes me twiceas much time to do that.
Yeah, inventory management isthe same thing.
If I know where things are,if I know if everything's
well organized, whatnot,it's going to create a
really smooth flow.
And you're going to see exactly.
You're going to saveso much, so much time.
So that's that's a bigone is the time saving.
And ultimately like it's goingto simplify the process.
(09:29):
The process is simple andyou're saving a lot of time.
That means you can scale andyou can grow your business
which is huge.
I mean isn'tthat everyone's dream?
Make more money?
I don't think.
Everyone's you know, you startoff selling like $20 a day in a
product and you're like,I'm happy with it.
Yeah, I think I canretire on that.
No, you want to.
You want to grow.
You want to build an empire.
That's what we'rehere for, right?
We want to build an empire.
(09:50):
And how do you do that?
You have to have aprocess and processes in place
that are there.
Good to scale.
You know, essentially,that's what it's all about.
And I guess lastly,the thing about.
Great.
Battery management in theretail space is
better forecasting, right?
It's all about knowing whatyou need, when you need it.
And if you have the data toback up what you know,
what you've been selling,what like how much of it you've
(10:12):
been selling, you're going tobe able to kind of, again,
get what you need when youneed it, buy the right products,
understandyour customers better.
Right.
So you're going tojust be a well-oiled machine.
You know?
Yeah, there's that popularsaying if you can't
measure it, you can't manage it.
So exactly.
Yeah, that's exactly whatit's all about.
It's all about the numbers.
So now that we know allof that, what are some best
(10:32):
practices that business ownersshould keep in mind?
The biggest thing is what Ialways tell people is to invest
in aninventory management system.
It's huge.
It's going to saveyou a ton of time.
Everything can like oursystem inflow, for example,
you can dopurchase orders, sales orders.
You know, you can pick,pack and ship right in the app.
You can use barcodes.
And so you're just basicallyyou're scanning out your items
(10:53):
as you're picking them andpacking them and shipping them
off to your customers.
So like doing that, all thatstuff is going to save you so
much time, right?
A couple other big ones thatare just kind of like very
common in something thateveryone should be doing,
especially in theretail space, is is
carrying safety stock.
We talked about it beforehaving it's all about having
that stock at the right timewhen you need it in
(11:13):
case something happens.
You know, we've seen supplychain issues in the last
couple of years.
So I think a lot of people arenow understanding that you
can't always expect things tohappen when they're
going to happen.
Things are going to always comeout of the blue and messy up.
So it's good to have thatsafety stock on hand for sure.
Another big one,which is like, if people
hate it, people hate it.
Start a cycle count program andit's like it's very important.
(11:35):
And even if you're using thebest system in the world,
there's going to bediscrepancies between what you
have in the system andwhat you have on the shelves.
Right.
So starting a cycle countprogram is really great to just
kind of keep up on that,making sure those numbers are
matching and whatnot.
So doing that is great.
And there's ways to doit that it's not so horrifying.
The bigger the business,the more you don't want to
do it, but the more youkind of need to do it right.
(11:58):
So you can kind of do it inbatches and sections if you
really want, you know, kind ofsplit it up into areas
of your warehouse.
So maybe do like thiswing of your warehouse one day,
this wing another day.
Because when you're doing acycle count program, you kind
of have to shut down everything.
The operations kind ofhave to stop that way.
You know, there's nothing kindof we talked about how things
are allocatedin different buckets.
(12:18):
Right.
So your finished goods aren'tmoving from ready for sale into
allocated while you're doingyour cycle count, because it's
just going tomess everything up.
Right.
So yeah, the cycle counts isall like scanning and keeping
track of inventory levelslike that, right?
Yeah.
It's just it's basically justcounting all of the things that
you have on your shelves andmaking sure that those numbers
match what you havein your system.
So it's just yeah, it's just.
Faster too, like beep, beep,beep instead of like one, two,
(12:39):
three, four and then youlose track again.
Wait, what was that again?
You're like marking things off.
You're like you're in aprison cell, you know,
which ticks.
I never really thought abouthow much goes on behind the
scenes with retailinventory management, but I was
doing some research on why somemajor retailers failed.
And do you rememberforever 21 I.
Yeah, I shopped thereall the time.
(13:01):
No of course, yeah Iremember forever 21.
Yeah.
Well, back when I was in highschool that was one of
my favorite stores.
And remember itwas super popular.
So I was researching intoforever 21 and it's actually
interesting.
Backstory.
Forever 21 started with twoSouth Korean immigrants who
only had $11,000 in savings,and they opened their first
store in LA.
And the original plan was totarget younger people who
(13:22):
didn't have a lot of money butwanted the latest looks.
So they realized that theycould capitalize on the fast
fashion business model becausethey could mass produce a bunch
of clothes at avery inexpensive rate.
And how quick turnovers.
So in 2015, they actuallypeaked in $4.4 billion
in sales, and they hadlike 480 stores.
But long story short, in 2017,they didn't anticipate the
(13:45):
retail apocalypse, which isbasically when e-commerce
started to likedominate the market.
So because of that,like they didn't stop to
evaluate their plan.
They just keptexpanding and expanding.
And if you think aboutit forever, 21 is as big
as department stores.
They're huge.
Right?
And because their focus was onfast fashion, they just had a
bunch of excess inventory.
And that led to them having tolike markdown, the prices.
(14:08):
And eventually they had to filefor bankruptcy in 2019.
Yes.
He access inventory.
It kills you.
It kills you.
And I mean, a lotof that probably would end up
being deadstock, too,because it's fast fashion.
The style was outbefore they can sell it.
So yeah, 100%.
So actually I have an exampleof a really great company who
doesamazing inventory management.
I'm sure you've heard of them.
Walmart.
(14:29):
Have you heard of ofcourse you have.
Everyone's heard of Walmart.
And the reason for that isbecause they have dominated the
retail landscape over the lastcouple of decades.
They actually putan entire retail juggernaut
out of business.
Kmart.
So back in the 90s, there wasbasically what they called the
the price wars thatwas going on.
And essentially what washappening was all these big box
(14:50):
stores were trying to competeto have the lowest prices to
draw in those customers,because a lot of them were
selling the same brands,the same products.
So it was all about getting thelowest price to the.
Customer because they're goingto go where the lowest
price is, obviously right.
They want the best deal.
It's good.
Everyone wants the best deal.
It's I mean that'sthat's a no brainer, right?
So at the time Walmart actuallyimplemented just
(15:12):
in time inventory.
Right.
So it's a system allabout lean, being lean,
getting everything you needjust in time right when
you need it.
So nothing's sitting on theshelves for too long.
And it was a hugeadvantage to them.
It gave them more visibilityinto what was being purchased
by their customers, so it gavethem a lot better insight.
It also gave them more cashflow because they're not buying
too much of things andstoring them, eating up,
carrying costs and all that,all that stuff.
(15:34):
Not wonderful stuff,all that stuff.
Right?
And they reinvested all themoney that they're saving back
into the business.
Right.
So now they're able to expandand whatnot and they're,
they're lowering their overheadby doing this as well.
So they pass that savings ontothe customer, which is great
because it gives them thenthe lowest prices.
Right.
So they're starting toabsolutely clobber Kmart.
And it's all in the numbers.
(15:54):
You can see it.
And I think in the course oflike 5 or 6 years,
Kmart's stock dropped by like60% while Walmart's like rose
by like 80%.
You could just see this reallydive like in the
opposite directions, you know,and it was all basically
attributed to their just intime inventory management.
So like it was huge.
And they essentially Kmart justdidn't change while Walmart did.
(16:17):
They just kept up with the sameinventory management techniques
that they were using,and it crushed them and
absolutely crushed them.
They end up having to selltheir company to Sears,
I think in 2005.
Yeah.
And that was the end of Kmart.
I was actually looking toSears as well.
And why it failed, because Iremember Sears was really big
when I was young, twoand one day just disappeared.
And apparently one of thebiggest mistakes that Sears
(16:39):
ever made was buying or mergingwith Kmart, because back then
Sears held like a uniqueposition in the market.
But as soon as they mergedwith Kmart, which was known as
a deep discount brand,it lowered their value and that
put them into directcompetition with
Walmart and Target.
And at the same time,other specialty upscale stores
like gap posed a huge threat toSears because, you know, no one
(17:00):
really brags about, oh,I'm wearing like,
Sears clothes or whatever.
But like back then when youwore gap was more exclusive and
more like cool.
So because the company salesdropped like crazy,
the suppliers straight up juststop supplying like TVs, books,
toys and everything to Searsbecause they're worried that
the retailer won't beable to pay its bills.
So yeah, towards the end ofthe day, they got cut off.
(17:21):
Yeah, they got cut off hard.
Yeah.
Just like suppliers.
Just stop sendingstuff to Sears.
And then the inventory wassuper low and empty,
like just poorly stocked.
And that's why series died.
Yeah.
I mean, yeah, they pickedup a sinking ship, you know,
and you're saying that it itput him it pitted
them against Walmart.
Don't do that.
Don't don't do that.
Walmart's inventory managementis on point.
(17:42):
You know it's just interestinghow like your reputation how
that affects your business too.
Like even if Searshas good products.
But people see you as like alow discount or like you're
kind of like you'restuck in the middle,
like that's a danger.
You're not you're not likebudget enough for like people
who want good deals.
But then you're also not, like,expensive enough to be like,
trendy, a bit ofan identity crisis.
Yeah.
Just like in the middle.
Like, who am I?
Yeah, who am I, where am I?
(18:04):
What is the meaning of all this?
Yeah.
Exactly.
Yeah.
So I mean, another example ofWalmart's great inventory
management is that they useRFID stands for radio
frequency identification tags.
So what it is essentiallythey're barcodes that are like.
In the air, in the clouds,the radio frequencies.
Right.
So you can actually scan itemswithout having a line of sight.
(18:26):
And it's great forobvious reasons, for,
for Walmart.
So they've mandated that comingup in February for like a whole
bunch of they've had somemandates on some
product types, but they'remandating it for almost just
about every product type comingup in February.
So they're not messing aroundwhen it comes
to inventory management.
If you want to sell your itemsthrough Walmart, you better,
(18:46):
you know, get it.
You better hop on the inventorymanagement bus because,
you know, we're headed toOrganization Town, baby.
Yeah.
I remember talking to oneof my friends.
They work at Uniqlo, and I'lljust ask them like, oh,
how does Uniqlomanage their inventory?
And they mention RFID as well.
Like they just havethis RFID gun.
And if you're looking for aspecific size and color, like a
dog finding drugs, oh.
(19:08):
Yeah, it's like boop boop.
Boop.
Yeah, finding metal on aon the beach kind of thing.
Yeah.
No, I love Uniqlo too.
They actually utilizenot just for their
inventory management.
They actually utilize the RFIDfor checkout too.
Yeah.
You just go to the checkout andyou dump all your stuff
into a box.
Yeah.
And it justsome like, magic, baby.
Just like all ofit gets rung up immediately,
(19:28):
which is super, super cool.
Need people to manage it.
Just all self-checkout.
Yeah.
It's, uh, people are just gonnabe obsolete soon, you know?
But no, it's great for.
It's a dual purpose, right?
So it's greatfor inventory management.
And it's also great for, like,actually checking out
the whole process.
It kind of can take a,take a, a pardon, which is
pretty really, really awesome.
Yeah.
(19:48):
The first time Isaw that shackle system was
actually in Singapore.
There's this huge sportinggoods store called decathlon,
and they use that samecheckout system, and they
recently opened up storesin Canada too.
I don't know why everyonedoesn't do it,
to be perfectly honest.
I would love, uh, you know,I think, um, the Amazon store,
if they have those Amazon Gostores where you go in and it
makes you feel like you'restealing everything because you
(20:09):
just kind of walk in and youpick things up off the shelf,
and then you walk out,and then it just charges your,
your card because, uh, yeah,I think that I think I'm pretty
sure they use RFID for that.
So they're like basicallytracking what you're picking up.
And then as you leave it kindof like, you know, puts it onto
your Amazon bill or whatever.
Yeah.
So it does make you feel likeyou're stealing though for sure.
Yeah.
(20:29):
It's kind of weird, like,don't I need to talk to someone
about this, but yeah,you just leave in the
everything's all good.
So.
Yeah.
So that wraps up our episode.
Thank you guys so much fortuning in and interested in
learning moreabout inventory management?
Make sure to subscribe onApple Podcasts, Spotify,
YouTube, or wherever you listento your podcasts.
Yes! Thanks somuch for listening.
Watching.
However you're consumingthe content, please share with
(20:51):
your friends, your family,your coworkers, your pets,
whoever you thinkwould be interested.
Leave a comment down belowif you want.
If you have an idea for afuture episode, please leave a
comment down below and we willdo our best to get into that in
a future episode.
Okay, bye.
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.