Grocery Store Inventory 101: The What, Why, and How for Inventory Success

Without the correct process or system, grocery store inventory can quickly resemble a children’s toy box: chaotic and confusing.

Proper inventory management is vital to the success of any grocery store, local market, or supermarket. Between managing stock levels, tracking damages, storage, sales reports, and ordering products, it can be easy to lose sight of what’s going on with your inventory.

This article will cover the what, why, and how of grocery inventory management to help you create and implement better systems. We’ll also discuss how a modern point of sale (POS) system for your grocery store or market can help take the load off your shoulders.

Why Is Grocery Store Inventory Important?

Inventory management is the management of sourcing, storing, and selling inventory and tracking essential data regarding damages, shrinkage, theft, and more. In a grocery store, effective inventory management uses product shelf-life information and category-level consumer behavior to cut retail food waste. 

Grocery store inventory management tracks and manages sales, ordering, storage, and stock movement to show how much you have of each item. These insights enable you to replenish products promptly to meet demand.

Using the right system for your inventory can push your business toward new heights. When your inventory is organized, and the system is efficient, there’s potential for increased profit margins through preventing spoilage and time-efficient operations. 

Efficient and effective inventory management is key to grocery operations, so we’re here to provide you with the what, why, and how for inventory success.

Grocery Store Inventory Management: The Basics

Grocery inventory management is the process of receiving, storing, and selling your products. 

The art of inventory management lies in the processes you implement to optimize how you receive your stock, how you track it, and how you use best practices to drive profits.

Related Read: How Do Grocery Stores Track Inventory? Plus 2024 Trends

It’s not easy to manage grocery inventory. You’ve got a mixture of perishable and nonperishable goods. And you might stock the same items, but with variations and from different brands — think cat litter or cereal. How can you track it all?

Manual methods are outdated and time-consuming. It’s too easy to make errors. And the risks of poor inventory management are clear:

• You’ll tie up cash in excess stock.
• Perishable goods will spoil before you can sell them.
• Your stockroom will overflow and increase carrying costs.
• You’ll frustrate your customers with frequent stockouts.
  
  

Efficient and effective inventory management is key to grocery operations, so we’re here to provide you with the what, why, and how for inventory success.

What Does Optimal Inventory Management Look Like? 

Effective inventory management means having: 

The right stock → in the right quantity → in the right place → at the right time → at the best cost possible. 

If any of these steps are mismanaged, you’ll have a problem on your hands. You need a watertight process from ordering to updating your inventory when products are sold. Let’s break it down:

• Ordering: Determine the items you need and in what quantities to meet customer demand. Use historical data, trends, and customer shopping habits to inform your ordering decisions.
• Receiving: When vendors deliver goods to your store, ensure they meet requirements and aren’t damaged. Use a barcode scanner to avoid having to manually receive goods using a spreadsheet.
• Stocking: Place items on shelves or in storage depending on need. Consider the placement of your top-selling items and slow-movers. Do you have any promotions running? Look at your store design and floor plan to help.
• Counting: Decide on a stock-counting cadence to ensure what you have in stock matches what’s in your system. Don’t shut down your store! Check different sections on different days.
• Reordering: As items are sold and inventory depletes, you need a system in place to reorder stock. It’s best practice to have your system alert you when items fall below the reorder threshold.

While the process is simple on paper, a lot goes into getting it right. First, you need the right tools.

Why Is Grocery Store Inventory Management So Important?

Profit margins are slim for grocery store owners. If there were a magic button you could press to make more profit, you’d press it, right? Proper inventory management is better than a magic button — it’s real!

The trick is to have just enough stock on hand — especially with perishable goods — and not too much stock, leading to spoilage, food waste, and shrinkage. You can’t afford to mismanage your most valuable asset. The benefits of good grocery inventory management are clear:

• When customers get what they need, they’ll have no reason to shop anywhere else.
• You’ll waste less and boost slim profit margins.
• Store management and workflows become easier.
• Your employees will feel empowered and provide better customer service.
  
  

Effective inventory management ensures customers get what they need, reduces waste to improve profit margins, and makes store operations easier.

3 Tools for Optimal Grocery Inventory Management

Reaching your grocery store inventory goals is a worthwhile endeavor. The right inventory management software and POS system are essential to achieving those goals.

Inventory Management Software

Inventory management software can help you manage stock in real time. This lets you see what’s running low and what isn’t moving from shelves. Stock data points can help inform what products you should be ordering more of and what you can hold off purchasing. 

Products that move from shelves quickly mean you can order larger quantities. With some manufacturers, this can mean purchasing more at a lower price, helping to reduce costs and improve profit margins.

Related Read: 5 Best Grocery Store Inventory Management Software (With Examples)

Barcode Scanner

Scanning a barcode will always be faster than entering product numbers manually. They’re an essential piece of technology for receiving stock, scanning shelf tags to check stock, and scanning products at checkout. Inventory management software should automatically update inventory as products are sold.

A POS System

We’ve mentioned POS systems in passing so far, but a grocery-specific POS system is the tool that brings it all together. With inventory management software baked into your POS system, you can tie inventory to sales, customer loyalty, your e-commerce store, and accounting software.

4 Pro-Level Grocery Store Inventory Management Tips

Your store is unique — as is your inventory — so you need inventory management processes that work for you. However, there are some best practices to adopt if you want to manage inventory effectively.

Review POS Data in Real Time

Finding a balance between meeting demand and overstocking is mission-critical. It’s 101, but it’s easy to get wrong. With access to inventory turnover in real time, you can make sure you get it right. Reviewing this data helps you make in-store decisions like placement or promotions for older products or items in high demand.

Implement FIFO (First In, First Out) Inventory Management

The concept is simple: Put your oldest inventory at the front of your storage area (and on shelves) so that it’s picked and sold first. Make sure you label inventory with the right receive and expiry dates.

Some customers will dig toward the back of shelves looking for longer expiration dates, so it’s critical that your staff rearranges shelves throughout the day.

Related Read: How To Manage a Grocery Store Effectively: 9 Steps to Success

Automate What You Can

How can you automate the inventory management process? Or at least make it more efficient? With your POS system and built-in inventory management, you can rely on data, reports, and reorder points.

Pull sale reports. Which items are selling fast? Find out why, and set reorder points. For example:

• You find out that lamb shoulders sell out quickly towards the end of March. Instead of guessing and ordering more lamb in general, you realize it’s because Easter is around that time. Now, you can ensure you don’t run out of lamb in the lead-up to Easter by setting a reorder threshold when lamb products reach a specific point.

You can do the same for various products. Think barbecue meats in the summer, turkeys around Thanksgiving, and snacks around major sporting events. Seasonal and historical data trends can help you forecast customer purchases so you can stock your shelves with the right items. 

Perform Inventory Audits

We mentioned audits and counts earlier. They’re a way to keep your finger on the pulse of your store. And they don’t have to be complicated. Full and partial counts help:

• Ensure inventory records are accurate.
• Reduce shrinkage from theft and spoilage.
• Assess how often you sell through your stock.

You can select a portion of inventory to count at any time and compare it to recorded balances. This helps identify discrepancies and minimizes disruption. 

Find Grocery Store Inventory Success With IT Retail

Grocery inventory management is a balancing act. You want your customers to get what they need without friction, but you don’t want to overcompensate by having too much inventory on hand.

Putting the time and effort into improving your processes will help you juggle expiry dates, stock reorder levels, waste, and customer satisfaction. It might seem overwhelming, but the right tools can help.

No tool is more important than a grocery-specific POS system. Integrated with a barcode scanner, a POS system manages your front and back office. With these tools and solutions like FIFO stock rotation, you can gain visibility into what’s selling, what’s expiring soon, and what needs to be reordered.

IT Retail works with thousands of grocers to provide a POS system that makes inventory management a breeze. It’s best to see it in action! Schedule a demo today.