Inventory Management for Grocery Stores: Tips, Tools, and Tactics
Inventory management is the leading challenge for grocery stores. In fact, the U.S. Department of Agriculture estimates that, due to poor inventory management and other challenges, upwards of 30 percent of food on American grocery shelves is thrown away before ever being sold.
The inability to forecast accurately, brace for stockouts, and efficiently manage shelf life eats at profits as store owners and managers do everything they can to minimize loss.
It’s a struggle every grocery store faces. But if you have the right strategy and equipment, you can mitigate the potential damage to your bottom line.
In this article, we’ll share the top tips, tools, and tactics to ensure your store can weather the challenge and develop a system that maximizes profits.
Inventory Management for Grocery Stores: Must-Know Resources
Inventory management is essential for any retailer, but can be particularly challenging in grocery stores. One of the most significant challenges for grocery stores is managing the vast scale of inventory items. Most grocers manage thousands of items including packaged goods, produce, meat, dairy, and frozen stock. Granular, item-level tracking at this magnitude is challenging; without the right tools, it can become impossible.
Another unique inventory challenge grocery stores face is perishability. Many products carried in grocery stores, like meats, dairy products, and fresh produce, spoil quickly. Without the right inventory management tools and tactics, you may find yourself in a steep climb uphill, losing profits to shrinkage due to unsold product spoilage.
Another common challenge for grocery stores is overstocking, often tied to bulk case pack purchasing. This method of purchasing secures discounts but concentrates stock risk on certain items. No matter how much you try to forecast your demand, your store can fall prey to unpredictable supply chain disruptions, from weather delays to vendor production problems. These challenges can quickly throw inventory needs off balance.
With this understanding of the unique challenges facing grocery stores like yours, let’s dive into our list of the best tips, tools, and tactics you can use to master inventory management in your grocery store.
Tip #1: Classify Item Sales Velocity
Our first tip for optimizing inventory management in your grocery store is to categorize inventory by sales velocity. Looking at your inventory in this way helps you make better, data-driven decisions about placement, pricing, and promotions.
Use historical sales data and other point of sale (POS) data to designate items as fast-moving, steady-selling, slow-moving, stagnant, or seasonal. Factor inventory turn and profit margin into your classifications, then position your fastest-moving, highest-profit-margin items in prime locations for convenience. However, consider that staples, like bread, milk, and sugar, won’t need prime locations, as people will seek these items out regardless of placement.
Apply temporary price cuts or cross-merchandising around slow sellers to encourage movement. Keep close tabs on stagnant products to determine if you need to stop carrying them altogether.
Tip #2: Establish Reorder Points
Next, you will want to set dynamic reorder points for every product in your catalog. Examine point of sale data to see the average weekly or monthly demand for your products, taking seasonal variability into account.
Related Read: How Grocery Store Inventory Leads to Increased Profits
Additionally, examine lead times and supplier timelines, then build in reorder buffers to avoid stockouts while avoiding overstocking. The goal is to maintain sufficient availability while minimizing excess inventory. Enable reorder alerts at specific par levels to simplify these processes and ensure that you don’t miss out on a critical restock and cost your store essential sales.
Tip #3: Use FIFO (First-In, First-Out)
First-in, first-out inventory management is a strong inventory method for many retailers, but it’s especially vital for grocery stores. This inventory management system moves older stock first to maximize product freshness and shelf life. This process can minimize losses due to on-shelf spoilage.
Design clearly labeled storage zones and train staff on back-stocking procedures. Use labels noting expiration dates and log periodic waste audits to further dial in ordering for demand.
Tip #4: Build Buffer Stock
You want to minimize the amount of excess stock you have in your backrooms. However, you need some safety stock on hand to prevent yourself from running out of top-sellers during peak times. Dedicate specific areas on the retail floor and backstock. These areas hold safety stock buffers of your fastest-selling SKUs.
Keep these additional units on standby if demand unexpectedly surges beyond normal volumes or supplier delays arise. You can leverage historical sales data and volatility patterns from your point of sale reports to dictate which items warrant safety buffers.
Tool #1: Inventory Management Software
Strong inventory management software is the most critical tool for grocery store owners to manage their inventory appropriately. Your inventory management solution should give you real-time visibility into your stock levels. If you invest in a cloud-based solution, like IT Retail, you can access this data from anywhere with an internet connection, allowing you to keep tabs on your business at all times.
Invest in inventory management software that’s built into your point of sale system. This integration ensures that inventory is updated with every sale. You can also leverage low stock notifications and reorder thresholds to receive alerts when you’re running out of stock of a top-seller, allowing you to replenish your stock before you lose any sales.
A robust inventory management solution should provide actionable visibility into shelf life, waste, dead stock, and other metrics while enabling seamless cycle counting. Prioritize a user-friendly system to encourage employee adoption.
Tool #2: Integrated Barcode Scanners
Integrated barcode scanners speed up receiving, picking, and ringing while minimizing the errors that come with manual entry. You can use barcode scanners to scan and update your inventory management system during receiving, manual inventory counts, and sales.
This granular visibility facilitates simpler cycle counts. You can also leverage scanning to confirm order accuracy on delivery and connect discrepancies directly to supplier records, helping you improve your vendor management efforts.
Tool #3: Digital Scales for Receiving
Grocery stores often sell products priced by weight. Deli meats and cheeses, items from your butcher counter, and some produce all fall into this category. So, digital deli scales are likely already on your equipment list.
But what about scales for receiving?
Digital floor and pallet scales verify incoming order weights and quantities down to the pound upon delivery. You can then record variances automatically into the inventory system and supplier records for recoup if needed while confirming billing accuracy. Then, use this data to compare weights shipment-over-shipment to identify potential supplier issues.
When selecting equipment for these processes, choose durable scales with easy-to-read displays. These should be user-friendly for your staff, while also handling heavy commercial volumes.
Tactic #1: Perform Daily Cycle Counts of Fast-Movers
One critical tactic every grocery store owner should implement to improve inventory management is to keep a close eye on fast-moving inventory with regular, daily cycle counts. Conducting daily counts of your top-selling items enables quick management of these items and prevents out-of-stocks through close monitoring.
Use historical averages to determine the ideal frequency item by item. You should always record results for auditing, including what's over or under and by how much. Analyze for trends that may point to process issues like consistent departmental shortcomings.
Tactic #2: Conduct Full Inventory Audits Monthly
Though advanced inventory management software can minimize your need for manual inventory counts, you should still conduct a full physical inventory count every month if possible. These regular product tallies help verify the accuracy of your inventory records and ensure there aren’t any gaps in your existing inventory processes.
Use barcode scanners to scan each item and import totals into your inventory system, adjusting stock levels to match. Identify opportunities to improve based on adjustments needed. Where is accuracy lacking, and why? What's the value of true shrinkage recorded? The answers to these questions can help guide your future inventory processes.
Tactic #3: Implement Random Spot-Checking
Unplanned spot checks aren’t a replacement for scheduled, full-stock tallies, but they are essential to keep a firm handle on your inventory counts. When employees don't know if a surprise inventory sample is coming, they adhere more closely to inventory accuracy best practices daily and may be discouraged from stealing.
Related Read: Grocery Employee Theft: Is Your Team Stealing?
Loss prevention is a key advantage of random spot checks, but you should be sure to remind your staff that the goal is systemic accuracy rather than a process designed to target employee faults.
Tactic #4: Remove Discontinued and Seasonal Items Fast
Finally, you should quickly delist any discontinued, seasonal, or obsolete stock. When you remove these records from your inventory management system, you prevent yourself from wasting valuable storage space on products that will not sell.
Transferring these goods out provides an accurate picture of store inventory to inform purchasing decisions, while freeing up room for new products. It also reduces shrinkage from devalued dead stock.
Take Control of Your Grocery Inventory Once and for All
Reining in grocery store inventory despite challenges like perishable goods, thousands of SKUs, and dozens of product categories isn’t easy. These tools and tactics can all help you develop an inventory management process that allows you to handle inventory for your store without wanting to tear your hair out.
The most crucial piece of your inventory management puzzle is the right technology. The right point of sale and inventory management solution is critical to helping you manage reordering processes, expiration date tracking, customer sales patterns, turnover, and more.
IT Retail is a point of sale solution built with grocery stores in mind. Our all-in-one solution integrates inventory management with flexible payment processing, self-checkout systems, barcode scanners, and custom label printers, giving you all the features and tools you need to manage inventory and sales.
If you’re ready to take control of your inventory while connecting operations, it's time to explore smoother-running retail solutions. Schedule a demo with IT Retail today.