Supermarket Inventory Management: 7 Steps to Success

Did you know that accurate inventory tracking can increase revenue by 4-8%

Beyond being good for your bottom line, efficient supermarket inventory management is at the heart of great customer service and staying competitive. 

But managing inventory isn’t simple — especially for supermarkets. What can you do to improve your processes and make it easier? In this article, we’ll dive into our top steps to optimize your inventory management.

What Are the Challenges of Supermarket Inventory Management?

At its core, inventory management is how retailers keep their stock – from ordering and storing it to putting it on shelves and selling it. While that sounds simple enough, inventory management can get complex, especially for supermarkets that stock a wide variety of items.

The challenges of supermarket inventory management include:

  • Seasonal demand shifts: Customer demands shift considerably depending on the season. Predicting customer needs so you’re well-stocked for different seasonal events is pivotal to keeping your customers happy. 
  • Perishable inventory: It’s tough to track perishable inventory like produce, dairy, and meat products. Each item has a different shelf life, and not managing it effectively can lead to food spoilage and lost costs.
  • Reliance on manual process: Many small supermarkets still use spreadsheets or dated software to keep track of inventory. Unfortunately, this can lead to errors, shrinkage, and lost opportunities — especially as your business grows.
  • Lack of visibility: With so many SKUs to track, it’s important for supermarkets to constantly monitor their inventory in real time so they can push expiring items or slow-moving stock.

Slim profit margins and an abundance of large competitors make running a small supermarket hard enough as it is. Without an inventory management system in place, supermarkets run into increased costs due to food spoilage, shortages of popular items, and missed opportunities to engage customers.

See How Our Grocery POS Boosts Profitability

Supermarkets vs. Grocery Stores (and Why It Matters for Inventory)

Though supermarkets and grocery stores tend to be talked about interchangeably there are a few practical differences

Grocery stores typically focus on selling a limited selection of essential grocery items, primarily offering food and produce.

Supermarkets sell food and produce, but they also offer a wide range of additional products and services. They tend to have multiple departments and sections that offer non-food items like clothing, cooking supplies, home decor, pharmacies, and more.

The wider range of products and services at supermarkets can make managing inventory more complex than a grocer. Because supermarkets compete with various types of stores, they often have to be more conscious of their pricing.

7 Steps for Successful Supermarket Inventory Management

Small supermarkets are unique and there’s no one-size-fits-all strategy for optimizing inventory processes. But by following these seven supermarket inventory management best practices, you can set yourself up for success.

1. Implement Modern Inventory Management Software

When supermarkets rely on outdated software or manual data entry, inventory management can become chaotic, leading to mistakes, shrinkage, and (potentially) unhappy customers. 

By far our biggest recommendation is adopting a modern inventory management solution specifically built for supermarkets. Many supermarket point of sale (POS) systems have advanced inventory management features built in, such as:

  • Ability to receive against an order or on the fly
  • Unlimited SKUs
  • Real-time inventory visibility
  • Cloud-based functionality
  • Mobile scanning
  • Automatic low-stock reports
  • Integrated vendor and purchase order management
  • Customized reports and shrinkage calculation

The goal of inventory management software is to streamline your inventory processes — from receiving and inventory audits to purchase orders and price setting — so you can free up time to spend on your customers, marketing, and store layout. 

While investing in new software can be intimidating, the benefits far outweigh the risks. If you’re interested in learning more about how a POS system can help optimize your inventory management, check out our free Guide To Grocery POS Hardware.

IT Retail guide to POS hardware

2. Use Sales Data for Demand Forecasting

Demand for many items ebbs and flows. Add to that the seasonal component of supermarket inventory and it can be easy to overstock some items and run out of others. This is why many supermarkets use demand forecasting to try and optimize their stock levels.

What is demand forecasting? In brief, it’s when you compare sales and other historical data to external data (time of day, season, weather, etc.) to discover trends in customer behavior. For example: most supermarkets will see an uptick in turkey and cranberry sales around Thanksgiving and make sure to keep more in stock. 

Of course, most small supermarkets don’t have the same resources as huge grocery chains. But you might be surprised by what your POS system can do. 

The best POS Systems track sales and customer data to create custom reports. These reports help you manage inventory more efficiently and optimize your supply chain by helping you better anticipate customer needs.

You can also see how your sales are doing and compare with competitor prices to adjust pricing on the fly. Supermarkets compete with many more stores, so the ability to make data-driven pricing decisions can be a huge help.

3. Strategically Use Discounts and Offers

When most people think of discounts or limited offers, they think of it in terms of store marketing. And this isn’t wrong — customer loyalty programs are a great way to retain and capture new customers.

However, intelligently using discounts and promotions is an excellent way to move underperforming or soon-to-expire inventory. Monitor your current inventory in real time, including things like:

  • What’s overstocked
  • What’s expiring
  • What’s popular (and what’s not)
  • What the profit margins are for each item

With these metrics, you can make strategic decisions about what to discount, what type of discount to offer (buy one get one free vs. 10% off), where products should be placed, and more.

Some software also lets you group different products to create custom and mix and match offers. This is another great way to upsell customers and keep inventory moving.

Don’t forget your store layout! Put discounted items front and center for a bigger impact.

4. Use the First In, First Out (FIFO) Method for Perishable Foods

Managing perishable foods like produce, dairy, and meat is one of the trickiest aspects of supermarket inventory management. One of the most important strategies to try is using the first in, first out (FIFO) system for food.

The FIFO method helps cut down on food waste by making sure the items you acquire first are the first ones you put out to sell. In practical terms, this means putting older items out front, both in storage and on shelves.

Use your inventory management software to track the movement of goods based on their arrival dates (along with any other product info). This ensures that nothing gets forgotten or slips through the cracks.

Remember, letting food go bad is a total loss — so adopting a modern inventory management solution can help significantly improve your bottom line.

5. Set Reorder Thresholds for Quicker Purchase Orders

Small supermarkets are running on fewer resources and staff, making it easier to lose track of your stock of popular items until it’s too late. 

One way to combat this is to use your POS system to set automatic reorder reminders for popular items. This works by setting an amount threshold for a particular item in your back office software. Then the moment you sell an item and hit the threshold, you’ll know it’s time to reorder.

Pairing reorder reminders with streamlined purchase orders can help keep your customers happy and prevent them from running into an “out of stock” sign at the wrong moment. 

6. Be Consistent With Your Training + Processes

Who handles your receiving? How and when are purchase orders made? How is your storage organized? 

You might have answers to these questions, but does everyone perform them the same way? Consistently handling all of these tasks is key to effective inventory management. 

Having a defined process for onboarding new employees will ensure that all employees are confident and know how to handle inventory. Make sure they understand the importance of stock rotation and how to use your inventory management system.

When you’re a small business, slowing down to train employees can feel like a hassle — but it pays off!

7. Perform Regular Inventory Audits

Regular inventory audits are important for any retailer but particularly important for supermarkets. They ensure that your inventory management processes are working as expected.

Performing regular inventory audits is important to:

  • Ensure the accuracy of your stock levels
  • Identify sources of shrinkage
  • Discover discrepancies.

Shrinkage could be a sign of employee theft, but many times it’s caused by data entry errors. An audit helps you identify these problems early and find their root cause. 

Optimize Your Inventory With a Leading Partner

To sum up, follow these seven steps to successfully manage your supermarket inventory:

  1. Leverage technology
  2. Utilize sales data for forecasting
  3. Move inventory with discounts and offers
  4. Follow the FIFO method
  5. Set automated reorder reminders
  6. Create consistent processes
  7. Audit inventory regularly

Supermarket inventory management can be tough — but with the right tools, it’s a lot better. IT Retail was built by grocers for grocers and comes with the advanced features small supermarkets need to stay competitive.

When you’re choosing a technology provider, partner with a company that is invested in your long-term success.

To learn more about how IT Retail can optimize your inventory management, schedule a demo today.