Taking small steps in managing inventory can mean big savings for your store operation.

By Jim Callahan

Inventory management is a pain point that plagues many convenience stores. Without an effective strategy, retailers can make critical mistakes such as tying up capital in excess inventory and even missing sales opportunities due to out-of-stock products.

Attaining and then maintaining effective inventory control doesn’t begin with that ‘twice monthly,’ ‘monthly’ or whatever timetable you choose to count your inventory.

I have been in retail management since 1968. Like most, I struggled to control inventory and shrink, but like some, finally found the right formula for effective inventory control.

In my experience I’ve gained a bit of insight on this super-critical subject and want to share my perspective on ways to improve inventory processes.

INVENTORY NUMBERS
Over the last 15 years of working in the very busiest stores that fell under my tutelage, we maintained an inventory loss of less than 0.5%, on average, with the worst year seeing a loss of 1.2%. At the time, the national average was 1.8%, according to the National Association of Convenience Stores (NACS).

Done right, creating inventory checks and balances might include seemingly minute and unrelated items, but will often come together to form a sound system. Namely:

• You must be absolutely dedicated to details, which fosters the results you desire.

• Always keep your store clean, neat and inventory-ready. Neither customers nor inventory crew are comfortable touching dirty or gross merchandise.

• Coolers are especially critical as they house a great deal of high-cost items often targeted in employee theft. Well-managed coolers are also easier to inventory.
Dimly-lit, messy coolers, tipped cases, out-of-place product, half cases shoved under full cases and a really messy return area are a welcome mat for inefficient inventory control.

• In the back room, areas that have space constraints and low visibility are also high theft targets. It’s also hard to manage inventory items that are stored in such cramped areas.

• Most tobacco products and packaging are small in size, making them easy to steal and conceal. The high cost and desirability of cigarettes and other tobacco products make them some of the most sought items. So, making incoming and outgoing employees do a complete pack count at every shift change is a good policy to have in your store.

Most employees and even managers will argue on this subject and the first couple of weeks of counts will frustrate everyone. However, once they realize that’s a company policy and non-negotiable, it will soon become part of the everyday inventory routine. In fact, good employees will derive a great deal of pride and satisfaction about “taming the beast.” With this seemingly impossible task under control, management and employees are now poised for other inventory victories.

• A large part of our success occurred after we instituted a simple, easy to administer rewards program for things such as a strong, professional attitude, cash control, good appearance (inside and out), suggestive selling and for attaining and the maintaining inventory control.

You can decide on the rewards and the number of operational criteria. The bonus doesn’t have to be huge either, but it does have to be meaningful to your employees, otherwise they won’t have an extra incentive to perform to expectations.

• One of the first steps is making sure the paperwork is done correctly from the moment the product is first delivered. It’s not possible to successfully check in inventory from behind the cash register or without touching it. What’s more, vendor theft is far greater than you imagine and often involves your favorite vendor.

• Lastly, all your good work and effort is for naught without a great inventory crew; do what you need to do to find yours and be willing to pay a premium price for it. In my travels, I have found the great ones difficult to find.

So many other details go into inventory control, like velocity reports and eliminating slow movers, etc. But as Bugs Bunny often said, “That’s all folks.” Just don’t allow poor inventory control to eat away at your carrot.

Jim Callahan has more than 40 years of experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog  appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at [email protected].