Efficient Inventory Management Keeps You on Top of Margins During Frequent Price Changes
Supply chain issues that trace back to the outbreak of the coronavirus. Rising wages due to the labor shortage. The economic fallout from the war in Eastern Europe. It’s no wonder why the price of consumer goods has risen faster than a day trader’s blood pressure at the opening bell. If you’re a retailer today, keeping up with the constantly fluctuating prices can seem daunting. However, there are ways to keep up with the frequent price changes with efficient inventory management and maintain your sanity at the same time.
According to a 2022 survey by the U.S. Chamber of Commerce, two-thirds of small businesses had raised prices over the past 12 months. Thirty-three percent also saw inflation and its accompanying price increases as their No. 1 challenge.
While rising prices might be a concern to the retail industry, it’s a fact of life for most hardware retailers. The supply chain disruption has caused frequent price changes and product substitutions for many hardware suppliers. Price increases occur with each order and unless they are closely monitored and managed, they can cause more problems than a loss in margin or profit.
Risk is greater than lost margin
Hardware Retailing recently detailed how one business innocently ran afoul of its state’s division of weights and measures when some products didn’t ring up correctly at the checkout stand. Responding to a customer complaint, the regulatory agency tested the store’s pricing practices and delivered a failing grade.
The store worked for weeks to check and double-check pricing. Managers turned off all their supplier’s computer pricing downloads for two weeks to make sure items were properly priced. And even then, had to jump through a few extra hoops to pass the second test.
If the store hadn’t passed the second test, it could have been subject to a heavy fine and further testing that would result in even heavier penalties.
Routine price increases
As was mentioned earlier, price changes are routine in the industry. Brian Flande, manager of Phil’s Hardware in Central Oregon, says his stores get up to 4,000 price changes with each order. That makes keeping up with them difficult, to say the least, especially when finding and keeping staff is so hard.
Rising costs of manufacturing, labor and shipping, along with increased labor costs at the stores directly lead to higher ticket prices. This all leads to many stores struggling to manage their inventory and maintain their profit margins.
According to Deloitte’s retail outlook for 2023, only about a third of retail executives are very confident their companies can maintain or improve profit margins this year. Two-thirds of the study’s respondents expect the price of goods will be more important to consumers than brand or retailer loyalty.
Flande manages his inventory and monitors his price changes with software from Paladin Data Corporation.
More accurate inventory management
Modern point-of-sale systems can’t solve all the problems involved with the increasing prices of consumer goods, but they can help stores manage them.
Comprehensive POS systems provide ordering assistance based on sales history, which further speeds up ordering and improves the efficiency of inventory management.
Ross Martin, owner of Caledonia Village Ace Hardware, uses just such a tool – Paladin’s Suggested Order™. He says it has allowed his store to keep an in-stock percentage of 97% to 98%, which he says helped him earn Ace Pinnacle status as a top-performing store multiple times.
“Our store uses Suggested Ordering 100%. Ace considers 95% really good and we’re always above that,” he says.
Some POS systems also allow stores to order from multiple EDI suppliers, which simplifies and speeds up ordering and receiving.
Modern retail technology helps stores accurately manage both inventory levels and price fluctuations. Stores just need to implement and trust the technology. Doing that will not only reduce out-of-stocks and assure margins, but it will also enhance customer service.
“You have to let technology work for you rather than you working for it,” says Dan Nesmith, owner, president and chief technical officer of Paladin Data Corporation. “Allow technology’s use of sophisticated forecasting models to automatically tailor your inventory to meet your customers’ expectations.”