Man stocking shelves with food items.
Leverage an item-level management solution to keep your shelves stocked with all your best-selling items.

The year was 1989. The fall of the Berlin Wall signaled the beginning of the end for the Cold War, and an eruption of student-led political activism in China culminated in the Tiananmen Square protests. Against this backdrop of tumultuous world events, a then little-known Texas-based software company called PDI released “Management and Information Systems in the 1990s.” Among other things, we predicted the end of retail inventory and the advent of item-level inventory.

So, what is item-level inventory? Item-level inventory is one of the most effective methods for enhanced inventory control and accuracy. It allows you to maintain and track inventory at the unit level with full item detail. Comparatively, retail inventory allows you to track inventory groups, which, among other things, sacrifices accuracy and often perpetuates higher shrink levels.

While we’ve made significant progress in the three decades since publishing that paper in 1989, the convenience retail industry still hasn’t achieved mass adoption. The primary reason is simple: item-level inventory is hard work. That statement was especially true in previous years when inadequate technology made the process incredibly labor-intensive and difficult to manage. But times are changing. Today, most stores can scan merchandise, and the technology exists to easily track historically difficult inventory areas like foodservice or non-scannable items such as newspapers.

If you’re thinking about moving to item-level inventory, here are a few challenges and benefits you should keep in mind.

Tackling the challenges

Item-level inventory is not easy, mainly because you’ll have to make operational adjustments and provide retraining for your staff. It’s important to recognize the potential challenges and surprises you may encounter and prepare your internal stakeholders to deal with them effectively.

  • Impact to the bottom line: Your bottom line may be heavily impacted when implementing item-level inventory, as it highlights shrink and other holes in your past inventory management process that have otherwise gone unnoticed. In addition, when you switch inventory methods, your inventory re-evaluation may show that your historical valuation of retail was not accurate. This means you’ve been misrepresenting your assets, and it’s typically the result of long-term, uncorrected mistakes over time. In this case, you may have to book a general ledger expense. Ultimately, however, your inventory will be more accurate.
  • Staff retraining: In retail inventory environments, employees will often scan and count by price point. In an item-level inventory environment, this method will completely throw off your inventory tracking levels. To accommodate this difference, staff will need to invest in spending extra time scanning and counting by UPC (universal product code) rather than price point when you first implement item-level inventory. However, this process is typically offset by the time savings and reduction in administrative costs you gain later.

Why switching to item-level management is worth the work

Now that you understand some of the potential challenges, let’s get to the good part! Using the item-level inventory management system helps you make informed decisions about replenishment, so you can continue improving your bottom line. But the benefits don’t stop there.

  • Accurate reporting: Although counting by price point can be a big time-saver, it sacrifices the accuracy of counts by UPC. Switching to UPC allows you to determine exactly how many of each counted item you have on hand. Additionally, item-level inventory eliminates many inventory padding opportunities presented by retail inventory. Each item can be evaluated independently, and high shrink on one item that would otherwise be an immaterial percentage of the overall department is easily identifiable.
  • Enhanced inventory control: Understanding where shrink occurs is a key benefit of item-level inventory. In addition to better analysis of inventory shrink, accurate item-level inventory information with daily movement details allows you to tune minimum on-hand inventory levels to virtually eliminate out-of-stocks. Simultaneously, you can reduce inventory overstocks and reduce your exposure to inventory loss. Item-level inventory allows for tracking cost of goods by site, item and day. This enables more accurate reporting, so you know exactly what each item is contributing to your bottom line.
  • Increased sales: Adjust sales forecasts to anticipate changing seasonal demand, holidays, events and promotions. You can configure stock adjustments based on your store data when determining ideal-stock levels. Create intelligent distributions based on actual sales and anticipate pending distributions when calculating suggested orders.

Utilizing an inventory management system provides the visibility to fully control your store and saves time so you can focus on your customers. In addition, the increase in order accuracy leads to improved customer experience by making sure you always have the right items on your shelves.

When it comes to helping you manage the daily delivery of unforgettable customer experiences, you need software you can count on. PDI’s item-level inventory management solution drives efficiency and time-saving automation into every part of your store-level operation, helping you keep your stores running at peak performance and your customers coming back.

Did You Know: Your Source for PDI News provided by PDI, the leader in enterprise management software for the convenience retail and petroleum wholesale markets.