Effective Inventory Management begins with improving our visibility into actual inventory levels and Virtual Quantity.
Let’s dive into the processes that reveal true in-store sellable quantities through your POS data, and how to better leverage Virtual Quantity in relevant auto ordering and transferring tools.
What’s in Stock?
Separating different statuses of inventory using distinct processes and POS features, helps unleash the power of your system and inform effective decision making.
In iQmetrix’s POS, RQ Inventory is a holistic design; maintaining all facets of the system allows you to drive out the best possible data to inform both purchasing decisions and promotions. By utilizing RQ’s potential, you can gain insight into where investments are sitting in the system and make sure that they are working for you.
You want to ensure you are making effective use of the various status flags like Used, Committed, and Non-Sellable. You want to keep an eye on your inventory which is outstanding on transfers and RMAs. All of these figures roll together to define Virtual Quantity, which is the figure retailers typically lean on to inform purchasing decisions.
Wait… Why Does Virtual Quantity Matter?
Virtual Quantity is the figure which powers the most powerful ordering and stock balancing flows within your POS. Many of our clients who are using RQ to its fullest potential are doing so using the power provided by the Auto Ordering Reports and Auto Transfer Reports.
So, now that we’ve established why it’s important, let’s drill a little deeper into what Virtual Quantity is.
Virtual Quantity is calculated as:
In Stock + In Transfer + On RMA + On Consignment + On PO - Committed On Order Entry
The more accurately you can maintain the components contributing to Virtual Quantity (through timely action and thoughtful processes) the more accurate your Virtual Quantity, and by extension, the more accurate is your capacity to generate POs.
Managing Virtual Quantity
One of the things to watch for as we work to maintain Virtual Quantity are bottlenecks which occur when various inventory processes are left incomplete. Incomplete inventory processes can create distortions in our Virtual Quantity figures, so maintaining these processes end-to-end is essential.
- Review Outstanding Purchase Orders- This can happen if Purchase Orders are left open indefinitely. As a best practice, the only reason to leave a PO open with outstanding product is when more inventory is expected to arrive within the next couple of days.
- Ensure RMAs are Completed- Similarly, neglecting to complete RMAs as either replaced, repaired, credited, or rejected is a common oversight and lingering, incomplete RMAs can inflate virtual inventory.
- Use Non-Sellable Flag- One process this connects to is non-sellable inventory because storing inventory to be RMA’d in a non-sellable status can ensure that these quantities are excluded from virtual quantity.
Tip: If stores are reporting that they don’t have the stock they need, this may indicate a problem with Virtual Quantity.
In RQ, without even having to delve into the myriad of different reports which are available to help audit inventory processes, the Inventory Console itself is an excellent resource to provide visibility on outstanding inventory processes and includes a Days Outstanding column which can be filtered to flag lingering POs, Transfers, and RMAs.
Managing POs, Transfers, and RMAs will become part of your proactive processes because inventory is no longer reactive.
Managing Non-Sellable Inventory
How does your business manage non-sellable inventory? This is one of the most important status flags for your stock. By having items refund to non-sellable status, you can segment them out from your purchasing decisions, while having them remain within the inventory system for effective auditing.
Choices within RQ’s Company Settings allow you to determine whether items default to or are forced to non-sellable status upon refunds. You can select a separate status for serialized and non-serialized inventory.
If you choose to, you can force serialized inventory to non-sellable upon refunds, so that a refunded product will require a manager’s authorization before re-entering the sales floor. Alternatively, you might allow more flexibility for non-serialized accessories by merely defaulting to non-sellable but leaving the rep with the discretion to return a case to the sales floor in the right circumstances.
Finally, non-sellable products are also tied to a non-sellable Reason Code that can help provide transparency as to the circumstances of the refund and whether the items should be returned to the sales floor or not. These reason codes are customizable and can be set up to meet divisions that make sense to your business and employees.
Non-Sellable Products Reports
The Non-Sellable Products Report is your one-stop shop for both auditing and managing non-sellable inventory and used inventory within a location. It also opens up flows for transferring items in and out of these status flags.
The best practice is to run this report frequently. It’s important to be consistent and review flagged items with the expectation that they are either going to be (a) returned to the sales floor (if their condition is acceptable), (b) begin the process of shipping them out on either a transfer or RMA, or (c) to be written off through a quantity adjustment. Most of these processes can be initiated directly from the report.
Used and Consignment Inventory
Used Inventory is a per product default which is usually entered upon refunds. Used Inventory is visible on a non-sellable products report and is typically managed alongside non-sellable Inventory.
While Used Inventory Status works well for most purposes, it cannot be placed on a Purchase Order. As such, if used inventory is something your business stocks on a regular basis and orders direct from certain vendors, it is sometimes worthwhile to instead have these products track on an entirely separate product SKU.
The consignment flow allows you to account for inventory that is technically still in inventory but not available for sale. Consigning a specific unit of a SKU to either a location as part of an in-store display, to an employee to be taken off-site for promotional purposes, gives you good visibility into these assets even as they are unavailable to typical sales processes.
So now that you’ve read this far, I’ll say it again… effective inventory management begins with understanding actual inventory levels and Virtual Quantity. This includes:
- Trade-in inventory
- Used inventory
- Non-sellable inventory
- In transfer inventory
- Inventory committed to RMA
Separating these elements is important at both a system level and also at the physical store level. Improving visibility within a store as to the different statuses is going to help your stores remain organized and better positioned to optimize inventory to sell more.
Interested in seeing how iQmetrix’s POS, RQ, can help you better manage your inventory? We’d love to give you a personalized demo.
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