4 Tips For Hoteliers to Manage Retail Inventory Better
Managing inventory for retail outlets isn't always second nature for hoteliers. It's a bit different than managing room inventory...after all, you can’t swap out your rooms for better ones! There are also two big differences in optimizing the retail product mix for peak profitability: what's on the shelves directly impacts how much product is sold, and what's kept in inventory (and for how long) affects overall profitability.
The main objective for inventory management technology is to stock the items that guests want, and keep just the right amount of those items in stock to meet demand -- all without over ordering and leaving too much money sitting on the shelves (especially important for perishable goods).
When deployed properly, inventory management can also help with:
Efficient use of limited storage. Most hotels are starved for space. An inventory management system keeps you're ordering streamlined and minimizes carrying costs or wastage from spoiled inventory.
Choosing winners and losers. As we noted above, the main objective is to get the right items on your shelves -- and keep them there. Inventory management technology separates the winners from the losers, so you stay streamlined on stocking inventory.
Promotions and other marketing activities. The technology can guide you in creating promotions centered on high-profit items.
Start practicing healthy inventory habits: here are 6 tips to help you run your hotel’s retail operation like Amazon. For this article, we'll be using Infor POS as our reference vendor to illustrate the functionality that helps build these habits quickly. Infor's point of sale pantry management solution automates highly profitable lobby retail outlets that grow incremental revenue.
#1: Know the costs of your inventory
Successful retail inventory management starts with a solid foundation. There are three key terms to understand:
Ordering costs. This is the amount of money that you spend on ordering items from vendors, as well as the labor cost associated with making these orders. That second bit is often overlooked! If your staff spends hours each week counting inventory and making orders, it's going to cost you a lot more money than just the goods themselves!
Shortage costs. This is the amount of money that you lose from having items out of stock, as well as the opportunity costs of tying up cash in inventory. For example, running out of sunscreen in the middle of summer would lead to lost revenue at your lobby store!
Carrying costs. This is the cost of storing your inventory. Each square foot of space has a sunk cost; you have to carry that cost for each item in your inventory.
Once you get a handle on these three costs, you’ll be well-positioned to optimize your retail operation. With a point of sale solution like Infor, your hotel will have real-time visibility into these key metrics to make better decisions around merchandising and stocking.
#2: Practice FIFO
Healthy inventory habits extend to ensuring the health of your guests. Don’t underestimate the importance of using FIFO, or First In First Out, when managing inventory. FIFO means that you won’t waste money on throw away expired goods. This means that staff will rotate stock, and put the fresh items behind the older ones when restocking shelves.
FIFO also has a side benefit: it actually makes for more accurate inventory counts. Inventory management solutions can trigger alerts for expired goods based on shelf life which saves time. When you train your staff to always rotate and stock from the back, they take more time with the process. This leads to more consistency in both how items are stocked and how inventory is counted.
#3: Be strategic about your SKUs
“SKU” is an acronym for Stock Keeping Unit, the global standard in product management. Each product has its own unique SKU, like a fingerprint, so that individual products can be accurately tracked. Each SKU takes up space on the shelf, and a strategic inventory manager will analyze the carrying cost of each SKU to determine whether it's worth it. Unless there’s a reason to keep a product stocked, such as certain necessities, underperforming SKUs would be discontinued. In an ideal world, only high-performing SKUs would remain.
Smart SKU management also means that you make bulk orders wherever possible. There’s cost savings to ordering in bulk, so hoteliers should strive to balance those savings with the carrying costs of storing inventory in the back of the house.
#4: Use data to shape product mix and placement
Each transaction provides a window into a guest’s mindset; from the time of day to the items purchased to the guest’s length of stay, the metadata is an important piece of the retail puzzle. This information identifies your winners and losers, which then keeps your inventory tight and focused on your guests’ actual needs. Any unexpected discoveries should influence your product mix -- and how it’s displayed on the shelves.
A vendor like Infor POS has a massive database of transactions that helps with these product and placement decisions. This database of over 5 million helps it make recommendations about what to stock (and how to display it). That way, you benefit from industry-wide benchmarks and won’t have to only rely on instinct or habit to decide what guests prefer. It’s like having a dedicated store manager -- but without the labor cost.