How to Boost Your Retail Profits with Automated Inventory Management

Inventory management is an important part of any retail business. But if you’re manually handling your inventory or relying on a cobbled tech stack to get the job done, then it’s also the part of your business that’s chipping away at your profit margins.

Simply put – time-consuming, error-prone, and inefficient inventory processes hurt your bottom line. This is where automated inventory management comes in.

In this post, we’ll dive into the essential role of inventory automation in today's retail landscape. We’ll explore how this technology not only improves operational and labor efficiencies but also significantly boosts profits. Plus, we’ll share the questions you should ask before deciding on inventory software for your retail operation.

What is Automated Inventory Management?

An automated inventory management system refers to software that tracks, controls, and maintains stock levels automatically with minimal human intervention. It’s the technology behind streamlining and optimizing inventory for a retail organization.

Imagine your inventory processes on autopilot.

How much better off would your team be if you could significantly reduce the time spent on tedious tasks? Lower the high chance of manual errors? Give them more time to focus on high-value tasks that make their jobs more fulfilling?

That’s exactly what automated inventory management does. For growth-minded retailers, automation becomes a cornerstone of success. Because implementing this system does more than save time – it benefits your customers, your employees, and your bottom line.

Why is Inventory Automation Essential for Retailers Today?

The pandemic led to profound shifts in consumer behavior which moved the digital transformation in retail forward by several years. However, a digital disruption was already underway – the pandemic just accelerated the rate at which retailers had to adapt. Supply chain disruptions, labor shortages, and inflation have only added more pressure to the mix.

Like it or not, we’re in the post-COVID economy. This unprecedented time in retail history means exceptional customer experiences (not just acceptable ones) are more important than ever before.

As Steve Dennis said in his book, Remarkable Retail: How to Win & Keep Customers in the Age of Disruption, “Customers will not lower their shopping expectations and requirements simply because a company is not one of the titans of the industry.”

Regional and mid-market retailers need every competitive advantage they can get. As retailers look for a way to exceed high customer expectations and improve profitability, inventory automation offers a solution.

Top 5 Powerful Ways Automated Inventory Management Boosts Retail Profits

Managing inventory in real-time through an automated inventory management system has many benefits over traditional manual methods (think: awkward spreadsheets, looking at data from disconnected systems, and relying solely on physical inventory counts). Automation allows you to run your operation like a well-oiled machine. This is critical for any retailer, but especially those with multiple locations or complex supply chains.

Now, let’s talk about how implementing an automated inventory management system, like the software included with the FieldStack unified commerce platform, translates to higher profits.

1. Improves Operational & Labor Efficiencies

Automated systems streamline various aspects of inventory management, reducing the time and resources spent on operational processes. This efficiency means significant cost savings, allowing retailers to allocate resources more effectively and focus on strategic initiatives that contribute to increased profitability.

Labor optimization not only cuts operational expenses but reduces the need for mundane tasks like manual stock counting, data entry, and order processing. This frees your team to focus on higher-value activities, contributing directly to increased overall profits.

2. Minimizes Overstocks and Stockouts

Automated inventory management optimizes stock levels by accurately forecasting demand. This prevents overstocks, reducing costs associated with excess inventory. It also minimizes stockouts, ensuring that your top-moving products are consistently available to customers. This balance leads to increased sales and avoids lost revenue opportunities.

At FieldStack, we often see inventory reductions of 14% or more soon after implementation while improving assortments and minimizing out-of-stocks.

3. Reduces Holding Costs

Excess inventory isn’t just annoying – it's expensive.

Efficient inventory management through automation helps minimize the holding costs associated with storing and moving excess inventory. By maintaining optimal stock levels, retailers see a decrease in expenses related to storage space, overhead, and other carrying costs.

4. Prevents Price Erosion

Automation allows retailers to respond quickly to changes in customer demand and market conditions. Optimal stock levels ensure products are sold before becoming obsolete (think: seasonal items like winter coats and holiday decorations).

This means retailers can maintain pricing integrity and avoid resorting too heavily on clearance sales or drastic discounts to move excess inventory. This helps preserve profit margins and sustains the value of products.

5. Boosts Customer Satisfaction and Loyalty

Have you ever looked up a product online and went to the store only to find it wasn’t in stock? Surprise out-of-stocks are disappointing – and costly – when it comes to customer satisfaction.

In fact, a recent Harvard Business Review experiment revealed that customers responded positively to inventory transparency even when items were shown as “Likely out of stock.” Sharing item availability resulted in a 5.33% increase in total revenue per customer over the long term.

Inventory automation helps ensure your inventory is always accurate across channels. The software enables customers to buy products where, when, and how they want. Online, in-store, BOPIS, and shipping items quickly from your store – flexible omnichannel fulfillment paired with accurate inventory is critical for a well-harmonized customer experience.

3 Conditions for Successful Inventory Automation

The key to successful inventory automation is within the data. Every touchpoint and transaction in your retail operation can potentially be leveraged for its rich, actionable data. But “actionable” is the important word there. Because all the data in the world won’t do you any good if you can’t use it.

Here are the 3 conditions your data must meet to launch a successful inventory management system:

1. Your data needs to be collected at every touchpoint — including customer, supply chain, and inventory data.
2. Your data should flow smoothly throughout your retail systems without the limitations of integrations, manual workarounds, or data siloes.
3. Your data needs to be clean and actionable — meaning a single version of the truth is available for real-time insights.

These three things allow retailers to automate giant portions of their operation, making informed decisions based on bottom-line impact.

How to Automate Your Inventory Management

Everything sounding good so far? That’s great – automating your inventory management will put you on the fast track toward a more profitable retail operation.

To get started, you’ll need to decide on a new inventory management system. As you’re shopping around, keep these questions in mind:

1. Does the system offer real-time inventory tracking? The software you choose should be able to track your inventory in real-time. Make sure it can monitor and manage inventory levels, and provide real-time data on stock levels, orders, and sales. More than that, software with advanced analytic capabilities (like those made possible by our Lean Retail Engine) will give you a competitive edge by providing actionable insights.
2. How does the system work with your Point-of-Sale (POS)? Inventory systems connected to POS ensure that sales transactions automatically update inventory records. This significantly reduces the risk of errors at checkout. Traditional integrations can cause errors, but a unified platform ensures the data flows seamlessly across retail systems – including loyalty programs, eCommerce, and more.
3. Can it handle forecasting and demand planning? Automated systems should help with inventory planning by optimizing stock levels while avoiding shortages or overstocks. For example, our unified platform leverages AI and machine learning to find patterns, analyze historical data, and identify trends for forecasting future demand.
4. Will it improve your order management processes? An automated inventory management system will streamline the order fulfillment process at every step – from receiving purchase orders to picking, packing, and shipping products.
5. Does it include warehouse management capabilities? Retailers know that inventory management is closely tied to your supply chain and warehouse functions. The same system that handles inventory should offer warehouse management system (WMS) capabilities for true efficiency and automation.

While it’s possible to use a point solution for automated inventory, another integration to your tech stack won’t be as effective as a single unified platform that connects your retail systems. With disconnected systems, you run the risk of data silos and mismatched inventory – potentially defeating the purpose of automating your inventory in the first place.

Regardless of which system you use, each tech partner will have a different onboarding process and steps for automating your inventory processes. Make sure you’re comfortable with the partner you choose and don’t be afraid to ask questions.

Get Started with FieldStack’s Unified Inventory & Supply

If you're looking to grow your retail chain, inventory automation will help set you up for success.

At FieldStack, our inventory automation software is part of our unified commerce platform. Built on Lean Principles, the platform takes the complexity out of tech so retailers can achieve omnichannel excellence, create great customer experiences, and profitably grow their businesses.

Our unified commerce platform shares real-time inventory data automatically across systems, so you can experience the transformative impact of resource and flow efficiencies. Optimize your operation with a retail inventory management and supply chain system, a warehouse management system (WMS), and a logistics solution – all in one.

Ready to get started? Book your demo now!