Helpful tips for retail leadership, finance, and budgeters everywhere to consider to help lower costs.
As any retail finance or operations expert knows, a sound strategic plan and budget is imperative to success. These 5 tips below will help illuminate inefficiencies and common mistakes in the retail budgeting process. But these budgeting tips aren’t just for finance teams or your retail leaders, these are factors that the full team should be aware of and help improve.
- Account for Human Error
- Cut Down on Waste and Unused Materials
- Accurately Track All Costs
- Consolidate Your Services
- Fully Optimize Your Space
1. Account for Human Error
While demand planning and inventory tracking has come leaps and bounds in recent years with more comprehensive software, there are still common human errors and misjudgments that can affect your retail operations budget.
One area that can impact your budget in a negative way is incorrect estimates by your team. Are your budgets relying too heavily on goals that may be unrealistic? Is the most reliable historical data being referenced?
There are also instances where operations or purchasing teams don’t fully trust software estimates and may favor their own intuition. Also, consider how they may be rounding up customer order estimates. If the majority of your team is rounding up and overestimating, your company could end up with wasted product and lost revenue. Talk openly with your broader teams for insight into issues like this and work together to make a realistic budget that everyone feels good about.
2. Cut Down on Waste and Unused Materials
Through proper forecasting and demand planning, your retail operation should be able to more accurately predict materials and retail operations supplies. Start by conducting a waste audit and then review where you may have unused materials and excess inventory. Perhaps there are redundancies among products and situations where one inclusive product could do the job in place of two.
Packaging waste can often be a large drain on budgets. Consider if your operations team could use less filler or no filler, smaller boxes, or recycle or reuse boxes.
Gathering intel to order the correct quantities to avoid overage or waste requires input from broad teams from different departments. Ask for feedback from all aspects involved on how waste could be cut down and processes simplified.
3. Accurately Track All Costs
Even the largest companies with stringent cost tracking can have inaccuracies and overlooked costs. Some factors to consider: Are employees guesstimating their mileage or reimbursements versus reporting actual costs in real-time?
Unused or duplicated services is another common budget suck, especially at large companies that analyze costs separately or that are working in a silo. Look at whether your retail operations budget include services, products, subscriptions or software that aren’t used or if you are paying for unnecessary users, etc.
Another common error in retail budgeting is not fully capturing the cost of damaged goods and the implications full cycle: disposing of broken goods, reshipping, repackaging, customer service time, insurance, etc.
It’s been reported that the cost to reship a damaged item is 17x more than the original cost, according to PMMI.org. We dove further into the true cost of in-transit damages in a recent blog if you’re interested in learning more about some of the lesser considered aspects of retail damages.
4. Consolidate Your Services
One area that can almost always be improved in retail operations is increased consolidation. Make a comprehensive list of your vendors and services and see where there is overlap.
Creating consistencies among all stores to reel in wildcat spending from management is another important area in cost savings for retail. Store managers may each have different vendors they use for store supplies, cleaning products, packaging and more. This can be expensive and make it hard to predict costs. These managers may also be over-purchasing or under-purchasing, resulting in more orders and added shipping costs than is necessary.
Look into consolidating your vendors, your services, your operations supplies, and/or your shipping. Can you get your retail signage from the same company as your janitorial supplies? Could you order larger quantities and receive fewer shipments at a lower cost?
Not only will this lower your retail operating budget, but this type of efficient consolidation benefits the environment as well.
5. Fully Optimize Your Space
Maintaining a clean and organized warehouse or backroom is key to efficient operations. Make it easy for your retail team to see the inventory they have on hand and group similar items together. Remove excess inventory and clearly labels items to ensure they can be found quickly and easily. Sorting items by turnover ratio is another best practice to streamline warehouse operations. Make the most of your warehouse and operational space through vertical shelving or shared shelving. Consider whether you could share warehouse or inventory space with another item or function. What else would you add to the list of ways to optimize your retail operations budget? Share this blog and let us know!
