How Do Grocery Stores Track Inventory? Plus 2024 Trends

Inventory management might be the most important component of running your grocery store. 

Managing stock levels, anticipating customer demand, and minimizing shrinkage require an effective system — and without one, you’re leaving money on the table.

Let’s say you run a small ethnic food store. You’re often busy serving customers, yet your outdated point of sale (POS) system and manual inventory tracking methods are causing financial headaches and operational challenges. Sound familiar? You can turn the tide with modern systems — but change is scary, right?

This article will provide an overview of the current best practices for managing inventory, look at future trends, and show you how to confidently implement new technology in your grocery store.

How Do Grocery Stores Track Inventory?

Inventory management is simply how you track goods and products. This includes monitoring perishable and non-perishable food, produce, canned and packaged goods, and various general merchandise for grocery stores. You have four objectives as a grocery store owner:

• Stock shelves properly
• Reduce spoilage and waste
• Identify fast and slow-moving items
• Avoid out-of-stocks

Sounds simple, right? But, like anything, inventory management relies on airtight management and everyone pulling in the same direction. Good inventory management helps with buying decisions, manages costs, and keeps customers happy.

Related Read: How To Manage a Grocery Store Effectively: 9 Steps to Success

The main components of inventory management include:

• Implementing a solid inventory management system
• Placing and receiving orders from suppliers
• Recording product information
• Adjusting stock levels (hopefully in real time)
• Using data to make better decisions

Integrating all of this is challenging if you’re still using manual methods. Transitioning to a modern POS system with integrated inventory management can make it much easier.

Related Read: 4 Inventory Management Tips To Streamline Grocery Store Operations

What Challenges Do You Face as a Grocery Store Owner?

We touched on this in the previous section, but your struggles go deeper than just staying on top of sales. With manual or outdated methods, you often face challenges like:

• A wide, constantly changing selection of products that makes it tough to keep track of stock levels
• No real-time inventory tracking or insight reports
• No link between front end POS and back office capabilities
• Misplaced inventory due to disorganized receiving and stocking
• No alerts for reorders or markdowns
• Getting wrong orders from suppliers, resulting in spoilage
• Out-of-stock items or theft prevention gaps that cost you money

These problems can quickly add up. The main issue that threads through these challenges is a need for more communication between your systems. With a modern POS solution, you can gain back visibility and control. The result?

• Streamlined point of sale and order management
• Real-time visibility into changing stock levels
• Optimized ordering and purchasing decisions based on sales reports and trends
• Reduced spoilage and waste through monitoring of perishables
• Efficient receiving, transfers, and physical inventory counts

With the right technology, you can turn a constant headache into sustainable growth.

What Does a Robust Inventory Management Process Look Like?

Using today’s modern tools, a typical grocery inventory management process includes:

• Receiving: New inventory arrives, and staff scans items into the POS system inventory database. This includes recording product information like expiration dates. Items are checked against purchase orders

• Stocking: Stock goes into storage, and staff scan shelf tags as they stock products to update on-hand quantities.
• Cycle counting: At specific times of the day, week, or month, you’ll scan products to verify inventory levels are accurate. You can focus on one section at a time, so you won’t need to shut down your store to perform counts.

• Reordering: You can reorder stock as necessary based on data from your POS system, such as sales reports and stock levels. Submit orders to vendors.

• Shrinkage tracking: Compare product received to sales and current stock — this will help identify shrinkage from spoilage, damage, theft, and other factors.

• Demand forecasting: Predict future demand by looking at historical sales data, trends, and promotions. This supports buying decisions.

• Audit inventory: Conduct full physical inventory audits periodically and compare counts to what’s in your POS system.

• Refine processes: Consider performance metrics and business goals to refine your inventory process.

It sounds like a big undertaking, but with a modern POS system and inventory management software, you have the tools to empower your staff and automate parts of the process. Compared to manual tracking methods, you get a more precise and more accurate picture of your inventory.

How Does a Modern Grocery Store POS System Help?

With technology evolving rapidly, you can now automate various parts of the inventory tracking process — and there are more advancements to come.

Cloud-based POS systems offer advantages to grocers. There’s no need for servers, expensive licensing, or complex setups. Many POS systems are ready to use and offer flexibility and mobility. Want to check on your store’s inventory from home? You can with a cloud-based system.

Related Read: Cloud-Based Grocery POS System vs. Legacy POS System: Which Is Right for You?

Inventory management software continues to evolve and become more efficient. Real-time visibility into stock across multiple locations, inventory transfer workflows, and low stock alerts streamline many tasks that once required manual entry across disconnected spreadsheets.

Identifying patterns of overstocking can help reduce food waste and spoilage. Then, look at your stocking methods and consider experimenting with first-in, first-out (FIFO) methods. You can track products to the SKU level, track expiry dates, and optimize rotation and markdowns.

Many POS systems today integrate with e-commerce platforms so you can manage in-store and online orders, as well as inventory, through one system. You can also offer buy online, pickup in-store (BOPIS), even as a small market. Customers want an omnichannel experience.

Note: Your POS system's customer relationship management (CRM) features centralize customer data, transaction history, and purchasing behaviors. Use these insights to inform customer loyalty programs and highly-targeted promotions.

The best modern POS systems have easy-to-use interfaces and prebuilt reports that help monitor sales, traffic, and more. These dashboards are intuitive even for non-technical staff and empower employees to manage your store.

Grocery Trends in 2024 and Beyond

With artificial intelligence (AI) making a splash in 2023, you can expect to see advancements in inventory management tools. What that means for your store remains to be seen, but for now, investing in state-of-the-art POS software is your best bet. That said, what’s on the horizon?

• E-commerce will continue to grow in popularity. Partnering with e-commerce platforms will help your store thrive.
• Customers will start to expect a truly omnichannel experience. For example, they might look at your products on Instagram and visit your e-commerce store before finally making their way to your grocery store. You must ensure they get the same experience across all three channels.
• With financial uncertainty still a significant factor, deals, discounts, and loyalty programs will help drive sales and provide much-needed relief to customers.
• AI will make building and pulling data from reports easier for store owners and staff. Demand forecasting will also become more efficient.

As AI evolves, POS systems and inventory management processes will become more accessible and user-friendly, while offering granular insights. Watch this space.

ANSWERED: How Do Grocery Stores Track Inventory?

Inventory management is integral to your operations, especially for grocery stores. While large chains use enterprise systems to collect and analyze massive amounts of data, independent grocers have a harder time finding the right solutions.

However, with the emergence of more affordable, intuitive, and scalable point of sale platforms, you can now get far greater visibility into your stock levels, purchasing patterns, and sales without breaking the bank. But what should you look for in a POS system?

• Must-have features like inventory tracking, purchase ordering, customer management, and reporting
• Integration with your existing hardware, such as deli and weight scales and barcode scanners
• Tiered but simple pricing
• 24/7 customer support
• Omnichannel capabilities

IT Retail is proud to work with many independent grocers. Our system is designed to offer everything above, and to give grocery store owners the features they need to succeed. Schedule a demo today with our grocery experts and see for yourself!