A POS system should integrate a sale. At the most basic level, a POS system is more than an inventory logger. This is especially important in a liquor business, which often involves bulk quantities, multiple sizes, multiple stores, and rapidly fluctuating demand. Most importantly, this means establishing the connection between the POS and inventory, so that the two keep each other up to date.
POS Transaction to Inventory Event
Let’s begin with the simplest application.
Customer buy → POS transaction → Inventory event → Restocking report
A purchase results in a transaction being made in the POS system.
This transaction contains relevant information about the sale: the item, the quantity, the price, and the time and place of sale.
This information can be used to update the inventory in turn.
Here’s an example:
Item ID: 1042, quantity: -2, location: Store A, at 14:32
This is simple enough for the inventory system to understand.
Once this event is processed, the inventory quantity for that item will be updated.
In this sense, the POS and inventory systems essentially communicate directly: the POS reports sales, and the inventory tracks the sales in turn.
This, in turn, allows the inventory to build a restocking report based on the sales.
This approach entirely removes the need for double-entry bookkeeping: a sale is registered once, in the POS system, and the inventory is updated automatically.
The Importance of Data Consistency Between Systems
However, the primary issue with this approach is data consistency.
If the POS and inventory disagree on the quantity, then it becomes impossible to know which one to go with.
The two systems must communicate to keep the data consistent.
This communication can take many forms, depending on the architecture of the two systems.
Either way, it is necessary to ensure that the data is kept as consistent as possible.
In any case, the inventory system should have up-to-date information on its items, in order to make correct restocking recommendations.
Automating Manual Inventory Updates
This brings us back to the problem of manual inventory updates. The primary issue with manual updates is the opportunity for human error. It becomes a burden on the staff to keep track of sales, and update them in turn.
Physical inventory counts serve to correct any errors that have occurred since the last count.
However, these discrepancies can be a sign of other issues, such as misreceived items. If the staff has to update the inventory twice once for a sale, and once for a purchase, it becomes a serious burden.
The integration of POS and inventory systems would help to reduce the number of manual updates necessary for bookkeeping. This is especially important in liquor stores, where there is often a need to keep track of large inventories.
While physical inventory counts still serve a useful purpose, the number of manual updates in between can be greatly reduced.
Using POS Data for Inventory Insights
As a POS accumulates more sales data, it can begin to make predictions about the inventory based on that data.
This allows answering questions such as: Which items sell the fastest? Which ones tend to stay on shelves? When do sales increase? Which items tend to reach their reorder point the quickest? How do sales vary between locations?
This, in turn, can be turned into a forecast: a request for more stock, based on historical sales.
This is an example of a sale being used for inventory insights:
Sales data → Analysis → Forecasting → Replenishment → Inventory
Here, the inventory isn’t just a list of items in stock: it is a dynamic entity that reacts to sales in real time. This allows a more data-driven approach to restocking and inventory management.
Adding More Technologies to the Mix
POS systems are often part of a larger inventory tech stack.
These technologies can serve to enrich the data from the POS or provide additional functionality.
Barcodes
Barcode scanning is a convenient addition to any POS, as it allows for quick and accurate identification of items during a sale.
RFID
RFID can help to identify and track RFID-enabled items: this is useful in larger-scale operations, where there is significant inventory.
IoT
IoT devices can be used to provide additional data or react to events from the inventory system.
Analytics
Analytics platforms can analyze the data from the POS and inventory systems in order to find patterns, predict future demand, or flag outliers.
Automation
Automation can be used to accelerate the process, and reduce the number of manual steps in the workflow.
These technologies don’t have to exist in isolation: they can work together with the POS and inventory systems to create a more comprehensive overview of the warehouse or retail space.
The important thing to keep in mind is that the data from these technologies can enrich the data from the POS, and in turn make the inventory more accurate.
Tracking Inventory Across Multiple Locations
Multi location retailing has different requirements for inventory tracking.
As a multi-location POS system, you have another problem to solve, not only do you need to track inventory, but you also need to know where it is.
A central inventory overview can be useful in this case, as it allows seeing the aggregate value of inventory.
Having one central POS with multiple locations allows building an inventory overview that covers all locations.
This, in turn, can be leveraged to make more informed restocking decisions.
That is, if one location has plenty of stock, and another one is running low, it may be worthwhile to redistribute some of the excess stock between locations, rather than purchase new items from the supplier.
This is especially important at larger scales, where the opportunity cost begins to matter.
Design Notes for Developers Considering POS and Inventory Integration
When building or buying your inventory system, it is important to consider your options carefully.
There are several factors that have to be considered when connecting a POS system and inventory system.
Data consistency: what happens when the two disagree on something?
Identifiers: are the identifiers consistent?
APIs: what API does the POS provide? What does the inventory use?
Error handling: how are failed inventory updates handled?
Concurrency: how are overlapping transactions handled?
Security: who can modify inventory values?
Scalability: will the system be able to handle larger operations?
Auditability: can the changes be tracked?
There are more considerations to be made, depending on the larger application.
For instance, if the POS has to interface with other applications, such as ERP, warehouses, or accounting software, those considerations have to be made as well.
It is important to ensure that sufficient measures are taken to ensure that the data stays consistent between the two systems.
Summary
Modern POS systems enable liquor merchants to take everyday sales and turn them into valuable inventory data.
A single customer purchase can generate an inventory event, which in turn can be used to update the inventory.
With enough data, the inventory in turn can generate restocking events: a form of forecasting, based on historical sales.
This turns a list of items into a dynamic, living entity, which helps to ensure that the shelves are always stocked, without buying excess. It is this combination that creates the most value for the developer: the ability to make decisions based on enriched data.
For liquor merchants, this means fewer stockouts, fewer missed sales opportunities, and lower inventory costs.
This is just the beginning of a larger discussion around the inventory tech stack.
When it comes to inventory tracking, management, and enrichment technologies,(https://theinventorymaster.com/) has more information on the topic.
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