Inventory: Never the Right Amount – Part 1
By Josh Coughlin, CTO Enhanced Retail Solutions LLC
As David Matsil use to say in one form or another at every meeting, “It is all about the inventory”. The exact wording would change, but the sentiment was always the same- fix your inventory and 90% of your problems go away. In the next few blogs, I want to explore the different facets of inventory and how it can be “fixed”.
For the first part let us dive into leftover inventory. It is those small quantities- 200 units here, 500 units there- that for some reason or another never make it to the retailer. I get it, the focus is on the 100,000+ unit orders. However, there may be an order that was supposed to ship earlier that was missed or for some reason never got routed. When I worked at a manufacturer most people did not focus on these small units except for the CFO or COO. They would bring me a report every week showing by style the odds and ends remaining in the warehouse. The age- how long it had been sitting on the shelf- was highlighted, especially for fashion items that have a short shelf life. If I did not find a place for it with the buyer/planner it could end up sitting in the warehouse for months or (heaven forbid) years. Every day the cost of maintaining the space was tying up capital that could be deployed to better use. The end of life for these items is commonly the same, sold off in bulk for pennies on the dollar. Having to remove labels for branded product or selling private brands to parts of the 3rd world add more complication and cost to it.
What can you do to make sure these missed units do not become lost in the warehouse to be sold off years later for pennies? If it is a fashion product you must act quickly. If the life of a program is only 12-13 weeks and it takes 3-4 weeks to get from your warehouse to stores, it does not leave much time for analysis. Luckily since this is a small quantity there will always be some subset of stores within the chain that sell through the products better than others. Within the first 2 weeks of a product launch seek out those stores. They have high sell through and higher rates of sale. The buyer is probably looking at total chain performance which could be substantially lower. Most buyers are stretched thin with limited resources and a fresh battery of fire drills on a daily basis. They are not going to focus on a small quantity you missed shipping. It is up to you to do all the work and show the buyer or planner how to best allocate them. In essence you are removing the risk of shipping of those small quantities. Using ERS reports you can automate a job that would take hours to do manually, making your CFO/COO, retail buyer and planner and ultimately the customer happy because their size or color is in stock.
Coming up in Part 2: How to Deal With the Dogs. For more information on optimizing your inventory turnover, contact us.