Here are a few of our most important ideas to manage your inventory well and get the maximum return on your investment.
By David Brown, President of Edge Retail Academy
A quick review of your balance sheet will show you where your business investment is concentrated and I’m sure it will be no surprise to find that the biggest asset your store has is its inventory. Depending on the size of your store, it may be a couple hundred thousand dollars up to several million. Regardless of which end of the spectrum you sit, your inventory will be a significant part of your business and the number one balance sheet asset you need to manage.
Effective inventory control involves having a system that minimizes the investment you need to make to gain the highest level of sales. It will also help you manage your stock-turn, the other most important factor in maximizing the return on your investment.
Here are a few of our most important ideas to manage your inventory well and get the maximum return on your investment:
Forecast
Setting budgets is an important part of your inventory management. This should be your benchmark for what you need. Forecasts will always have a margin of error but can be an effective predictor for demand.
Keep the old items moving
Your best inventory has an ability to manage itself. It’s the items that are slow to sell that cause the greatest drain on funds and bottleneck in the system. Ignoring them is not the answer. You need a systemized approach to reviewing non-performing product and a plan to recoup your investment.
Use your software tools
Your inventory system is your friend. With a touch of a button, it will help you identify and manage the good and bad performers within your inventory. Inventory is a constantly changing paradigm, however, today’s fast seller can be next year’s dead item. Regularly hecking your reports will identify these items and present you with an opportunity to take action in a timely manner.
Run an audit
When did you last run a spot check your inventory? Do a category specific inventory. Are the records accurate? Chances are if you are well out in this area you may have systemic issues that could be happening elsewhere. Periodic audits help with accuracy and help with shrinkage.
Focus on the big-ticket items
To paraphrase George Orwell, all inventory items are equal, but some are more equal than others! Your big-ticket items represent the most significant part of your inventory and require the greatest level of management. A handful of your biggest rings can be 20-30% of your total store inventory in dollar value. These items may need closer management as even moving one old item out can have a significant impact on your bank balance.
Watch for inventory creep
Is your inventory investment constantly increasing faster than your sales growth? Inventory should maintain a consistent ratio to sales. If you are encountering inventory creep, it’s a good idea to adopt a dollar in – dollar out policy in terms of what you are spending
Double check your orders
Make sure customer orders are picked up in a timely fashion. Custom orders shouldn’t be sitting around on the inventory report for any length of time. They either need to be collected promptly or you need to double check your system of inventory treatment.
Get inventory into the system and out on the floor promptly
Fast sellers start with fast turnaround. If an item sells every 20 days and it takes you 10 days from the last sale until the items is received, processed and put out on the floor then you are losing potential sales. Review your turnaround and look for bottlenecks that can be removed to speed things up.
Published in The Retailer Jeweler.
About David Brown
David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact inquiries@edgeretailacademy.com or Phone toll free (877) 5698657