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Christmas is two weeks away.
Time to focus on the “science” part, the numbers part, of “the art and science of inventory management.” The march has begun toward a vital, critical touchstone – your 12/31 targeted ending inventory level.
On that date, you must have appropriate inventory levels and mix for the months ahead – plus the cash to pay for it!
This is the moment an “ending inventory enforcer” must step up.
And here's a quick and easy – and free! – way to know what that target ending inventory number should be. By department. It's all based on your turnover rate for each department.
Here's how it works. For each department:
Convert the turnover rate into months of supply.
For example, 4 turns divided into 12 months in a year equals 3 "months of supply of inventory @retail", what we call "one turn's worth." (Similarly, 3 turns divided into 12 months equals 4 “months of supply @retail”, and so on.)
Add up "one turn's worth" of sales.
For example, at 4 turns: add up your expected sales volume for the up-coming 3 months: January plus February plus March for that department. That represents the "one turn's worth" of inventory @retail at 4 turns that you should have on hand on December 31. (And no more than that!)
Do this for each department.
Now you have a targeted inventory level @retail – "one turn's worth" – for December 31 for each department.
Now, total it up.
Compare that target with your inventory on hand @retail right now, plus all on-orders, minus realistic sales. Close counts, but get an estimate now.
And now, the crucial test:
Are you on track to hit the year-end inventory target?
If not, what adjustments do you need to make? Like much sharper markdowns? Or canceling or delaying orders? Or...??
Nice to have that estimate now, right?
A worthy enforcer (ahem, that would be YOU!) will monitor this process two/three times a week through December.
Customers are available! Now! But time is running out. Tick tock. Tick tock. Do not miss out on this golden opportunity!
As the old adage goes, "If you don't know where you're going, any road will get you there." Having a targeted ending inventory is the answer for "where are you going?"
And you will be much happier when you get there!
According to the calendar, as of March 21, it officially is springtime. No matter what the weather is doing. Well, it's time to bring the calendar to real life! Spring is really a state of mind! The dark winter has passed. Even the rain is warmer in the spring. And new growth is beginning to sprout; leaves are coming out. It's a wonderful, fresh outlook. And that of course means it is a wonderful opportunity for retailers to refresh and reenergize their stores. No matter what merchandise you sell - whether it's tires, apparel, books, housewares, office supplies, whatever - every retailer is in the fashion business. And that means that your customers are wanting what is new and fresh.You know; "in fashion."
Maybe you've also noticed it. The recent articles about how retailers now have their inventories "more in line" after the glut of excess inventory caused by "supply chain disruption." Okay. That's good news. But, what jumps out at us is the frequent reference to "just-in-time" inventory management.
Look, if you can't measure it, you can't manage it. And, if you can't manage something, by definition (and experience!) it is out of control.
There's little that any of us can do to address the public health crisis of the pandemic. Its impact on people and businesses is a widespread and major jolt, akin to the shocks of 9/11 and the 2008-09 economic meltdown. Even as painful and disruptive as the pandemic is at this moment, we must remind ourselves that it will subside. It's not whether it will subside, just when. But all of us are going to have to deal with the ensuing economic situation, and its effects on our sales, our customers, our employees. These are difficult times for us all. Retailing in particular is under enormous stress. Many feel like there are no good choices. But, there are good decisions. And The ROI is dedicated to helping you be able to make those good decisions for yourself.
You've seen all the headlines. Worldwide inflation. Dire warnings of a coming recession. Big time discounts at retailers due to boatloads of inventory. Amazon doubling down on their Prime Day(s) sales. Shoppers shopping early in anticipation of rising prices. Shaping up to be yet another "unprecedented" Holiday season for retailers, isn't it? And a wonderful opportunity for all merchants! How best to start? Set the boundaries.
Next, establish clear routines for monitoring inventory levels.
Periodically it’s more essential than normal for business owners to interrupt their routine and get a good look at their upcoming financial choices.
And this is one of those times!
Many very savvy people are quite concerned about the economy and consumer behavior right now.
High debt maturing in both the real estate and the public sectors.
The multiple international upheavals that continue to grow.
And, certainly, the impending changes at the Presidential and Congressional level in the U.S
These issues are joined by others to make NOW a very important time for business owners to look ahead financially…maybe weekly for a while.
Now that we've put a wrap on 2021, and before we really dive into 2022, it's time to catch your breath and reflect on where we are after 2021. Perhaps like us you believe that fundamental and enduring changes have occurred; no one can operate on "auto-pilot" anymore. All of us have to learn new processes, and form new habits. What's it called? Oh yes; "embracing change." Lots of it. That's why it is a very opportune time, particularly for owners, to have a very active Q&A session with themselves.
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