Reducing your inventory and rearranging the shelves
accordingly, may give you the opportunity to expand your product lines, but be
careful; don’t give your customers more than six choices of a similar product.
Items that should be, but can’t be returned to vendors should be marked down
and scattered within the category. DoN’t
set up a clearance table. Very few people want to buy junk nobody else wants,
and it will sit there for a long time gathering dust and creating an unsightly
mess. Leave the items where they are, and make a big deal about the discounts. Label
the products accordingly, but be careful not to cannibalize like products that
are currently producing profits. Fifty-percent of the time, it is best just to get
rid of them.
When we try to set up a program for managing replenishment,
tracking sales and performing audits, we usually run into a brick wall, because
the average retailer sees the problem from where he is at that moment.
Naturally in a space of 2,700 square feet, if you have 4,000 items with
overstock reaching as high as 1,000 days of a single product, all but tracking
sales causes you to consider it an impossibility; and you know what? You would
be right! That is what I meant when I said, “You can’t get there from where you
are.” Sooner or later, you will be required to face this issue.
One major retailer calculated the cost of transporting goods
to the store is only 13% of the total cost of handling stock, but a whopping 48%
of the costs are associated with “the replenishment of shelves”. Reasons cited
were replenishment frequency, the size of the shelves, the pack size, space
available in the backroom and TOO MUCH INVENTORY ALREADY ON THE SALES FLOOR.
The process of rearranging the inventory to excavate a place
to insert the new items, and carrying inventory back to the storeroom that will
not fit no matter how hard you try must be major factors. Example: You may be
able to push more than eight bags of candy onto a peg, but as soon as your back
is turned, it usually falls off the peg and ends up on the floor. One manager
of a store said recently, “The last shift has the responsibility of putting out
every bit of the new inventory by the end of their shift, else the store gets
‘gigged’ ” (whatever that means). Even though it may not be possible, their
staff is going to do whatever it takes to make it happen and in the process,
they create an unsightly mess.
Cutting back on inventory solves a number of problems, the
main one being the increase in your available working capital. If you do it
correctly, you will not only see a 40% increase in sales, partially due to your
creation of a more hospitable shopping environment, but you will set up your
stores for Automated Store Replenishment; which brings us to our next topic—‘Audits’.
Not too long ago, I had a conversation with a large chain
that stated, “Your system would not work for us.” When I asked them ‘why’, the
answer came back, “We only take inventory once a year.” They were right, our
system would not work for them, because in order to reach the level where ASR
will benefit you, you and your supplier must know within a reasonable degree of
accuracy what you have in your store prior to the next delivery. As I stated
earlier, suppliers do not want the responsibility of pushing products to your
stores. Except in the case of brand new products when manufacturers need stores
to test new products, suppliers want you
to send them orders.
The process currently being used in relying on managers to
determine what a supplier needs to bring to the store isn’t working. Store
managers, terrified they will run out of fast moving items will always order
more stock than they need, and this practice alone is costing the retail
industry millions of dollars annually. If you were to have the tools to sit
down and calculate all of the carrying cost associated with this type of system
it would scare you out of your wits.
No comments:
Post a Comment