Years ago, the owner of a statewide chain of retail stores told me that there were only two kinds of inventory – the kind you sold and the kind you counted. He admitted that he only wanted the kind that sold. He didn’t need any to count.
Of course, his point was that he didn’t want a lot of inventory just sitting around on the shelves. It though it was a valuable asset, it was wasted resources. It certainly isn’t very liquid, especially if it never sells.
too much too little too late
Having the right amount of inventory is the key. Not enough, and your customers are unhappy when you don’t have what they want to buy. Too much, and, well, like I said, you are wasting resources.
Almost nobody gets it right, they buy too much of this, and not enough of that, especially when it comes too seasonal or trend buying. Just because the marketing guy for the manufacturer says "this is really going to be hot this spring," doesn’t mean it actually is.
If you buy a huge supply, it may sit on your shelves until you finally cut the sale price down to bones to can get rid of it. In the meantime, something else you didn’t buy is flying off the shelves of your competitor faster than he can carry "bucks to the bank."
I’m really glad that not a lot of my clients are in a business of selling a lot of "seasonal" or "trendy" merchandise. On the other hand, I see a lot of merchants that are, even if it isn’t clothing related.
Just last week, I went to the grocery store and, as I entered, there was a display with more than 400 snow shovels, each at $44.95. We were forecast to get up to 4 inches of snow the next day. It looked to me like three or four out of one box of more than 40 (of 10 each) had probably been sold.
I certainly wouldn’t buy a $45 plastic snow shovel named "The Dozer" from a grocery store when for 4 inches of snow. First of all, I knew the temperature just 36 hours later was going to hit 40 degrees. The snow wouldn’t even be around long enough to shovel.
I wonder if they could still sell these shovels in May at a marked down price of $9.95?
Now, the shovels may have only cost the grocer $10 each (or less), so he was selling them at a 450 percent mark up. Translation: Sell one full box and he breaks even. But still, snow shovels in Oklahoma?
I mean, if we get 2 inches of snow the world stops around here. Schools are closed. Churches don’t open. You don’t need to go to the store because all the milk, bread and toilet paper are already sold out three days in advance of the snow’s arrival. The only place people go is to a nearby hill so they can slide down the snowy slopes on their trash can lids or that inner tube left over from playing in the pool five days before the snow.
Remember folks, it's Oklahoma – 15 degrees and 4 inches of snow one day, and 68 degrees and sunshine the next. You can't change your socks faster than the weather changes in Oklahoma.
My opinion is that the grocery store would have done much better had it stocked up with 10 times the amount of milk, bread and toilet paper. People need those items more than they need snow shovels.
Stop by my house, I have plenty to spare, because my brother bought out the store. We drink about a half-gallon of milk every week, so why do I have 3 gallons sitting in the refrigerator? Because it's going to snow. We don't eat more than a loaf of bread per week, yet there are at least two to three different kinds of bread in the pantry.
I guess we use a lot of toilet paper, because, as you know, I’m "full of crap." But I guess we are going to sift through three, 36-roll packages (that’s 108 rolls) during a 4-inch snowstorm. I won't tell you how many rolls we have left.
Typically, my brother keeps our pantries well stocked. One bottle of this went from pantry to refrigerator, which left three in stock. So, better buy four the next time. I have threatened to install a point-of-sale system and barcode everything so I can get a proper asset value of our inventory on hand.
Wonder how I can include that in my business costs? Not!!
Somehow, I don’t have to worry about spoilage around my place. You know, that metric that reflects how much inventory is wasted because it's past the sell-by-date. The reason is that I routinely screen the "soon-to-be-out-a-dates" and take them to my church pantry, where they fly out the door like “TP before a 4-inch snow.”
I guess that's shrinkage in terms of inventory control, but I prefer to post the credit for the count reduction in inventory against a debit to donations. Then, I just sit back and watch my brother when he goes to take an inventory count in the pantry.
“I was confident we had six of those," he says. "Our restock level is five. How is it that we only have one and we just went to the store two days ago?”
I quickly tell him, “You must have miscounted. I’m going to install that barcode scanner if you can’t keep things on track.”
It just burns him up.
No, inventory isn’t just for bean counters anymore, folks. It’s for our local grocery store that need 395 snow shovels it won’t sell over the next 10 years. Or your favorite "trend shop" that never has what you're looking for, but has plenty of stuff you wouldn’t be caught dead wearing.
Inventory is for your home pantry and all those consumables like milk, bread and toilet paper.
And most of all, it’s for folks like you and me who help the countless millions of others get and keep their inventory straight.
What would we do without it…
PS – Be on the look out for a series on "Inventory fundamentals."