Monday, June 20, 2011

Managing your retail inventory and managing the cash flow that goes into managing that inventory is one of the biggest challenges retailers face. While there are many software programs and templates that exist to help retailers manage the process of buying inventory, I can’t tell you how many retailers I meet who still don’t see the benefits of using one of these systems to help plan their business.  

In our never ending quest to help retailers small and large take more money home and not leave it on their store shelves, once again, we offer our rationale on why setting up and managing an Open To Buy program (of some sort) can be effective and why it should be used to help run your retail inventory.  

You know what an open to buy is, right? It’s a system used to help plan your purchases on a department or class level and to match your inventory needs with planned sales you expect to do in that time period. A successful open to buy plan will maximize the flow of inventory and improve sales and turnover so that as the owner of the business, you can keep more cash from sales in your bank account and not spend it on inventory sitting on your store shelves that you don’t need.  

And while many of you reading this have been in business a long time and are quite knowledgeable about what sells when in your store, there is still some fine tuning that can be done with the help of an open to buy program for a business of any size no matter how old the business is.  

Using an OTB program will help you track selling by department on a regular basis and will alert you to shifts in business - very quickly. Reacting or proactively pursuing these shifts can and will save you money and help you drive more sales and profits to the bottom line for your business.  

Whether you buy more merchandise because you react to a positive shift in sales, or react to slower sales by canceling or shifting dates on purchases, you can help your business drive more profitable sales in trending categories while reducing the inventory you spend on departments that are no longer selling.   So how much money can you expect to save if you use an OTB program? Typical results from running an Open To Buy are turn improvement of between 7-10% the first year and a reduction in purchases of between 5-10% annually. These two things alone can pay for the cost of managing an OTB program and so much more!  

And while there are tremendous benefits to using an open to buy program, it is not a silver bullet that fixes all that ails your store. You will need to spend time working on and with your open to buy to make it truly successful. You must not be ambivalent about your Open To Buy.  For an Open To Buy plan to fully to succeed, you must be committed to following the plan you set in place and have the discipline to stick to the plan in the course of the year. The results will happen if you stick to the plan!


1 comment:

Kristopher Gawron said...

Retail inventory systems have become so high-tech they only require little space to handle the inventory and sales of a large company. But for a system to be useful, a technically-skilled staff and a strong plan are needed. Back-up solutions will also be useful in case anything goes awry.