Are you carrying too much retail inventory?

How much inventory does your business need to run effectively to make your sales plan and deliver the appropriate level of profit to the bottom line?        

This question one of the most difficult for retailers to answer- yet the one that holds the most value to the health and well-being of the business. Why not make 2013 the year you get a handle on your inventory once and for all- and stop spending money you don’t have to in order to deliver the sales you want.

Having too much inventory (or the wrong type) during certain periods can slow your cash flow and can reduce your overall profits (by taking too many markdowns in order to liquidate slow moving merchandise.  On the other hand if you don’t buy enough of the right merchandise (that is, the merchandise that your customers really want to buy) you will miss sales opportunities and thus not make the maximum potential profits from your business. One thing can help you get started- an Open to Buy plan.

A retailer can be sure to stock the right amount of the right products at the right time by using a well-planned as well as a continually updated and well executed Open to buy. (OTB)

OTB can be calculated in units or dollars. (Though our recommendation is to do it in dollars so that you can use the tool when going to market and working with your vendors on a daily basis) The calculations are relatively simple. An OTB is essentially the difference between how much inventory is needed and how much is actually available to be sold at any given time during the selling cycle. (OTB’s are most always calculated on a monthly basis then totaled to quarters, seasons and then finally a year total for the business.) This includes inventory on hand, in transit and any outstanding orders.

While the OTB to buy will tell you how much to spend, the key to managing it effectively is to account for trends- both up and down in a given time period and leaving yourself the flexibility to adjust purchase dollars when and if necessary. To do so, it will be best if you plan to hold a percentage of purchases back in order to take advantage of special buys or to add new products. This will also allow you to react to fast-selling items and quickly restock shelves that your store needs to keep sales moving forward.

You should set up your OTB plan with no more than 10-15 classifications that will roll up to total for your business. (We have managed OTB plans for multi-store national chains doing more than $100 million dollars with less than 10 OTB categories- so we know you can plan your business this way to!) Use the annual retail sales as a guide to setting up your OTB classifications/departments – this will help you reduce the number of classifications you need to plan.

In short, there are many ways to manage an OTB plan. The plan can be maintained on paper, in a spreadsheet or by purchasing one of the several retail software packages available that contain Open-To-Buy programs but the key is to start. Your inventory is the biggest expense you have in your business and managing it on a consistent basis can insure that your business is spending on the right products all the time.

If you need/want more help about how to manage your inventory, contact CBCG today. We can create and manage an annual OTB plan for your business to make sure that 2013 is a year of profit and prosperity.

Where does the time go?

Yesterday, I had a meeting with a client where we were supposed to spend 3 hours brainstorming a marketing strategy for new store grand opening. Instead, we spent the time organizing her schedule. She couldn’t even “think about marketing ideas and strategy" until she had made sure that everything was going to get done on time.

This got me wondering how many of our retail clients and partners are in the same predicament. How cluttered are their minds with day-to-day tasks? And how does this clutter affect the long term strategic planning that business owners must do to insure a successful future for their businesses?

So I’ve decided to create a series of blog posts that will give you information to help organize your time and tasks in order to make you more efficient in your day-to-day business operations. Hopefully, you can use the “extra” time you gain to strategize long-term projects (marketing,operations, social media strategy) that can and will improve the overall performance of your retail business.

Today we start with a tip that can improve your efficiency and help you to create a replicable process to help you achieve all of your daily activities. I’m talking about a to-do list.

Why do I believe creating a well-organized to-do list will improve your businesses’ overall performance? Most importantly, because I believe that creating a to-do list will help the most important person in the business - that’s you - focus on what is important to your business on a daily basis.

When you, as the owner and visionary for your business, define success on a daily basis it will make you focus (with laser precision) on the tasks that are necessary and most relevant for you to achieve optimum performance from your business. Here we offer some quick and easy guidelines to creating, and maintaining a to-do list for your business:

1.Create a final to do list before you go home at night. This will clear your head at the end of every day and insure you remember all the tasks that must get accomplished the following day. (Note: putting your list in plain sight and adding tasks as you remember them all day long will go a long way toward making the end of the day list building much quicker.)

2.Organize your to do list in 3 categories. Allocate time for each priority on your list.
a.High priority – These are the very important tasks and the ones that if not finished, will have the most impact on business operations if not accomplished.
b.Medium priority – While important, these are tasks that must get accomplished on time, but not critical to the bottom profit line of your business.
c.Low priority - These are tasks that are not critical to business operations and bottom line, but none the less need to get accomplished. Think of them as tasks that you would like to get accomplished (if there was enough time in the day) Tasks in this priority are not affixed to a specific weekly or monthly deadline. (These may be great tasks that if left on your list for a few days running, may be candidates to be delegated to another staff member.)

(Note: If anything remains a low priority on your to do list for more than 2 weeks, we suggest you take it off your list. Clearly, it wasn’t important to the future of your business otherwise you would move it up the priority list and make sure you got it done!)

3.When writing your list, check the calendar for future events. What is going on the next day? And in 2-4 days that you need to do work for? (Pre-planning tasks that need to be completed will save everyone in your organization from running around at the last minute to complete it.)

4.Communicate and schedule time in advance. Make sure that you engage all of the necessary participants required to accomplish your task well in advance of your deadline. (If you need your manager, marketing director, or bookkeeper to help you finish the task on your list, you must request their participation in order to make sure you can finish on time.)

If most of these tips seem like common sense, it’s because they are. The key is that you must have the discipline required to set up and to complete to do list on a daily basis. No one can help you meet the goals you set up for your retail business if you don’t start with a good example. So start writing a to do list and start accomplishing the tasks you need to for your business!