See the Future, Then Stock the Future
Help Vendors Help You
Continuous inventory is advantageous to your vendors as well, because you commit to buying a certain amount during any given season or period. In return, vendors will often provide discounted pricing. Your vendor should also agree to ship your product throughout that period to meet your forecasted demands. This is where you really see the savings of continuous inventory in reduced warehousing costs and decreased back orders. It’s also easier for your vendor to manage inventories rather than provide all the product to you up front.
Best of all, continuous inventory allows you to compare actual demand vs. forecasted demand to keep purchases at the level necessary for optimum buy quantities and minimized shipping costs. Create “hot” lists to know what to buy and when to receive it to meet projected sales. You can also use hot lists to identify products you’ll be long or short on. Then respond accordingly by acquiring additional product to meet increased demand, creating specials and promotions that reduce anticipated excess inventory, or using alternative channels.
Best Perpetual Products
Products with short to moderate lead and reorder times, as well as those that are offered multiple times throughout the season, bene-fit most from continuous inventory. Especially staple products.
All products are candidates for the continuous inventory model, but some bring a lesser benefit. One-time buys and products with long initial lead times can be tracked using the continuous inventory method. But their benefits may not be as dramatic. Still, many products with long initial lead times offer shorter reorder times, increasing the benefit of managing them with this method.
No matter what, where or how you sell, making money boils down to how well you fulfill customer needs profitably. That means knowing what to carry, when to have it on hand and how to get it to customers at the right price.