10 Steps to a Better Holiday Season

By Ray Goodman

Overstocks, Math  and the Value of a Day

Every day matters. Vendors and freight move 24/7. If you can make a purchasing decision on Friday, don’t wait until Monday because early decisions prevent lost sales and back orders.

Expediting freight can mean the difference in preventing back orders, or even making the sale altogether. The cost of expediting a purchase may be more than the gross margin you expect from it, leaving you with no profit on the sale. Know the cost to expedite freight and by item in relation to your gross margin so you can quickly make intelligent decisions.

The best overstock reduction opportunity time period is pre-Christmas, when you can take advantage of strong customer demand. Don’t stray from the framework of your overall merchandising and brand strategy. Instead, use the moment to your advantage. Make targeted promotion decisions in early December, and you can increase sales volume, improve customer experience and reduce  inventory overstocks. —RG

It's no secret that up to 40 percent of most merchants' annual sales occur in the critical fourth quarter holiday period, according to industry estimates — most in the six weeks prior to Christmas. With this, seasonal customer demand is an opportunity to increase sales, reduce back orders and cut down end-of-year overstocks with well-managed forecasting and inventory planning.

The challenge is to deliver the right inventory at the right time during the most time-constrained period of the year. Higher sales volumes require more purchase orders to place, more inbound freight to monitor, more back orders to address, more questions to field from distribution centers and typically more SKUs than other times of the year to forecast and manage.

The pressure is especially intense this holiday season, when companies must deliver enough sales to compensate for their lackluster year-to-date results due to the economic downturn.

Proven seasonal management techniques can improve fourth quarter results and increase staff efficiency during your most critical period. Although the quarter's upon us, there's ample time to exercise these 10 timely tips:

1. Prepare an inventory budget, and review it weekly. Know your cash limitations related to placing purchase orders, and live within those limits. If you have surprise hot sellers that you need to reorder, this budget review helps determine whether you have cash available to place the orders or if you need to free up cash by adjusting other orders.

2. Adhere to an inventory management calendar. Know key marketing dates to anticipate when you'll have better demand-forecasting information. Every day between now and Christmas is an opportunity to forecast, place reorders and adjust existing purchase orders. Use this tool as a road map to each date you must reforecast, to follow with the dates to review your inventory ownership against the new forecasts, and to improve the timing and quantity of purchase orders.

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Ray Goodman Author's page Ray has been a consultant to various direct marketing companies across the country. His goal is to streamline the merchandising and marketing planning processes inherent in multichannel marketing. He works closely with clients and industry experts to develop new methodologies and tools for merchandising and inventory control. He says, "It's exciting to work with our staff customers to help evolve our applications. I'm proud of the way our staff works together to bring our visions from concept to product." Ray has been with Direct Tech since 1994. His primary responsibility is directing the development of Direct Tech products. He's been a featured speaker on inventory forecasting and management at various industry conferences.

Inventory Management: 10 Steps to a Better Holiday Season