Inventory Management: Focus on the Fundamentals
Instead of anticipating the doom and gloom of market conditions no one can predict, stay focused on the fundamentals to get through these tough times, and position yourself for greater profitability when up markets return.
Simply put, it’s a matter of what you know, when you know it and what you do about it.
What You Know
It’s as basic as understanding what you need and what you have to spend to get it. It starts with data integrity. Successful companies understand the importance of data integrity in their ability to accurately forecast and buy inventory at the most advantageous terms.
- Know demand. From a forecasting standpoint, this means capturing demand accurately from your order management system by offer or event, then matching back as much of the demand as possible to the source driving each sale. If your order management system allows, you also want to capture phantom demand (aka lost sales) to forecast the total potential future demand.
- Know vendor terms and costs. Make sure all vendor-related data is accurate and up-to-date as well. Staying current with lead times, product costs and discount terms helps minimize the total costs associated with each product you purchase and speeds the buying process, which ensures products are on hand to meet anticipated demand.
- Know your budget. It’s not only important to have a budget. You also must have the means to consistently measure spending against it through open-to-buy tracking. This gives management and the inventory department the information each needs to manage the overall inventory investment. It ensures you have the inventory on hand along with a place to store it.
- Know your product assortment. While perfection is the goal, it’s not always possible to be perfect and complete. Give control buyers as much information as soon as possible — rather than all the information when it’s too late.