Inventory Management: Stay On Top of the Metrics

Merchandise analysis is an ongoing process. Although most companies should schedule formal reviews at the end of each season, the key to profitability is staying on top of the metrics that drive any multichannel business. Postmortems, as many of these reviews have been labeled, have a negative connotation in many marketers’ minds, and as a result, often are sidestepped.

I’ve found that changing them to “preseason kick off” reviews promotes an offensive approach to profitability that can be maintained throughout the season. Of course, each business can apply its own weight to the measures to make final decisions.

As multichannel merchants say, “It’s all about the merchandise,” or “Product is king.”

Therefore, you constantly must monitor and improve your ability to:
• select better product,
• improve performance productivity,
• control inventory and
• drive increased profit to the bottom line.

Depending on your system’s sophistication, you can develop and produce reports that allow you to look at item-level performance in myriad ways. If you have these tools available, hopefully you’re using them productively. I’ll look at the key information you should be tracking and, ultimately, reporting.

Now or Later

Starting from a higher category level — or the top-down approach — you need only look at a few measures to determine if the category is or can be (from a planning perspective) profitable. From a preseason planning approach, I should state that one of my business mantras is “almost right now,” which is better than “exactly right later.” (I’ll touch on the “exactly right later” part in a bit.)

By looking at a few ratios, you can obtain a sense of direction. The ratios that follow should be looked at as a “package.” That is, only looking at one measure in isolation would result in incorrect conclusions.