Inventory Management: 4 Keys to Improving Holiday Inventory Management
2. Management by exception. Whether your inventory problems are overstocks or out-of-stocks, the 80/20 rule applies with inventory in the vast majority of real-life situations. Twenty percent of the items in your business typically account for eighty percent of your problems. Focusing precious time on these exception items is particularly important in the busy fourth quarter, due to the financial impact of each decision.
In the fourth quarter, every decision is more impactful because of higher sales volumes. Higher sales means bigger volume purchase orders, an increased likelihood of lost sales and back orders, and larger season-ending overstocks to be liquidated. To capitalize on opportunities for success, invest the time and effort to design and implement exception reports for buyers aimed at the relatively few items that will generate the largest profit. It's simply good business.
3. Speed of decision making. Time is a critical factor for multichannel retailers. The customer demand expected by inventory planners changes daily. Marketing plans are changing until the last possible moment, as does inventory supply information — whether it's a manufacturing problem, delivery delay, quality failures, lost inventory in the distribution center or unexpected large customer orders.
Since buyers are ultimately responsible for delivering the right inventory to the right place at the right time, they're especially time-dependent. They're balancing two opposing, time-sensitive factors: the accuracy of demand plans and the uncertainty of the supply chain.
Experienced buyers understand the value of each day. Each day's sales information improves demand plans, sometimes significantly. Placing a purchase order on Friday rather than Monday can mean the difference between pre- and post-holiday deliveries.
The most successful multichannel retailers establish detailed weekly calendars to align marketing plans with purchasing deadlines, so buyers have the best possible demand plans available as they place their purchase orders.