Are Your Bathrooms Clean?

While working at Lands’ End some years ago, I joined a tour of the company's facilities with a visiting investment analyst. At tour's end, the analyst said, "You may have wondered why I stopped at every bathroom along the way."

Actually, I hadn't even noticed until he brought it up. He continued: "It's part of the analysis. In my experience, you can pretty much judge the quality of a company by the cleanliness of their bathrooms."

His point was that well-run companies pay attention to details. Sure, there were other more critical business and financial metrics to consider, but he wanted validation for his belief that companies built for long-term success are managing the little things. In other words, they pay attention to clean bathrooms as well as sales and profits.

In the years since, I've found that to be equally true for inventory planning. Working with customers and prospects at Direct Tech, I've observed a number of common traits. Chief among them — those who pay attention to (the right) details succeed, while others struggle.

Here are a few of the most crucial best practice details I've identified. Whether you adopt one or all of them, it just might make a difference in your company:

• Commit to data integrity. Make sure you can trust the information needed for inventory purchase decisions, such as source of sales, item attributes, inventory levels, vendor information and item costs. A disciplined approach here to maintain accurate data will pay dividends with more accurate and timely decision making.
• Train all planning staff on basic incremental profit analysis. Success is the result of thousands of daily decisions made by merchants and inventory planners throughout the year. Give them the knowledge and access to profitability data to deliver decisions that truly add to profits, rather than reduce them.
• Leverage the 80-20 rule (the Pareto Principle). It's been proven time and again that it pays to invest most of your inventory management staff's time on the 20 percent — the small subset of products or inventory that will deliver 80 percent of the sales and profits. Have appropriate systems and processes in place to easily find and manage the 20 percent.

As you reflect on your business, consider whether you're really managing the right details. If you don't feel that you're fully in control of your inventory — if crucial information is too long in coming, if important decisions are consistently made too late — than perhaps your bathrooms (ahem) could use a little more attention!