No more tears

When enough is enough for inventory

A contemporary song, “No more tears”, has a line that repeats many times throughout; “Enough is enough.”

While the song is intended to be about love between two individuals, a retailer could hear the song as applicable to their business. Perhaps also appropriate is the saying that, “Inventory is something you can’t live with and you can’t live without.”

Whether it is in a song or an old saying, the way we control our inventory warrants our close attention.

Considering the last couple of years within the firearms industry, there are plenty of retailers who have adopted what has been the strategy of many customers; in anticipation of a scarcity of product, buy as much as you can.

The idea of inventory control or “open to buy” has gone out the window. This thought process is sure to create a problem, if not being the death knell for retailers if they do not have a plan.

The first area of concern is that of taking any product and simply ordering in quantity with the thought of, “If I don’t sell it now, I will sell it later.” The problem with such a thought is that when you order an item and the vendor offers terms of net 30, there is a drastic change that occurs in the business on day 31.

At that point, the invoice is due to the vendor, and anticipating the dealer pays the invoice on time, any of the item from that order that is still sitting on the shelf is now becoming more expensive to own. With a paid invoice, that firearm or box of ammunition is the same as money sitting in a checking account or that proverbial, “hidden under the mattress.”

If that money sitting on the shelf in the form of a product were turned into cash, it could at least be earning some amount of interest if it were invested. Only if you have an item that has a cost that is continually rising does it make sense to buy with little regard to the due date of the invoice.

There is a second area within the firearms industry where an inventory problem has the potential of rearing its ugly head. Let’s take an example of a camo jacket. It is a good looking item that you have found from the manufacturer or your wholesaler and you want to be sure you have the item when the customer comes in. But therein lies the problem.

This would be an easy order to place if it were something such as a firearm lock; you are simply determining the quantity you want to buy. But the camo jacket is very different.

To begin with, you have to consider the sizes you are going to order. In addition to the initial small, medium, large and extra-large, you have the plus sizes. Then you add to that the possibility the jacket is available in tall sizes. What if the jacket is also offered in women’s sizes? How many jackets do you have to order just to have one of each size? What happens when the camo jacket is offered in four camo patterns?

Just to have one of each size and color, you are going to have a lot of product on hand. The problem grows when you sell the first jacket; it’s likely to be a size large. The next customer walking in your store is out of luck if they are wanting the same thing. You may have some 40 jackets on the shelf, but you are now out of the one they want.

Whatever the quantity of jackets you initially ordered to cover all of the sizes and camo patterns, you can double that amount if you want to be sure you can take care of that second customer. The problem grows when you think of the third and fourth customer.

Where does this inventory problem lead us? According to James Dion, president of Dionco, Inc., a Chicago based retail consulting firm, the retailer will quickly see that there is a substantial cost to being 100% in-stock for customers.

The retailer has to choose how many times they are prepared to tell a customer that they are either out of stock or don’t carry that size, color, or style. An option is to ask the customer to allow the retailer to special order the one jacket if the vendor accepts such orders.

There is no exact percentage that can be given to the retailer as to how much inventory you should have. However, even if you had the space and the money that would allow you to purchase all of the inventory, you are going to find that at the end of the season there are going to be various sizes and colors of this camo jacket sitting on the rack that did not sell simply because the retailer was striving for 100% and found that while they did have 100% of the inventory, they did not have the right mix of customers. Now the retailer is forced to start marking down the merchandise left over meaning their profit and their Return on Investment are diminished.

Is this an argument for the retailer to diminish their inventory? Absolutely not! Inventory is the best investment you could possibly make; far better than the stock market or other forms of investment. Making the most of the inventory is knowing the number is somewhere less than 100% and finding the right balance among all of the items the firearms retailer offers.

Understanding how to control our inventory properly can become the fulfillment of the song; when “enough is enough”, there will be no more tears.

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