A key KPI in retail and warehouse management is stock turn. It’s calculated by dividing a period sales by average stock and is a good indicator of what items are providing a strong return on investment. Without a reasonable stock turn, items can tie up budget that would be better invested elsewhere.
Being on the front foot is vital, and some actions to improve stock turn are:
1. Promotions & Clearance Anything will sell at the right price. Sales can range from a variety of price reduction techniques: clearance, flash sales, seasonal or any other background reason. The key with promotions is to ensure that the right price is set to maintain some level of profit. This can be done through customer research to discover the optimum pricing strategy and marketing mix that will appeal to customers.
2. Bundles Bundling a lower selling item with a higher selling one at a small additional cost can be an effective strategy for driving sales on both lines. With the underperformance of No Mans Sky in 2016 Sony, and retailers, were left with large amounts of slow moving stock. By bundling this with PS4 consoles, they were able to drive sales and reduce the overstock on NMS.
3. Resellers Getting rid of all stock of a single item can be achieved through bulk sales to a reseller. DVD suppliers do this well in situations where a film has become dated and no longer sells at a reasonable price. They’ll sell off the rights and all existing stock to a smaller reseller who can then manage the lower margin product through discount and variety retailers. Reducing Slow Moving Inventory
Reducing Slow Moving Inventory
4. Presentation Levels & Safety stocks Most replenishment systems utilise parameters for presentation levels and safety stocks. These are important to ensure that there is enough stock at the point of sale to visually display a compelling offer and enough stock to account for forecasting error or delayed shipments. When these aren’t aligned with a products sales, it will cause overstocks, and in turn for the product to be treated as a slow moving line. Using a rate of sale metric to set these parameters, and aligning with in store space, will result in lowering the base stock level and increasing stock turns.
5. Prevention of slow moving stock The most ideal way to avoid slow moving stock is to ensure that products are managed well through their life cycle with the aim that they never become slow moving. Accurate forecasting, customer knowledge, and understanding which retail sites perform well for certain product categories can all contribute to delivering the right stock in the right quantities to the right place at the right time. Stock turns are a key contributor to inventory management and can either result in the right sales performance, missed sales or overstocks. Getting stock turns right is vital and at V Net our replenishment engine ensures that the right mix is found to maximise sales and reduce inventory.