One aspect of inventory investment that is frequently, and surprizingly overlooked is the cost of display inventory. This is particularly relevant to retailers. Stores need to achieve a nice "full bin look" to make the shopping experience pleasant to customers. Have you ever walked in to a retail store and wondered whether these guys are going out of business because their shelves are bare? My first reaction is to turn around and shop elsewhere.
I once worked for a retailer who fell into the trap of ignoring display costs. Our inventory turnover target was, on average, 6. The company could never seem to achieve higher than 2 or 3 turns per year. This was a company who was, wisely, committed to high levels of customer service and presenting attractive stores. Once I conducted a thorough analysis of what it would cost to fill all of the display shelves in every store, and achieve 100% in-stock, we concluded that we were doomed to 1 turn per year.
Turning inventory once per year is, of course, is unacceptable. There are creative ways to achieve a "full bin look", without making the maximum inventory investment. By employing some appropriate space management principles, Pareto Analysis, creative visual merchandising, and looking upstream in the supply chain to exploit efficiencies, we were able to achieve, and exceed our target of 6 turns.
It can be done!
I once worked for a retailer who fell into the trap of ignoring display costs. Our inventory turnover target was, on average, 6. The company could never seem to achieve higher than 2 or 3 turns per year. This was a company who was, wisely, committed to high levels of customer service and presenting attractive stores. Once I conducted a thorough analysis of what it would cost to fill all of the display shelves in every store, and achieve 100% in-stock, we concluded that we were doomed to 1 turn per year.
Turning inventory once per year is, of course, is unacceptable. There are creative ways to achieve a "full bin look", without making the maximum inventory investment. By employing some appropriate space management principles, Pareto Analysis, creative visual merchandising, and looking upstream in the supply chain to exploit efficiencies, we were able to achieve, and exceed our target of 6 turns.
It can be done!
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