Business Tips May 2011

PLANNING STOCK

In last months Business Tips we covered the planning sales process.
This month we'll deal with planning stock levels.
Both sales and stock levels are vitally important to the success of your business.
How much stock you can carry is in direct proportion to your level of sales.

You determine how much inventory you can reasonably carry by figuring what turnover rate you want to accomplish.

Turnover is simply the number of times in a year you sell( or turn) your average Begining of the month stock AT RETAIL.
You always use retail in doing your planning.

A good turnover rate is 3 turns a year. This is an aggressive number and you might not be able to accomplish that at first. But 3 turns a year should be your ultimate goal.

First you need to know what your actual current turnover rate is.
To do this you need to know your current stock on hand at retail.
You also need to know your total planned sales for the year.

Determine your average begining of the month(BOM) stock at retail.
Divide that number into your planned total yearly sales.
The number you get is the number of times you turn your average stock in the year. That's your turnover rate.

Example:
$300,000 yearly sales
$100,000 Average BOM stock level at retail
Turnover rate is 3

Using this as a starting point you can plan your monthly stock levels.
There's a lot more to planning your stock levels. But this is the first step.

Next month( June) we'll talk about planning your Fall season. That's July through December.
We always plan in six month seasons. That way you can adjust your next seasons plan based on current season results.