Another
popular myth that keeps retailers from using Minimums is that these
do not apply to one-time-only styles. The logic behind this myth is
that Minimums are only useful if you are going to be reordering the
same style from your vendor. Those retailers who carry unique or seasonal
styles tend not to use Minimums. Once again, we believe Minimums are
still useful, even for those styles that cannot be reordered.
Suppose you place a large order of men’s dress loafers from a
vendor in Hong Kong, and it takes three to six months to order and
get them delivered. Furthermore, you know from prior experience that
this vendor will not make more pairs of the particular loafer you
are ordering. This seems like a clear-cut case for not using Minimums,
right? Wrong. Once you do receive the container of loafers, your central
warehouse should act like your own “just-in-time” supplier
to your stores. We suggest delivering only part of the total shipment
to your stores and holding back 20 - 40% of the stock in the warehouse.
This reserve inventory would be used to ship out to stores that need
particular items, or size/color combinations. Use XpertMartTM to monitor
sales in each store on a daily basis to determine which items to ship
out to which stores. The stores could be resupplied twice weekly.
As we’ve already discussed, you can quickly establish Minimums
based on a limited sales history and use these to determine how you
allocate your inventory reserve.
Now
suppose you’ve exhausted the reserve stock you put aside, stock
is dwindling in each of the stores and consequently, sales are slowing.
Each store no longer carries a full size run of the loafer. This
is the time retailers usually start marking-down the items that
are left. At this point we suggest concentrating the stock that
is left over, for example, moving the remaining items in your 40
stores to the 5 or 10 stores where the loafer has sold the best.
This way you can stock full size runs in each of the 5 or 10 stores
and continue to sell at full price.
Note
that one of the problems that is quite common in retail distribution
is that many pairs of shoes get lost or misplaced every time merchandise
is moved since it is usually too expensive to put bar codes on each
individual shoe. (At most, one of the two shoes in a pair will have
a bar code, but usually it’s just the box). One of the advantages
of XpertMartTM is that every item in the Items Catalogue can have
a photo. The Items Catalogue can be easily accessed at the point-of-sale
by simply pressing F8, allowing store personnel to return misplaced
merchandise to its proper box, saving the retailer lots of money.
(The item can be looked up by any combination of style, color, size
or bar code). The two alternatives, sending all lost shoes back
to the central warehouse for sorting or throwing away all mismatched
shoes, are too expensive.
As
we’ve seen, Minimums can still be used to optimize supply of
unique styles. Even though we have a slow, one-time delivery of
the loafers in our example, within our chain of stores we have fast
distribution, sales and feedback from sales. The end result is being
able to sell the whole shipment of shoes a lot faster, with fewer
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