HOW MUCH INVENTORY DO YOU NEED? Presented By: Tracy Moffatt AGM Education Team K&K Consulting

Transcription

1 HOW MUCH DO YOU NEED? Presented By: Tracy Moffatt AGM Education Team K&K Consulting

2 Many stores carry 2 to 3 times more inventory than they need Many stores have no idea how much inventory they need to purchase each month Most inventory is purchased Just in Case when it should be purchased Just in Time Inventory should not be FISH (First In, Still Here) Jim Dion, Dionco Inc Calculating Inventory Needs for your Shop Planning Monthly Inventory Levels Tips for Managing your Inventory Minimize dollar investment Lowers Costs necessary to carry inventory Inventory Tax Interest Insurance Special Orders Open to Buy must be reduced by amount of special orders at cost to prevent overbuying Minimize amount of merchandise left at end of season Minimize markdowns Minimize shrinkage 1

3 Maximize sales Maintain appropriate inventory levels to meet customers wants and needs Maximize turnover Maximize PROFIT Make more $$$ Average Inventory levels are determined using Cost of Sales plan and Turnover goal The Calculation Cost of Sales Plan Turnover Goal = Average Inventory Plan This number must then be adjusted up or down for each month depending on sales curve Calculation Cost of Sales Plan Turnover Goal = Average Inventory Plan Cost of Sales Plan $152,400 Turnover Goal = Average Inventory plan $ 76,200 On average, $76,200 of inventory is needed each month Where do the numbers come from? 2

4 RETAIL SALES / COST OF SALES / ROUNDS / FORECAST RETAIL SALES LAST YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DEC 31 TOTAL % TO TOTAL 0.9% 2.3% 4.1% 12.9% 14.4% 15.7% 14.1% 12.8% 8.7% 4.1% 2.5% 7.7% 100.0% COST OF SALES LAST YEAR COS % 100.0% 80.0% 73.0% 63.8% 69.8% 66.7% 71.0% 67.9% 68.4% 77.8% 74.1% 88.8% 70.9% ROUNDS LAST YEAR $ PER ROUND $0.00 $0.00 $89.00 $11.28 $9.00 $5.75 $5.64 $6.51 $5.94 $5.00 $54.00 $0.00 $8.13 BEGINNING OF MONTH RETAIL SALES PLAN ,000 % TO TOTAL 0.7% 2.0% 3.6% 12.5% 14.7% 16.5% 15.2% 13.4% 8.5% 4.0% 2.2% 6.7% % COST OF SALES PLAN COS % 86.7% 84.4% 75.0% 64.3% 69.7% 64.9% 64.7% 66.7% 71.1% 72.2% 76.0% 70.0% 68.0% ROUNDS PLAN PER ROUND PLAN $0.00 $0.00 $80.00 $11.20 $9.17 $6.38 $5.86 $6.98 $5.94 $5.63 $50.00 $0.00 $8.30 $ COST OF SALES LAST YEAR L/Y 155,500 COST OF SALES PLAN PLAN TURNOVER GOAL 152,400 76, , TURNOVER LAST YEAR RETAIL SALES LAST YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DEC 31 TOTAL % TO TOTAL 0.9% 2.3% 4.1% 12.9% 14.4% 15.7% 14.1% 12.8% 8.7% 4.1% 2.5% 7.7% 100.0% COST OF SALES LAST YEAR COS % 100.0% 80.0% 73.0% 63.8% 69.8% 66.7% 71.0% 67.9% 68.4% 77.8% 74.1% 88.8% 70.9% ROUNDS LAST YEAR $ PER ROUND $0.00 $0.00 $89.00 $11.28 $9.00 $5.75 $5.64 $6.51 $5.94 $5.00 $54.00 $0.00 $8.13 Last years Retail Sales and Cost of Sales by month From General Ledger or Budget POS System Dollar per Round Tee Sheets Starters Report POS system JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DEC 31 TOTAL ,000 RETAIL SALES PLAN % TO TOTAL 0.7% 2.0% 3.6% 12.5% 14.7% 16.5% 15.2% 13.4% 8.5% 4.0% 2.2% 6.7% % COST OF SALES PLAN COS % 86.7% 84.4% 75.0% 64.3% 69.7% 64.9% 64.7% 66.7% 71.1% 72.2% 76.0% 70.0% 68.0% ROUNDS PLAN PER ROUND PLAN $0.00 $0.00 $80.00 $11.20 $9.17 $6.38 $5.86 $6.98 $5.94 $5.63 $50.00 $0.00 $8.30 $ Retail Sales Plan by month Use Dollar per Round Plan realistic improvement Adjust to reflect current trends Sales x COS % = Cost of Sales in Dollars Plan month by month Adjust to reflect current trends 3

5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DEC 31 TOTAL BEGINNING OF MONTH COST OF SALES LAST YEAR 155,500 COST OF SALES PLAN 152,400 L/Y 92,231 PLAN 76,200 TURNOVER LAST YEAR TURNOVER GOAL Calculating Average Inventory Last Year Sum of BOM Inventory Month 1-12 $1,108,500 + Month 12 EOM Inventory $ 90,500 $1,119, = Average Inventory $92,231 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DEC 31 TOTAL BEGINNING OF MONTH COST OF SALES LAST YEAR 155,500 COST OF SALES PLAN 152,400 L/Y 92,231 PLAN 76,200 TURNOVER LAST YEAR 1.7 TURNOVER GOAL 2.0 Calculating Turnover Last Year Cost of Sales for the year $ 155,500 average inventory $92,231 = Turnover = 1.7 turns JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DEC 31 TOTAL BEGINNING OF MONTH COST OF SALES LAST YEAR 155,500 COST OF SALES PLAN 152,400 L/Y 92,231 PLAN 76,200 TURNOVER LAST YEAR 1.7 TURNOVER GOAL 2.0 Establishing turnover goal Look at last years results Plan realistic improvement Plan increase of.5 to 1 turn per year 4

6 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DEC 31 TOTAL BEGINNING OF MONTH COST OF SALES LAST YEAR 155,500 COST OF SALES PLAN 152,400 L/Y 92,231 PLAN 76,200 TURNOVER LAST YEAR 1.7 TURNOVER GOAL 2.0 Calculating average inventory Cost of Sales Plan $152,400 Divide by Turnover Goal 2.0 = Average Inventory plan $76,200 Reduction of $16,031 to previous years actual average inventory Cost of Sales Plan $152,400 Turnover Goal 2.0 = Average Inventory plan $76,200 If all months were equal, you would need $76,200 in inventory each month Next step is to establish a monthly inventory plan for the entire golf shop Average inventory is adjusted for each month Higher or lower based on % month s retail sales are to the total year s retail sales Be mindful of minimum inventory levels for off season months When complete, average inventory for the year must remain the same Two Methods: 8.3% Formula Excel Spreadsheets 5

7 8.3% Formula If all months were equal they would be 8.3% of inventory needs Adjust months up or down based on +/- to 8.3% If month is 12.3%: = 4 Raise average inventory 40% Month % to total Avg Rate +/- avg rate % adj to avg inv Avg Inventory $ adj to avg inv BOM Inv January 4% 8.30% -4.3% -40% $ 76, $ (30,480.00) $ 45, February 5% 8.30% -3.3% -30% $ 76, $ (22,860.00) $ 53, March 7% 8.30% -1.3% -10% $ 76, $ (7,620.00) $ 68, April 9% 8.30% 0.7% 10% $ 76, $ 7, $ 83, May 11% 8.30% 2.7% 30% $ 76, $ 22, $ 99, June 12% 8.30% 3.7% 30% $ 76, $ 22, $ 99, July 12% 8.30% 3.7% 30% $ 76, $ 22, $ 99, August 12% 8.30% 3.7% 30% $ 76, $ 22, $ 99, September 10% 8.30% 1.7% 10% $ 76, $ 7, $ 83, October 8% 8.30% -0.3% 0% $ 76, $ - $ 76, November 5% 8.30% -3.3% -30% $ 76, $ (22,860.00) $ 53, December 5% 8.30% -3.3% -30% $ 76, $ (22,860.00) $ 53, total $ 914, avg inv $ 76, RETAIL SALES PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL $ PLAN % OF YEAR 4.0% 5.0% 7.0% 9.0% 11.0% 12.0% 12.0% 12.0% 10.0% 8.0% 5.0% 5.0% 100% COST OF SALES PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL $ PLAN COS % 83.3% 86.7% 76.2% 72.2% 69.7% 69.4% 73.6% 69.4% 71.7% 87.5% 83.3% 80.0% 68.0% MONTHLY PLAN PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ACTUAL INV

8 COST OF SALES PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL $ PLAN COS % 83.3% 86.7% 76.2% 72.2% 69.7% 69.4% 73.6% 69.4% 71.7% 87.5% 83.3% 80.0% 68.0% 8.3% METHOD PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ACTUAL INV SPREADSHEET METHOD PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ACTUAL INV Golf Shop size and layout Removable v. built in fixtures Fixture fill requirements Socks, hats, gloves, balls Off-season months How low can your level get while still being in business Markdown program v. end of season sale Clearance all year round leads to higher profitability and lower inventory levels The Total Shop Monthly Inventory Plan must now be broken down into departmental inventory plans Divide Inventory Plan into departments based on percentage each department is of your total shop If men s is 40% of your business they receive 40% of the Inventory Plan Dollars You now have an inventory plan to follow when purchasing merchandise: You are ready to run an Open-to-Buy 7

9 TOTAL SHOP MONTHLY PLAN PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVG INV. PLAN THIS LAST YEAR YEAR RETAIL % TO PLAN % SALES TOTAL DEPARTMENT MONTHLY PLAN TOTAL SALES % 0% 100.0% 0% AVG INV. PLAN MEN'S % 40.0% WOMEN'S % 6.0% HARDGOODS % 34.0% EQUIPMENT % 20.0% Each department s inventory plan may now be tweaked keeping average the same Open-to-Buy Reserves Monthly Analysis Special Orders p Pre-Books and Programs On-Order Log Reducing Current Levels Gives you a Cash Flow plan Gives the buyer a checkbook Allows for consistent planned flow of merchandise one month prior to desired selling period Guide for placing orders Plan for holding reserves An annual planning process Developed for total shop Broken down by Department A monthly review process 8

10 Indicates need to react to current trends Place additional purchases Address slow selling merchandise Adjust future shipments Improves profitability Improves opportunity to meet cost of sales and turnover goals Stay for the next hour.complete process made very simple!!! Current Month s Planned Cost of Sales + Next Month s Planned Inventory - Current Month s Planned (or Actual) Inventory = Cost Buy Plan (Planned OTB) - On-Order & Reserves & Special Orders (at cost) = Actual Open to Buy for Month Department Total Shop MONTH JAN FEB MAR APRIL MAY JUNE Current Month's Planned Cost of fsales Next Month's Planned Inventory Current Month's Planned (or Actual) Inventory = Cost Buy Plan (planned OTB) Current On Order Reserve & Special Orders Actual Open to Buy

11 Can cause overstocks in Golf Shops Reserve dollars from Open to Buy plan to prevent overbuying and increased inventory levels in high Special Order Departments Failing to hold reserves means every special order taken equates to that amount of additional inventory in your Golf Shop Each order means you didn t sell merchandise from golf shop so your inventory was not reduced Very important to track in shoes and clubs Major Cause of Overstocks in Golf Shops!!! Benefits Terms, Discounts, Rebates Convenient Buys all done at once Suggested order done by Rep Risks Reps orders based on units shipped not units sold Discounts and Terms not taken Excessive Inventory Decreased Turnover Increased Markdowns Change of product line mid-season Planning with Pre-books and Programs Use previous SALES records and adjust to trend Know Vendor Profitability Be prepared have your own numbers Spend only dollars in Buy Plan!!! Challenge monthly and adjust orders Ensure all Terms and Discounts are received Programs don t sell merchandise the right product, price, and people do!!! 10

12 Tool for reacting to Open to Buy Track all vendors Plan delivery timing Plan floor presentation Challenge if delivery dates are not met Use records for choosing vendors next season Use for dealing with tough buying decisions next season MONTH JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC Current Month's Planned Cost of Sales Next Month's Planned Inventory Current Month's Planned (or Actual) Inventory = Cost Buy Plan (planned OTB) Current On Order Reserve & Special Orders Actual Open to Buy Ship Date Vendor Date R'cd Description JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC Vendor A 3/20 Navy/Purple/Teal /1 Khaki/White 3000 Vendor B 2/20 1/26 Green/Yellow /15 Red/Black /25 Tech Pastels 3000 Vendor C 3/1 Grey/Black /15 Blue/Yellow /15 Red/White/Blue 1800 Evaluate current Inventory Return to Vendor for credit or exchange Purchase merchandise that compliments existing inventory Evaluate number of lines you are carrying Challenge duplication in lines Consider lines with pricing incentives Purchase Off-price merchandise Plan receipts one month prior to your planned sales 11

13 Inventory levels should be planned based on cost of sales plan and turnover goal Each department should be looked at individually Developing an Inventory Plan is the first step to running an Open-to-Buy Tracy Moffatt K&K Consulting AGM Education Team The Educational Voice in Golf Merchandising All AGM educational materials are protected by U.S. Copyright and cannot be reprinted or used without the expressed written consent of the Association of Golf Merchandisers. 12

14 MONTHLY PLANNING RETAIL SALES PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL $ PLAN 0 % OF YEAR 0% COST OF SALES PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL $ PLAN 0 COS % #DIV/0! MONTHLY PLAN PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ACTUAL INV 0