7 Keys to Good Inventory Management

There is unfortunately no magic formula or ratio that you can apply to guarantee you buy enough inventory to meet your sales needs without ending the season with a large carryover.  Inventory management involves a complex set of variables that requires experience, diligence and a little bit of luck, however there are a number of things you can do to help achieve your goals for controlling inventory.

The Marine and Motorsports industry has one defining factor that few industries share that makes inventory management tough for even seasoned veterans of the business – "SEASONALITY". Manufacturers need to schedule production months in advance to be able to supply on a timely basis before the season starts.  There is no reprieve and this demands you make decisions months in advance of your selling season.  So what do you do, roll the dice and pray you get it right, work off you personal emotions for the new models, or just sign the booking order your sales manager gives you and hope for the best.  All of the above will usually spell disaster.

There are steps you can take to reduce the risk of making a bad decision and it all centres around knowledge of your business and the outside forces that influence your Dealership.

Micro & Macro Economics:
This may sound a little over the top but it is really quite simple.  Macro economics are those things that are happening globally that may affect your business.  For example, improvements in sales volume could be expected this year with a stabilizing of the economy, all be it tenuous.  What about the effect of the Japan earth quake and Tsunami?  What about the fact we have a Federal election this spring and, for some, Provincial elections. 

 It would be foolish of me to think we have a crystal ball on how global events will affect your business, but it would be equally foolish to not at least consider what is happening in the world that may impact our economy.  Of greater consequence is what is happening in our local economy or the Micro Economics.  Are there potential strikes in key industries scheduled in the next year?  Are there planned shut downs of military bases, paper mills, local industry etc?  Are there any new industry announcements for your region that will bring new customers into your market area?  I think you get the idea!

Product Introduction:
Does your major supplier/s have any new product introductions for the next season that are going to be winners?  You are the product expert for your market place so make sure you maximize your opportunity, but don't get greedy.

Sales History:
You have all the data at your finger tips if you have been in business for a number of years.  Look at your sales trends in comparison to your local economies for the last few years.  All things being equal it is one of your best guides for making an intelligent inventory purchase.   

Manufacturer Data:
More than likely your manufacturer has a wealth of data on unit registrations in your market place, age demographics, and competitor statistics.  Ask your sales manager for this information before placing your booking order.

The Canadian Dollar:
Of course there is the dreaded cross border shopping to consider.  What is the current status of our currency and what are the economists predicting for the coming year.

Manufacturer Programs:
What are the programs associated with your booking order?  Study them carefully to assess the retail stimulus and the length of Free Floor Plan financing that is available depending on your purchasing level.  

Business Plan:
Last but not least, what are your business plan expectations for the next year.  Are you planning to expand or be liquidating inventory.  Do your profit goals dictate you need to reduce sales to bring your expenses in line, or are you looking to increase sales based on your local market expectations.

 No doubt there are other factors I have omitted, however the important message is your success is based on making an educated decision - so gather as much intelligence as you can before you make that important booking order decision.  Your inventory management responsibilities don't end here, but I will save that for another article.  Remember knowledge is power and the key component for making good decisions.

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