Managing inventory takes commitment

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Managing inventory takes commitment_IHFRA_HFA blog5-2022

I have a favorite saying by the immortal Matt Ross. Matt had a ton of Mattisms that I loved to parrot back to him and anyone else who would or was paid to listen to me. Matt became a north star to me when he joined our team after a storied career at the Southern California power retailer and first members-only store, FEDCO. For those too young to remember or are not from around here, FEDCO had it all. Imagine a Target in Moscow pre perestroika. They had everything you could ever want in a drab, bland, lifeless environment that could bring Bobby Mcferrin to his knees in despondency. Matt was in operations, and I was mostly sitting on the three-legged stool of sales, merchandise, and marketing, so we worked together quite a bit. Matt had skills. He could see all my greatest furniture fears in almost Stasi-like acumen and feed on them. He could tell where we were over-assorted or under-assorted and the many dogs I brought on. He was much older than I was, and he would always get to work well before me; even if I made it in before the sun came up, he would be there to tell me how nice it was I showed up before closing. Matt was everywhere, knew everything, and he let me know it with a wink in his eye and a loveable wry smile. He was epic.

One morning, I came in, and he was waiting for me, sitting on the worst-selling sofa on the floor. It truly was an abomination, and I cursed myself for buying it; but how did he know? “Don’t worry, kid…. doctors bury their mistakes, and retailers just mark ‘em down”.

Sage words indeed.

A blunder once in a while is understandable. Bad buys happen, and it’s no use getting emotional about it. No one is immune. They’re sort of like a good martini. One or two is easy to laugh off, but when you’re ordering martinis everywhere you go, you wind up with a messy house and an angry home life. We don’t want that.

I’ve seen more than one seemingly good retailer crash and burn by poorly managing inventory, and those were in the days of predictability. You knew that if you ordered something with a 60-day lead time, it would ship within the allotted time, and the freight rate would be about what you expected. Ah, the good old days. Managing the ebbs and flows of shipping schedules and timing with demand is a dangerous balancing act. DUH! Thanks, Captain Obvious. But the show must go on, the doors must open, and we must have stuff to deliver. Matt Ross would tell you what I lacked in purchasing discipline, I made up for in calculated strategy and contingencies. I was passionate about my salespeople, who trusted me to have products in stock for them to deliver so they could feed their families. Managing inventory dollars was the heartbeat of the company.

Every company is different, and each of you has your own pet concerns and KPIs that you hang your hat on, so bear with me if this seems a little JV. These were my mantras.

  • Watch that boneyard. New furniture in a box tells no tales, but the broken, returned, and defective stuff could paralyze you with fear if they could talk. This is a massive black hole in any durable goods operations. My source of nausea came from the boneyard of the warehouse. Looking at it made my stomach turn. I could hear my father, in his Brooklyn accent, remind me that everything inside the walls are dollar bills, and ya can’t lose control. Watch that boneyard like a hawk.
  • A dominant retailer in my area taught me a lot. The first thing is that even though something I showed the sales team was filled with adjectives, they needed to stay disciplined with their strategy. I showed them hip, cool, unique, on-trend, rad, and proven winners, but if the way business is done doesn’t align between the companies, forget about it. There were too many ways to do things, and it wasn’t worth the inefficiencies variation brought on. Round pegs never fit through a square hole.
  • Celebrate getting creative on selling the losers. Have a plan for the overstocks when managing inventory. You know they’re coming. GMROI is nothing to hang your hat on anymore, so if you have to take control of flowing your own goods, then look at them in a mathematical way. In baseball, it’s called the Mendoza line. Try and make three buckets. One bucket is for the winners, one for the tweeners, and one for the losers. Winners get reordered, and you can never have too much of them. Think of the tweeners as excuses you can’t make anymore. You’ll find this bucket has the product you fell in love with at a furniture market but never sold. Never fall in love with furniture – it’s too expensive.
  • Hold sales management responsible for selling the losers and celebrate when they do. It’s merchandising’s fault, but the sales team gets stuck with it. Furniture takes a village to be successful, and we all have to trust that everyone is doing their best to further the cause. If you’re in sales, laugh at that floral printed, ball and clawed, sock arm sofa that showed up waiting for great aunt Tootie to jump up and down for, but then give it your best shot to make it successful. Good buyers expect to get laughed at; it goes with the territory.
  • If, at first, it does not succeed, move it. Every building I ever had was plagued with a few black holes. No matter what you put there, the items would die a slow death. I verified this by switching a dead group with a hot seller from bucket one, and I’ll bet you can guess what happened. Winners are hard to find, so don’t give up on the losers too soon. There is a reason you bought it, so give it a chance to prove you right. A batter gets three strikes; furniture gets two.
  • Cycle count. It’s a constant battle to cycle count the floors every week and dig in beyond the stats to discover the reasons why the stats are happening. The nitty-gritty details are what would keep me up at night. Like an actor on a stage, the costume must be right for the performance to resonate. Things to look at critically are:
    • Price tags are clean, correct, and current. Old tags are off-putting so change them up to give the appearance that the item is new and trending.
    • Lighting is uniform and directed correctly. Don’t forget about them when you reset the floor.
    • Accessories marry well with the group. Obviously, you can’t always take the accessories that were on the set that used to exist in a space where a new group occupies. Set a standard for each group so you can sell the whole room and inspire a purchase.
    • Flooring can get annihilated very slowly and ripped, and unkempt flooring sends a clear message that you don’t care. I know it’s expensive, and someone might think that duct tape fixes all, but I’m here to tell you that it makes things worse. Remember, we’re here to inspire, and no one would duct tape their carpet at home together if it ripped. Clean your carpets regularly. Spots and stains should take your appetite away. Have pride in your presentation and be critical of it. If you can’t, ask your friends or family to be brutally honest with what you’re doing. Bring in a designer you would refer customers to for opinions and write them a check for their time to keep the relationship professional.

Take the above with a grain of salt. These were my rules that I did my best to live by. I was never perfect, and emotions have a powerful pull, but the stakes are very high. A few wrong moves could turn out your lights. As a merchant, I was guilty of hanging on too long, but I rarely found enough ammo to prove myself right. There is too much good product out there to have a sordid affair with a living room set you were sure would be a massive seller. When it comes to managing inventory, take the hit sooner, clear out the backstock and come back to fight another day. After all, that puzzle is what keeps the fire in the belly burning hot and bright, and it’s what got me to the office before everyone else – except Matt.

 

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