Pulse May 2019 - Page 56

money matters B y t o m s h ay INvENTORY CONTROL The key to improving cashflow? Inventory management. Whether you’re a vendor who sells online or a spa with a retail space, all forms of retailing must confront the challenge of inventory control. and while internet retailing has changed the way all of retailing works, far too many retailers think that dealing with inventory must be done the same way it has for years. The lone change that has occurred has been the advent of the point of sale (PoS) system, which allows a machine to do what the buyer used to do. This only works, though, if the parameters are properly established for the reordering of merchandise and the buyer knows how to read the information the point of sale system provides. The reality, though, is that the proper and most profitable way of dealing with inventory has been around for decades, but many retailers do not utilize the correct methodology. have you ever taken a look at your checking account and found it to have less money than you need to cover bills over the coming month? if so, have you ever then walked over to the merchandise display in your spa and had this conversation with yourself? “if i had not ordered as much of these three products, or not brought in 54 PULSE ■ MAY 2019 this new line, or had let these items run out, that money would be in the checking account.” Perhaps the conversation went the other way. you think about your trip to the iSPa conference & Expo last year and the conservative approach you took to ordering. Perhaps there were products you decided to order much less of than you thought you needed because of cash concerns. all of these are legitimate concerns you can have in your spa. While budgeting and cashflow planning are important components in resolving these worries, a proper inventory control system is the first tool that you should use. Some retailers use a concept of “stock replenishment” to order. you take the dollar amount of sales in any category, look at the margin (for example, 55 percent), multiply the amount of sales by 55 percent and that’s how much money you spend to replenish what you sold. it’s a great concept, but with one sizable fallacy: stock replenishment makes the incorrect assumption that you need all the inventory sold to be replaced. The error? no consideration for the four seasons of the year. if you are a spa in florida, the big tourist and seasonal resident season ends in the early spring and the family tourist season does not start for several months. you need a method, called “open to buy,” that does consider seasonality. While the open to buy method takes a bit more effort, i anticipate you will quickly see that this is the correct, best and most accurate method for managing inventory for a spa. To get started, consider a moisturizer. are you buying for the sales you anticipate in the next month, or the next six months? not all vendors are the same. They have minimum quantities, weights or dollar amounts that need to be considered. how long does it take for the inventory to arrive? can you reorder this moisturizer, or will this be a one- time order for the season? is this a moisturizer that you stock year-round,