Entrepreneur's Adviser: The optimum inventory

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Digital Library > Operations and Technology > Inventory control"Entrepreneur's Adviser: The optimum inventory"

Question:
"How does a small company keep shelves stocked as deeply as the big boys without tying up all its sales capital in inventory?"
          —Alan Bryant, True Value, Yosemite, Calif.

Answer:
The real issue is having what customers want when they walk into your store. Hardware store customers usually are looking for a few items to fix a problem quickly. That makes your store a "convenience store" rather than a destination store like the big-box retailers.

Having stacks of specific products doesn't necessarily make a difference to your customers. They want what they want, when they want it, along with capable service. Understanding your customers and their needs is crucial in maintaining the optimum inventory.

Tip: Never be out of stock of any item that you sell. Good operating systems and careful attention to purchasing can help you maintain the proper items and quantities at all times.

Example: Casters are sometimes sold individually. But having only one on hand is no better than being out of stock, since customers typically purchase casters in sets of four. Make sure that you always have at least four of each caster style carried in your store.

How do you always have four casters (or whatever quantity is necessary for a particular product) in stock? Identify the normal weekly selling rate for each item, and then place the appropriate weekly order for your store.

Adviser: Craig R. Stokely is president of The Stokely Partnership Inc., Wayne, Ill., a consulting firm specializing in strategy, marketing, and mergers and acquisitions.

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Operations and Technology

Articles in our Entrepreneur’s Resource Center appeared in print and online newsletters published previously by the foundation. More than 1,000 articles can be found in the categories below, addressing timeless challenges faced by entrepreneurs of all types.