26 | The Jewelry Business Magazine The following article by David Brown on Inventory Management is a good one and contains practical suggestions on how to manage your inventory. It does however, omit the discussion of what exactly to do with product that is no longer selling. There are as many opinions of what to do as there are retail jewelers. The simple straightforward method is run a sale. I know there are many jewelers who look at sales as distasteful. They believe sales ruin your image and damage your pricing credibility. Au contraire, sales are a part of every business today and jewelry is no different. A recent (October 1-11) NRF survey of 7313 people revealed “Sales and discounts remained the largest factor in choosing a particular retailer. 71% of the respondents cited sales and discounts as the reason to shop a particular store! It can’t get much clearer that this survey!!! How you do the sale, when you do it, how you promote it, and how long you run it are all variables at your disposal. The point is JUST DO IT. And, make it a practice to do it on a regular basis. Not to decide is to decide! Editor’s Note What is your strategy to deal with surplus product? KEY STEPS TO EFFECTIVE INVENTORY MANAGEMENT Inventory is the lifeblood of any business. It is often your greatest cost and the biggest burden on cash flow. Keeping it under control is a fulltime job, yet many retailers adopt a haphazard approach to its management – allowing the inventory to control them rather than the other way around. In order to get the best out of your inventory there are a number of key steps that can help you manage it more effectively. •  Set re-order levels. As we often repeat 80% of items that sell are fast sellers – that also means 80% of inventory orders should be reorders. This alone removes much of the inventory management process and automates it in a way that can save both time and money •  Divide your inventory into categories. Not all inventory is created equal. Within the product lines you carry will be the following types of product • High ticket items that don’t turn over quickly (think diamonds) • Medium priced items that will turn over slightly quicker •  Cheaper items that can turn over rapidly (silver and giftware) How you handle each of these is different and an effective management strategy needs to take this into account. You wouldn’t monitor your diamond turnover as frequently as your silver earrings but ordering of this product will have a more significant effect on cash-flow and aged inventory and your higher ticket items will have a greater consequence for your business. Design a strategy that reflects each area. Include repairs in your inventory management process. Often inventory control can focus around product that you own but effective management should also include repairs of customer’s items that you have. Work in Progress is part of inventory control and the turnaround of repairs can have a big impact on your cash-flow as well. Remember– the first items in should be the first items out. Even though jewelry is not a perishable item it still makes sense to manage it on a first- in first-out basis to prevent tarnishing, worn tickets and any in-store wear and tear Don’t ignore your carrying cost. Inventory cost is more than just the buy-in of the item. Additional expenses such as cleaning costs, storage, boxing, and insurances can add 20-30% to the costs of any item in store. Have a plan for excess inventory. All businesses suffer from surplus product, discontinued lines and slow selling items therefore there is no excuse not to have a strategy to deal with it. Do regular inventory audits. What your records say and what your store tells you will seldom agree at any random point in time. That’s why regular checks should be part of your store policy to protect against error and theft. This can be done on two levels •  Regular full audits. A closed-door full inventory should be undertaken at year end and more often as required •  Spot checks. A random check on individual stock codes. This picks up errors but also signals to staff you are vigilant and expect them to be also. •  Cycling checks. On a rotating business, whole departments can be checked (perhaps once a week)Have good inventory software. Your inventory control will only be as good as the system you use. A good business system has, as its hub, a good inventory system. You need one that is simple to follow and can be relied on for accuracy. This investment is worth its weight in gold. Appointapersoninchargeofmanagingit.Managementmeans having someone to manage! Effective inventory management involves having a clear overview of your inventory strategy and ensuring it is effectively carried out. A dedicated person responsible for this and ensuring the measurement procedures are in place and are being followed will minimize inventory levels from becoming out of control or stale. Managing your inventory effectively can save you a fortune in time and money on a weekly, monthly and annual basis – year in and year out. Take the time to put an effective system in place. David Brown David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact inquiries@edgeretailacademy.com or Phone toll free 877-569-8657