RECESSION STRATEGY - Part 6: INVENTORY AND DISTRIBUTION

INVENTORY

Cut your inventory, but wisely. You don't have to continue stocking a product just because you have always stocked that product. Use the 20/80 rule. Trim inventory where it makes sense to do so. Examine your inventory and decide what twenty percent of your inventory produces eighty percent of your revenue. Define what "high end" product means to your business. Define the functionality of the products you stock. Look at your inventory by "functional" and "discretionary" categories. Examine recent sales of the high end products. Have your customers stopped buying these products? Do you see any patterns of purchases of functional or discretionary products? If you have an integrated analysis tool that allows you to calculate register sales and inventory, examine price point and functionality versus discretionary products. Review the trigger-points you created in your budget process and examine your drop in sales. Decide if you will continue stocking, drop or reduce products based on your sales triggers.

Think trimming and just-in-time ordering. Think cash-flow.

DISTRIBUTION

Not all businesses, especially small retail businesses, have multiple distribution points or distribution options. If you do, improve distribution when possible. If you can, increase yourf outlets. Regardless of the number of outlets, provide incentives for your sales staff.

If you have the kind of business that invites quantity purchases, offer discounts for larger orders. Give discounts for advanced (committed) orders.

Maintain your cash flow. Identify and promote low margin but high volume products. Examine what you can do to develop marginal accounts or marginal territories.

Don't compartmentalize your thinking or actions. Remember, inventory and distribution are an integral part of the rest of your business. Continue to think of your business as a whole. Understand what effect your inventory and distribution decisions will have on the rest of your business.