Stock Control Systems

Each store will vary in the systems and procedures used to control stock. Regardless of the system, the calculations are important and accurate stock counts are vital. While there are many stock control systems available it’s worth identifying what information, an efficient stock control system should provide

Unit Control Units in stock by size, style and colour for each classification Units on order by size, style and colour for each classification Units in stock already committed Open to buy by classification updated automatically Identification of best/poorest performers Stockturn by item to identify problem stock (as well as good performers) Weeks of stock on hand Re-order time highlighted by item, recommended quantity and capital outlay Comparison to optimum planned range by item, particularly for basic lines (very difficult to achieve in anything less than a sophisticated system).

A unit control system should be able to integrate dollar control, planned inventories by classification and planned open to buys, including forward commitments – i.e. to convert units to dollars at cost (or retail depending on which inventory system you operate under).

Dollar Control The objective of dollar control is to measure and control the: amount of money invested in each product line stock turn of each product line gross profit

Inventory Management In inventory management there are a number of issues that you need to be aware of when monitoring and controlling your stock and staff: These issues include: How can the merchandise received from different suppliers be controlled? What inventory tasks can be done during non-spa hours rather that while the spa is open? What level of breakage or damage is acceptable? How do you know when this level is exceeded? Who is responsible for deliveries coming in and going out of the spa?

Determining Stock Profitability There is no best method of determining stock profitability. The key to selecting a method is how well it identifies the relationship between: Stock turn Gross profit Expenses The inventory being carried. Stock turn is the frequency that stock is sold or turned over. It is usually expressed in terms of a year, but in some businesses the period may be expressed in terms of less than a year. It is calculated as follows:

At Retail Divide the average stock at retail into annual sales at retail, for a store, a department or just a classification. For example: If Sales were:$720,000 and Average Stock was:  $180,000 Then Stockturns =Annual Sales at Retail:=$720,000 Average Stock at Retail:$180,000 =4 Stockturns per year Average stock is calculated by adding the closing stocks for each month (12) as well as the opening stock for that 12 month period and dividing that total by 13.

At Cost If Cost of Goods Sold was:$480,000 If Average Stock at cost was:  $120,000 Then Stockturns =Annual Cost of Goods Sold  = $480,000 Average Stock at Cost  = $120,000 =4 Stockturns per year This example shows 4 stockturns a year. While a high number of stockturns per year is important, overall profitability is critical. It is pointless achieving 10 stockturns per year if the gross profit is too low to cover your overheads.

Factors That Affect Stockturns Some retailers concentrate on stocking fast sellers and quickly eliminating slow sellers. Others have some fast sellers but too many slow sellers that drag their stockturn figure down.

Slow selling merchandise is costly and should be eliminated from your range. In some cases you may need to carry certain lines to maintain your credibility and/or complete a product range

Another factor that impacts on stockturns is excess inventory. Efficient retailers keep the lowest levels of stock possible without losing sales. This provides a safe level of fast sellers and ensures that they are never out of stock. They also reduce their back up stock of slower lines or eliminate them altogether. The key to net profit is a high stockturn at the best gross profit rate possible. Unfortunately, no buyer gets it right every time and occasionally there will be slow movers in your range. This can be offset by carefully selecting replacement lines or new merchandise that has a better chance of selling

The Cost of Dead Stock To identify what dead stock costs you, first consider the cost of: The floor space being occupied Losses by spoilage or damage Interest on money that is tied up in the stock Tired looking stock that damages image of your store. Most of all - the profit lost by not selling better stock.

Measuring Dead Stock Consider the following example: If you had $8,000 worth of dead stock at cost your gross profit margin was 33-1/3%th en it should sell for $12,000. Subtract the $8,000 cost from the $12,000 received in sales and the cost of the dead stock is $4,000 (gross profit). If you turn your stock over 4 times in a year - this dead stock has potentially lost 4 x $4,000 = $16,000 potential gross profit in a year

Measuring Dead Stock You cannot afford to keep dead stock. Don’t hesitate to price it at a level that will sell, even if it means selling below cost