How you capture sale potential if you have been out of stock

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Reference no: EM133203008 , Length: 10 pages.

Assignment: Inventory Management Paper

Discussion Topic Description

How do you capture sales potential if you have been out of stock? First, you need to see when you ran out. Then you can calculate what your sales could have been.

Knowledge from course

1. Sales trend: This is a snapshot of the prior three months of sales and of the average of these three months. You can calculate sales trend by product category (see totals under each category) or by SKU. What is important to note about trend is that you need to account for out-of-stocks, events, promotions, product launches, and major holiday events to get a true picture of what you are selling.

2. Out-of-stocks: If you don't know how long you have been out of stock, you can't recalculate sales trend. Without knowledge of what sales were missed, you cannot have an accurate trend. You must continually increase min/maxs to capture the correct number. You won't know what the max is until there is remaining inventory in the order cycle. In this case, either use another month-one in which you weren't out of inventory-or if market conditions have changed and demand is up, make assumptions about how the market change will affect demand. For example, if someone wore your fall collection lipstick on the red carpet, sales will spike, but the question is for how long.

3. Events: It is important to keep records of events. Whether your events are good or bad, you need to know. If an event is good, you will need to anniversary it next year. If it is not successful, you will want to note what didn't work, so you can avoid those mistakes in your upcoming events. Industry professionals who have run hundreds of events in their careers know that meeting prep and planning are as important as the debrief with the team. By reviewing events and promotions through the eyes of the team, you find opportunities that could have been improved upon.

4. Promotions: Just as you should keep records of events, so should you keep records of promotions. Although some promotions are one-of-a-kind and may not be able to be duplicated, rest assured that the management and marketing teams will be planning ahead to anniversary these successes.

5. Product Launches: It is tough to anniversary a major product launch. If the product is something that will become a hero product, those sales may stay strong, though not at product launch levels (the first month). You will still need to plan to reproduce the difference, so you can hit your number. A tougher thing to reproduce is a flash trend or limited edition item. Such items are darlings today but dreaded tomorrow because you need to find a way to beat them next year.

6. Holiday Events: Obviously, the months leading up to the Christmas holiday are huge. It is estimated that the sales on Black Friday weekend alone were over $57BB in 2016. Some businesses, such as body and bath or candles, do as much as 40% of their annual volume between Halloween and New Year's Eve. Planning a strong holiday means bringing customers back as much as possible. In beauty, you will see stores such as Ulta, offer a new GWP or even a GWV (Gift with Visit) during this time. You will notice that the enticements go up as you get closer to the holiday. This change occurs because early in the season, people browse, but Christmas Eve is full of buyers who aren't as picky as they may have been before Thanksgiving.

7. Project Sales Classifications in Dollars and Units

8. When you look at the chart on the top of this page, you will see a 3-month average. Again, this is your trend. When you look at Checks & Balances, you see that the 3-month average, or trend, is 21. Now look at the budget. You notice that for this month it is $520. That means that if you order what you sold in April-20, or your three-month average-you will have enough inventory to hit your $520 budget.

9. Now you can project your numbers out as a category. If you look at what you have sold as a category and order to the average, you will hit your skin care category number.

Reference no: EM133203008

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