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Mastering Inventory Management: Identify Winners & Optimize Profits

Learn to assess inventory, identify top sellers, and eliminate underperforming items for enhanced profitability. Explore advanced analysis techniques like GMROI and inventory turnover to optimize your store's inventory management strategy.

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Mastering Inventory Management: Identify Winners & Optimize Profits

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  1. Moving Inventory: Pick the Winners & Lose the Others! Course Title

  2. Step One: Get a POS

  3. Step 2: Identify the Winners Run weekly by Department • Top 20 Sold by Retail $ w/Quantity on Hand (QOH) • Top 20 sold by Units w/QOH

  4. Step 2: Identify the Winners Run Weekly: Store Wide • Top 100 by $ w/QOH • Top 100 units w/QOH

  5. Step 3: Find the Losers Run Monthly, Quarterly & Annually • Bottom 20 by $ w/QOH • Bottom 20 by units w/QOH

  6. Advanced Analysis GMROI:An inventory profitability evaluation ratio that analyzes a store's ability to turn inventory into cash above the cost of the inventory. • It is calculated by dividing the gross margin by the average inventory cost. • A ratio higher than 1 means the firm is selling the merchandise for more than what it costs the store to acquire it. The opposite is true for a ratio below 1.

  7. Advanced Analysis Average Inventory: You're average inventory on hand for any given period. Measured monthly is the best. Calculation: Beginning Inventory + Ending Inventory / 2 = Avg Inv

  8. Advanced Analysis Inventory Turnover: A ratio showing how many times a store's inventory is sold and replaced over a period (usually one year) Inv Turns = COGS / Average Inventory

  9. Advanced Analysis Run or Create an Inventory Analysis Report Start with Category or Sub-Category view first • Re-run for details to analyze problem departments

  10. Advanced Analysis

  11. Advanced Analysis Scan in this order for problems: • GMROI, • then Avg Inv • to see how much of a problem it is • the larger the avg inv, the more of an effect it’s having.

  12. Advanced Analysis If GMROI is low, and avg inv is high, then these are the likely culprits: • Too few turns • Margin too low • Carrying too much inv for the level of sales

  13. Advanced Analysis The Fix: • Increase turns • Raise margins • Reduce inventory

  14. Advanced Analysis

  15. Advanced Analysis

  16. Questions? Donovan@SpringfieldMusic.com

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