Friday, January 2, 2009

Customers First (it turns out)

I was talking with one of my business partners last night over coffee about store inventory management. Other stores have what I think is a strange way of managing inventory in which they pay all of their bills, and whatever money is left over they use to purchase inventory. I gave a seminar that included open-to-buy spreadsheets for inventory management, and when I asked around, this was how most store owners did it. This topic was of interest to me because cash flow is always a problem with a store like ours. There isn't a lot of cash to start with, and there are few "standard" months in which we can predict our sales. This means it's not unusual to be short cash, requiring some short term borrowing, usually from owners. In the past, the cost of money was cheap, but now, short term borrowing is very expensive.

I use a spreadsheet for purchasing that shows my available inventory budget. This sheet is a closed system, independent of any of the other store finances, with the theory that the inventory budget may go up and down, but shouldn't be dependent on store finances, only sales. Sometimes this gets me into a small amount of financial trouble. My business partner pointed out an upside to my problem. By using my strict method of inventory management, I may be shorting the operations budget, but the shelves are always full. New releases are never missed, inventory isn't reduced for the purpose of paying operational expenses, and customers are generally very happy with the outcome. Inventory management is always a balance between pleasing the customers and working within your budget. Putting inventory first, therefore, is a method of putting customers first. There you have it: a quirk of how I manage the story has a positive twist for the customer.

No comments:

Post a Comment