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Friday, June 1, 2012

Inventory Control



Inventory Control


Let’s Go Sledding

When we first opened the Western Auto Store we were a little naive about the term “Order Multiple”. I am sure they covered all of this at Western Auto school but, when it came to details, my father kind of zoned out.

Basically, small retailers are forced to order in multiples. Often times this is one case. So, if you want to order one quart of Havoline oil you have to order a complete case of 24.
One of our customers asked my father to order a sled for him to send to his grand-youngens up north. My father looked in the catalog and saw that we offered two kinds of sleds. The man said he wasn’t sure what kind he wanted, that he would know if he saw it in person.  My father figured that he could always sell one sled. How hard could that be?

The two sleds sold for $19.99 and $39.99 each. My father ordered one of each. The problem was that the $19.99 sleds had an order multiple of 12 sleds and the $39.99 model had an order multiple of 3 sleds. So, when the order arrived we had 15 sleds. Grandpappy took one of the $39.99 sleds and we put the rest of them out on display.

Years went by and we marked the sleds down to practically nothing. Still no one wanted the sleds. Back then stores had a platform that ran along the tops of their regular shelves where items could be displayed. We moved those sleds up to the platform and tried to keep the darn things dusted. Every year we paid inventory tax on them and every year they sat. We ordered them in 1974.
In 1986 we began remodeling the store and we moved the sleds to the backroom. There they sat. Finally, in mid-January 1987 it started snowing. The store normally opened at 8 AM but, at 7 AM I was sitting at the Waffle King eating breakfast and saw the snow start falling.

The sleds came to my mind. Maybe we could sell one or even two of the things. I went to the store and got them out of the backroom. They still had the original price tags on them. I dusted them off and started to look up what they cost us so I could mark them at cost and get rid of them.
People started coming in and I sold sleds. I sold them all at the original stickered price. By the time my father arrived at a few minutes to 8 AM we were sold out. He went to the back to look for the sleds and could not find them. He asked me if I knew where they were and I told him I had sold them all. When I told him I sold them all at full price he was surprised and pleased.

Even selling them at full price we lost money. Every year the sled sat unsold we had to pay inventory tax on them. Every year they sat, our money was tied up in them. Money we could have used to purchase other items that would turn a lot faster than once every 13 years.

Business is all about the little details. Knowing about order multiples is an important detail.

Do you have a story about buying an item to sell that simply sat on the shelf for years? Post a comment and tell us about it.



Disclaimer
The opinions or advice listed in this blog or website should be used as a place to start only. It is not a substitute for the use of a professional.
Please be sure to consult your attorney and/or accountant with any specific questions.
There is no one right answer to any business question that will cover all circumstances.
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1 comment:

  1. That’s quite a story, David. You’re correct in saying that business is all about the details. This concept is especially true, when it comes to inventory control. Poor inventory control can be caused by a lot of factors, such as plan failure, too much inventory, and failure to monitor. It’s a good thing though that we have technology on our side to make things a lot easier. Tons of inventory control software (many of them are free) are available. With a little bit of research and practice, you can use them to your advantage.

    Ethan Mudgett

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