Open to Buy is a highly effective blunt instrument used by most general merchandise retailers to plan their purchasing and control inventory. I am sure many of readers of this article are familiar with this tool and it works pretty well – most of the time. Of course, there are other ways to budget one’s stock requirements. Allow me to relate a real life scenario. When it comes to birthdays, selecting a gift is always a challenge, especially when one has been with a partner for many ye
ars. In recent years I have tended to snoop among my wife’s cosmetics and toiletries to find something a little exotic or expensive that she really likes, but doesn’t always feel justified in buying.
Armed with the details of a product, I recently set off on a mission to purchase the item, which has a popular brand name with stores carrying only that brand.
The first of these stores was out of stock. I asked the sales assistant whether the item was a slow seller. “Oh no,” she said, “it is one of our top sellers. Why not try another of our stores?”
I asked her to call ahead to ensure that the other store was in stock. I needn’t continue because the rest is predictable.
The problem with OTB and similar budgeting tools is that unless one has a robust system to ensure that core items are always in stock, lack of budget can lead to out of stock of your best sellers. And there is no better way to irritate a customer than to be out of stock of a basic item.
It is human nature for buyers or planners to allow money to gravitate towards new and exciting product while the more mundane items are overlooked. It is therefore essential to divorce regular buying from core item replenishment.
It is desirable to go one step further and to utilise an automated replenishment system. This can be provided by a third party or home grown.
The home grown alternative is frequently considered the cheaper option, but often does not work out that way, especially if you include the ongoing maintenance and management.
Invariably the better option is to delegate the responsibility to a professional provider that has more sophisticated software than a legacy system and where the disciplines are part of the deal.
Another option is to delegate the replenishment of goods to the supplier. The problem here is that the human element is prone to error and personal interests may interfere in the process. In all instances, however, a high element of mutual dependence is required between the retailer and the vendor. If this is abused, the system is doomed.
The efficacy of a replenishment system lies in its design, discipline, and mutual dependence.
Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702
