When you have items which are slow moving they are like keeping cash in a bank account with no interest and recurring fees. If your inventory does not turn at a regular and frequent rate there are actions you can take to improve your cash flow and bottom line.
What your turn rate should be depends upon a variety of factors and by industry. By analyzing the data you can determine appropriate targets, but a rule of thumb may be that inventory should turn every 90-120 days or 3-4 times per year. If you have shorter lead times, you will generally want to have higher turn rates and keep your stock levels lower.
The most common response to slow moving inventory is to put the items on sale to turn them into cash. Lowering prices also reduces margin and there are several strategies to reduce the cost of slow moving inventory without losing your shirt:
- Create kits or bundles of product which pair slower moving items with faster moving items or with complimentary items.
- Promote the items without slashing prices by using item placement in your store, website or catalog.
- Change the description, key words and even a product name to create new interest in the product.
When you put the items on sale, you have multiple options for reducing price:
- Promote multiples at lower costs. Buy 12 get one free.
- Cross sell it with other products. Buy a case of the popular item and get a slow moving item at a discount.
- Create a sale event like a Flash Sale or "Deal of the Day" as a positive promotion as opposed to a clearance sale which has a more negative connotation.
The best strategy for slow moving inventory is to avoid it! You can never know with 100% certainty with how a new product will turn, but often you can compare it to an existing sku or product line. SAP Business One has multiple tools such as the Inventory Status and Analysis and Intelligent Forecast tools to identify which items to focus on and how much stock you should carry. The SAP Intelligent Forecast uses advanced statistical algorithms, forecasts and historical data to predict future demand so you can stock appropriately.
To find out more about how you can optimize your inventory with SAPDistribution.com and the powerful tools in SAP Business One, contact one of our distribution experts at 678-401-6244 or fill out a Contact Us form.