Southern Jewelry News
  • Featured
    • All
    • Featured
    • Featured Retailers
    • Retailer Roundtable
    • Sponsored Content
    • Supplier Spotlight

    Tiffany Stevens: JVC has industry’s back

    Perry’s Emporium: Sailing for success

    Perry’s Emporium: Sailing for success

    From nursing to jewelry, a WI retailer’s career conversion

    Atlanta Jewelry Show, featuring RJO, kicks off 2021 with safe, successful event

  • Latest News
    • All
    • COVID-19
    • Furry Friends
    • Industry Awards
    • Industry Events
    • On The Move
    • Other News
    • Tradeshow News
    • What's New

    Jewelers of America announces CASE Award winners

    Jewelers Mutual® Group hires Mark Smelzer as Chief Content Executive

    Artistry, Ltd. releases new products for Spring 2021

    After a difficult year, the Israeli Diamond Industry begins 2021 with positive figures

  • Columnists
    The Retailer’s Perspective:It’s April Fool’s Day again…and again…and again

    The Retailer’s Perspective:It’s April Fool’s Day again…and again…and again

    Applied Marketing 101: The incipient end of the Airbnb Effect

    The Story Behind the Stone: Auction Action

    The Story Behind the Stone: Auction Action

    Celebrate Mom!

    5+ Digital Marketing Hacks for Jewelry Retailers on Mother’s Day

    Applied Marketing 101 video from George Prout: The Incipient End of the Airbnb Effect

    Are you losing the life blood of your business?

    The Story Behind the Stone: Provenance and Story

    The Story Behind the Stone: Provenance and Story

  • Classifieds
  • Subscriptions
    • Newsletter Signup
    • Print Subscription
No Result
View All Result
Southern Jewelry News
  • Featured
    • All
    • Featured
    • Featured Retailers
    • Retailer Roundtable
    • Sponsored Content
    • Supplier Spotlight

    Tiffany Stevens: JVC has industry’s back

    Perry’s Emporium: Sailing for success

    Perry’s Emporium: Sailing for success

    From nursing to jewelry, a WI retailer’s career conversion

    Atlanta Jewelry Show, featuring RJO, kicks off 2021 with safe, successful event

  • Latest News
    • All
    • COVID-19
    • Furry Friends
    • Industry Awards
    • Industry Events
    • On The Move
    • Other News
    • Tradeshow News
    • What's New

    Jewelers of America announces CASE Award winners

    Jewelers Mutual® Group hires Mark Smelzer as Chief Content Executive

    Artistry, Ltd. releases new products for Spring 2021

    After a difficult year, the Israeli Diamond Industry begins 2021 with positive figures

  • Columnists
    The Retailer’s Perspective:It’s April Fool’s Day again…and again…and again

    The Retailer’s Perspective:It’s April Fool’s Day again…and again…and again

    Applied Marketing 101: The incipient end of the Airbnb Effect

    The Story Behind the Stone: Auction Action

    The Story Behind the Stone: Auction Action

    Celebrate Mom!

    5+ Digital Marketing Hacks for Jewelry Retailers on Mother’s Day

    Applied Marketing 101 video from George Prout: The Incipient End of the Airbnb Effect

    Are you losing the life blood of your business?

    The Story Behind the Stone: Provenance and Story

    The Story Behind the Stone: Provenance and Story

  • Classifieds
  • Subscriptions
    • Newsletter Signup
    • Print Subscription
No Result
View All Result
Southern Jewelry News
No Result
View All Result
Home Columnists

The ideal inventory (or how much is enough?)

David Brown by David Brown
April 1, 2020
Share on FacebookShare on Twitter

So how much inventory is enough? What is the ultimate mix of product you should carry in order to maximize the sales your business can make? Getting this right is a balancing act for most stores and can absorb a huge amount of your business investment and time.

The ideal level, in my opinion, is the amount of inventory required to meet your current anticipated sales. What time frame this represents will depend on how quickly you can reorder product back in; obviously the quicker you can restock, the less product you need to carry.

Inventory is something of a balancing act – too much and you fail to earn a satisfactory return on your investment – too little and customers leave feeling your selection is not sufficient. Ultimately, inventory should be viewed from the customer’s perspective. How many choices does the customer need to see in order to make a buying decision?

One of the best tools we know of for planning your inventory is an Open To Buy system (OTB). This is the ideal planning tool for buying as it takes into consideration how much inventory you have now, how much you will be selling and what you will need to spend to replenish back to the appropriate levels.

In its simplest form, an OTB system takes into consideration your expected sales and factors in your Gross Margin % and markdowns. This will provide you with how much inventory will be moved during the selected period. The system will then subtract this from your beginning inventory and will compare the expected ending inventory with your planned ending inventory.

If your expected ending inventory is less than the plan, then the difference is the amount of purchase dollars available to buy more inventory. On the other hand, if your OTB is negative (expected inventory greater than plan) then there are no dollars available to buy more product. In fact, action may have to be taken to move more inventory (markdowns, vendor returns, etc.)

Managing an open to buy system can be tricky as it is a constantly moving challenge, and for a store with limited trading history it can be difficult to determine anticipated sales.

So, what is the ideal inventory level? As we said earlier some product lines can be restocked quicker and hence less product is required, but as a rough rule of thumb we suggest 1.5 – 2 stock turns per year on average as being the ideal. You need room to grow, but don’t need to be in a situation where your product lines are becoming a millstone around your neck. This may be only 1 stockturn for higher priced diamond product but be 3 times for cheaper silver lines – again the product line will dictate the criteria for this.

This means that if you plan to have sales of $50K (retail$) in a 3 month period, and are aiming for a stockturn of 2, then you will require between $75-$100K (retail$) of inventory on-hand at the beginning of the period. Seasonal adjustments are obviously required for December and other busy periods.

Once you start using an OTB system you can get much more specific in your inventory management by using the OTB at the category or department level. This way the OTB not only tells you whether you have enough inventory, but also if you have the right mix.

Getting your inventory levels right is one of the most important decisions you can make for your store. If you need help with setting up an Open to Buy system for your business our experienced staff are available to help.

David Brown

David Brown

David is the President of The Edge Retail Academy (sister company of The Edge). They provide expert consulting services to help with all facets of business including inventory management, staffing, sales techniques, financial growth, retirement planning, etc. – all custom-tailored to your store’s needs. Utilize the power of The Edge, to analyze major Key Performance Indicators that point to your store’s current challenges and future opportunities.  Edge Pulse is the ideal add-on to the Edge, to better understand critical sales and inventory data to improve business profitability.  It benchmarks your store against 1100+ other Edge Users to ensure you stay on top of market trends. For more information call 877-569-8657, ext. 1,  e-mail Inquiries@EdgeRetailAcademy.com  or  visit www.edgeretailacademy.com.

Related Posts

The Retailer’s Perspective:It’s April Fool’s Day again…and again…and again

The Retailer’s Perspective:It’s April Fool’s Day again…and again…and again

April 1, 2021

Applied Marketing 101: The incipient end of the Airbnb Effect

April 1, 2021
The Story Behind the Stone: Auction Action

The Story Behind the Stone: Auction Action

April 1, 2021

Celebrate Mom!

March 31, 2021

Latest News

Industry Awards

Jewelers of America announces CASE Award winners

April 7, 2021
On The Move

Jewelers Mutual® Group hires Mark Smelzer as Chief Content Executive

April 7, 2021
What's New

Artistry, Ltd. releases new products for Spring 2021

April 7, 2021

Other News

After a difficult year, the Israeli Diamond Industry begins 2021 with positive figures

Soothe 3 common customer pain points with Diamond Hunt

Study of rare diamonds unlocks more of Earth’s secrets

CBG announces 2021 live event in Las Vegas

AGA Career Forum – “What Can You Do with Your Gemology?”

Jewelers Board of Trade® holds annual elections

Southern Jewelry News

© 2020 Southern Jewelry News.

Additional Information

  • About
  • 2021 Trade Shows
  • Media Kit
  • Contact

Get Social with Us

No Result
View All Result
  • Featured Articles
    • Featured
    • Featured Retailers
    • Retailer Roundtable
    • Supplier Spotlight
    • Sponsored Content
  • Latest News
    • What’s New
    • Industry Events
    • Tradeshow News
    • On The Move
    • Other News
    • Furry Friends
  • Columnists
  • Classifieds
  • Subscriptions
    • Newsletter Signup
    • Print Subscription

© 2020 Southern Jewelry News.