It’s Nearly 2017. Do You Know Where Your Inventory Is?

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Thanks to careful inventory planning, you’re on track to have a good holiday season in 2016.  Now it’s time to set new inventory plans, for 2017. The coming year will be one of changes in the White House, on Capitol Hill and, perhaps even from the Federal Reserve.  The Fed has spent much of 2016 dialing back on expectations for interest rate hikes; in September, Fed officials lowered their long-term view on U.S. economic growth to 1.8 percent from 2 percent and left their interest rate target rate unchanged.

The local economy surrounding your business may or may not align with that outlook. In fact, your business may not turn on it at all, responding instead to trends that could have more of an impact on your inventory plans. Maybe your customers will be dropping gluten-free pasta for a trendy imported brand, or forgoing big-screen TVs for more portable electronics. As you prepare your inventory plans for the New Year, think about these ways to evaluate your merchandise and raw materials.

1. Categorize your inventory.

How do you best manage your investment to maximize profits and cash flow while minimizing costs? Categorizing your inventory into three different buckets: dead inventory, slow-moving inventory and productive inventory. But don’t rely on back-of-the-envelope guesses; check the reports from your point-of-sale (POS) system if you have one. Businesses cannot afford to have their products sitting on the shelf for extended periods of time. Some say 12 months on the shelf qualifies a product as dead, but I’d recommend half that. Instead of accruing negative rates of return on inventory that remains stagnant, mark it down for sale if you can to recoup some of your spending. If a particular item was a slower seller than you expected it to be, but you think it still will belong in your product mix, adjust your spending plans to buy less of it less often.

2. Automate your inventory.

If you don’t yet have a POS system with inventory tracking, commit to getting one for your business in 2017. These systems are now well within the reach of small businesses in a wide range of industries and an investment in them can pay off in many ways. You’ll see what’s really selling, instead of what you hope will sell. If you are adding ecommerce to a brick-and-mortar location, the SKU (stock-keeping unit) features of an automated inventory system can help your merchandise flow seamlessly into an online store. The reports generated from these systems also come in handy when you are applying for financing, whether from a bank or alternative finance provider. As a business owner it empowers you to say, with authority, what is selling in your business and how fast it is moving.

3. Gaze into the future.

Google the business you are in and the words “inventory trends 2017.” Big businesses spend heavily on trend forecasts and some of the firms that do this work release summaries of their reports to the public. Think about how the trends they are spotting are confirming or clashing with your own observations, and then consider testing an item or two from their report in your inventory mix. Sometimes, shoppers don’t know that they want something until they see it on the shelf in front of them. 

Looking ahead to 2017, these tips can help prepare your business for the changes that will occur over the next few months and help you maintain profitability through certain or uncertain times.

Stephen Sheinbaum

Stephen Sheinbaum

Stephen Sheinbaum is founder of Merchant Cash and Capital. 

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