how much inventory do you need orlando 2010 - pga sho · how much inventory do you need? ... open...

HOW MUCH INVENTORY DO

YOU NEED?

Presented By: Tracy Moffatt

AGM Education Team K&K Consulting

1

Many stores carry 2 to 3 times more inventory than they need

Many stores have no idea how much inventory they need to purchase each monthinventory they need to purchase each month

Most inventory is purchased “Just in Case” when it should be purchased “Just in Time”

Inventory should not be FISH (First In, Still Here)

Jim Dion, Dionco Inc. 2009

Calculating Inventory Needs for your Shop

Planning Monthly Inventory Levels

Tips for Managing your Inventory

Minimize dollar investment Lowers Costs necessary to carry inventory Inventory Tax – Interest – Insurance

Special Orders Open to Buy must be reduced by amount of

special orders at cost to prevent overbuying

Minimize amount of merchandise left at end of season

Minimize markdownsMinimize shrinkage

2

Maximize sales Maintain appropriate inventory levels to meet

customers wants and needs

Maximize turnoverMaximize PROFITMake more $$$

Average Inventory levels are determined using Cost of Sales plan and Turnover goal

“The Calculation” The CalculationCost of Sales Plan ÷ Turnover Goal =

Average Inventory Plan

This number must then be adjusted up or down for each month depending on sales curve

Calculation Cost of Sales Plan ÷ Turnover Goal = Average

Inventory PlanCost of Sales Plan $152,400

T G l 2 0÷ Turnover Goal ÷ 2.0= Average Inventory plan $ 76,200

On average, $76,200 of inventory is needed each month

Where do the numbers come from?

3

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DEC 31 TOTAL

RETAIL SALES LAST YEAR

2000 5000 8900 28200 31500 34500 31000 28000 19000 9000 5400 16900 219400

% TO TOTAL 0.9% 2.3% 4.1% 12.9% 14.4% 15.7% 14.1% 12.8% 8.7% 4.1% 2.5% 7.7% 100.0%

COST OF SALES LAST YEAR

2000 4000 6500 18000 22000 23000 22000 19000 13000 7000 4000 15000 155500

COS % 100.0% 80.0% 73.0% 63.8% 69.8% 66.7% 71.0% 67.9% 68.4% 77.8% 74.1% 88.8% 70.9%

ROUNDS LAST YEAR 0 0 100 2500 3500 6000 5500 4300 3200 1800 100 0 27000

RETAIL SALES / COST OF SALES / ROUNDS / INVENTORY FORECAST

$ PER ROUND $0.00 $0.00 $89.00 $11.28 $9.00 $5.75 $5.64 $6.51 $5.94 $5.00 $54.00 $0.00 $8.13

BEGINNING OF MONTH INVENTORY

56000 54000 53000 73500 94500 106500 114500 117500 116500 111500 106500 104500 90500 1199000

RETAIL SALES PLAN 1500 4500 8000 28000 33000 37000 34000 30000 19000 9000 5000 15000 224,000

% TO TOTAL 0.7% 2.0% 3.6% 12.5% 14.7% 16.5% 15.2% 13.4% 8.5% 4.0% 2.2% 6.7% 100.00%

COST OF SALES PLAN 1300 3800 6000 18000 23000 24000 22000 20000 13500 6500 3800 10500 152400

COS % 86.7% 84.4% 75.0% 64.3% 69.7% 64.9% 64.7% 66.7% 71.1% 72.2% 76.0% 70.0% 68.0%

ROUNDS PLAN 0 0 100 2500 3600 5800 5800 4300 3200 1600 100 0 27000

$ PER ROUND PLAN $0.00 $0.00 $80.00 $11.20 $9.17 $6.38 $5.86 $6.98 $5.94 $5.63 $50.00 $0.00 $8.30


TURNOVER LAST YEAR

155,500

AVERAGE INVENTORY L/Y

COST OF SALES PLAN

AVERAGE INVENTORY PLAN

TURNOVER GOAL

152,400

76,200

2.0

92,231

1.7


RETAIL SALES LAST YEAR

2000 5000 8900 28200 31500 34500 31000 28000 19000 9000 5400 16900 219400

% TO TOTAL 0.9% 2.3% 4.1% 12.9% 14.4% 15.7% 14.1% 12.8% 8.7% 4.1% 2.5% 7.7% 100.0%


2000 4000 6500 18000 22000 23000 22000 19000 13000 7000 4000 15000 155500

COS % 100.0% 80.0% 73.0% 63.8% 69.8% 66.7% 71.0% 67.9% 68.4% 77.8% 74.1% 88.8% 70.9%

ROUNDS LAST YEAR 0 0 100 2500 3500 6000 5500 4300 3200 1800 100 0 27000

Last years Retail Sales and Cost of Sales by month From General Ledger or Budget POS System

Dollar per Round Tee Sheets – Starters Report POS system

$ PER ROUND $0.00 $0.00 $89.00 $11.28 $9.00 $5.75 $5.64 $6.51 $5.94 $5.00 $54.00 $0.00 $8.13


RETAIL SALES PLAN 1500 4500 8000 28000 33000 37000 34000 30000 19000 9000 5000 15000 224,000

% TO TOTAL 0.7% 2.0% 3.6% 12.5% 14.7% 16.5% 15.2% 13.4% 8.5% 4.0% 2.2% 6.7% 100.00%

COST OF SALES PLAN 1300 3800 6000 18000 23000 24000 22000 20000 13500 6500 3800 10500 152400

COS % 86.7% 84.4% 75.0% 64.3% 69.7% 64.9% 64.7% 66.7% 71.1% 72.2% 76.0% 70.0% 68.0%

ROUNDS PLAN 0 0 100 2500 3600 5800 5800 4300 3200 1600 100 0 27000

Retail Sales Plan by month Use Dollar per Round Plan realistic improvement

Adjust to reflect current trends

Sales x COS % = Cost of Sales in Dollars Plan month by month Adjust to reflect current trends

$ PER ROUND PLAN $0.00 $0.00 $80.00 $11.20 $9.17 $6.38 $5.86 $6.98 $5.94 $5.63 $50.00 $0.00 $8.30

4



56000 54000 53000 73500 94500 106500 114500 117500 116500 111500 106500 104500 90500 1199000


TURNOVER LAST YEAR

155,500


COST OF SALES PLAN


TURNOVER GOAL

152,400

76,200

2 0

92,231

1 7

Calculating Average Inventory Last Year

Sum of BOM Inventory Month 1-12 $1,108,500+ Month 12 EOM Inventory $ 90,500

$1,119,000÷13 ÷ 13= Average Inventory $92,231

TURNOVER LAST YEAR TURNOVER GOAL 2.01.7



56000 54000 53000 73500 94500 106500 114500 117500 116500 111500 106500 104500 90500 1199000


TURNOVER LAST YEAR

155,500


COST OF SALES PLAN


TURNOVER GOAL

152,400

76,200

2.0

92,231

1.7

Calculating Turnover Last Year

Cost of Sales for the year $ 155,500÷ average inventory ÷ $92,231= Turnover = 1.7 turns



56000 54000 53000 73500 94500 106500 114500 117500 116500 111500 106500 104500 90500 1199000

COST OF SALES LAST YEAR 155,500


COST OF SALES PLAN


152,400

76,20092,231

Establishing turnover goal Look at last years results Plan realistic improvement Plan increase of .5 to 1 turn per year

TURNOVER LAST YEAR TURNOVER GOAL 2.01.7

5



56000 54000 53000 73500 94500 106500 114500 117500 116500 111500 106500 104500 90500 1199000


TURNOVER LAST YEAR

155,500


COST OF SALES PLAN


TURNOVER GOAL

152,400

76,200

2.0

92,231

1.7

Calculating average inventory

Cost of Sales Plan $152,400Divide by Turnover Goal ÷ 2.0= Average Inventory plan $76,200

Reduction of $16,031 to previous years actual average inventory

Cost of Sales Plan $152,400÷ Turnover Goal ÷ 2.0= Average Inventory plan $76 200 Average Inventory plan $76,200

If all months were equal, you would need $76,200 in inventory each month

Next step is to establish a monthly inventory plan for the entire golf shop

Average inventory is adjusted for each month Higher or lower based on % month’s retail sales

are to the total year’s retail sales Be mindful of minimum inventory levels for off

season monthsseason months When complete, average inventory for the year

must remain the same

Two Methods: 8.3% Formula Excel Spreadsheets

6

8.3% Formula

If all months were equal they would be 8.3% of inventory needs

Adjust months up or down based on +/- to 8.3%

If month is 12.3%:12.3 – 8.3 = 4 Raise average inventory 40%

Month % to total Avg Rate +/- avg rate % adj to avg inv Avg Inventory $ adj to avg inv BOM InvJanuary 4% 8.30% -4.3% -40% 76,200.00$ (30,480.00)$ 45,720.00$ February 5% 8.30% -3.3% -30% 76,200.00$ (22,860.00)$ 53,340.00$ March 7% 8.30% -1.3% -10% 76,200.00$ (7,620.00)$ 68,580.00$ April 9% 8.30% 0.7% 10% 76,200.00$ 7,620.00$ 83,820.00$ May 11% 8.30% 2.7% 30% 76,200.00$ 22,860.00$ 99,060.00$ y , , ,June 12% 8.30% 3.7% 30% 76,200.00$ 22,860.00$ 99,060.00$ July 12% 8.30% 3.7% 30% 76,200.00$ 22,860.00$ 99,060.00$ August 12% 8.30% 3.7% 30% 76,200.00$ 22,860.00$ 99,060.00$ September 10% 8.30% 1.7% 10% 76,200.00$ 7,620.00$ 83,820.00$ October 8% 8.30% -0.3% 0% 76,200.00$ -$ 76,200.00$ November 5% 8.30% -3.3% -30% 76,200.00$ (22,860.00)$ 53,340.00$ December 5% 8.30% -3.3% -30% 76,200.00$ (22,860.00)$ 53,340.00$

total 914,400.00$ avg inv 76,200.00$

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

$ PLAN 1500 4500 8000 28000 33000 37000 34000 30000 19000 9000 5000 15000 224000

% OF YEAR 4.0% 5.0% 7.0% 9.0% 11.0% 12.0% 12.0% 12.0% 10.0% 8.0% 5.0% 5.0% 100%

RETAIL SALES PLAN

COST OF SALES PLAN


$ PLAN 1300 3800 6000 18000 23000 24000 22000 20000 13500 6500 3800 10500 152400

COS % 83.3% 86.7% 76.2% 72.2% 69.7% 69.4% 73.6% 69.4% 71.7% 87.5% 83.3% 80.0% 68.0%

AVERAGE INVENTORY

PLAN JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

ACTUAL AVERAGE

INV

76200 50000 50000 60000 82000 107000 120000 113000 93000 75000 68000 63000 60000 76231

COST OF SALES PLAN

MONTHLY INVENTORY PLAN

7


$ PLAN 1300 3800 6000 18000 23000 24000 22000 20000 13500 6500 3800 10500 152400

COS % 83.3% 86.7% 76.2% 72.2% 69.7% 69.4% 73.6% 69.4% 71.7% 87.5% 83.3% 80.0% 68.0%

COST OF SALES PLAN

AVERAGE INVENTORY


ACTUAL AVERAGE

INV

76200 45720 53340 68580 83820 99060 99060 99060 99060 83820 76200 53340 53340 76200

AVERAGE INVENTORY


ACTUAL AVERAGE

INV

76200 50000 50000 60000 82000 107000 120000 113000 93000 75000 68000 63000 60000 76231

SPREADSHEET METHOD

8.3% METHOD

Golf Shop size and layout Removable v. built in fixtures

Fixture fill requirements Socks, hats, gloves, balls, , g ,

Off-season months How low can your level get while still being

“in business”

Markdown program v. end of season sale Clearance all year round leads to higher

profitability and lower inventory levels

The Total Shop Monthly Inventory Plan must now be broken down into departmental inventory plans

Divide Inventory Plan into departments y pbased on percentage each department is of your total shop If men’s is 40% of your business they receive

40% of the Inventory Plan Dollars

You now have an inventory plan to follow when purchasing merchandise: You are ready to run an Open-to-Buy

8

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVG INV. PLAN

50000 50000 60000 82000 107000 120000 113000 93000 75000 68000 63000 60000 76231

RETAIL SALES

% TO TOTAL

TOTAL SALES 219400 100 0% 100 0% AVG INV.DEPARTMENT MONTHLY INVENTORY PLAN

TOTAL SHOP MONTHLY INVENTORY PLAN

INVENTORY PLAN

LAST YEAR THIS YEAR

PLAN %

Each department’s inventory plan may now be tweaked – keeping average the same

TOTAL SALES 219400 100.0% 100.0% AVG INV. PLAN

MEN'S 83372 38.0% 40.0% 20000 20000 24000 32800 42800 48000 45200 37200 30000 27200 25200 24000 30492

WOMEN'S 10970 5.0% 6.0% 3000 3000 3600 4920 6420 7200 6780 5580 4500 4080 3780 3600 4574

HARDGOODS 74596 34.0% 34.0% 17000 17000 20400 27880 36380 40800 38420 31620 25500 23120 21420 20400 25918

EQUIPMENT 50462 23.0% 20.0% 10000 10000 12000 16400 21400 24000 22600 18600 15000 13600 12600 12000 15246

DEPARTMENT MONTHLY INVENTORY PLAN

Open-to-Buy Reserves Monthly Analysis

Special OrderspPre-Books and ProgramsOn-Order LogReducing Current Levels

Gives you a Cash Flow planGives the buyer a “checkbook”Allows for consistent planned flow of

merchandise – one month prior to desired selling periodselling period Guide for placing orders Plan for holding reserves

An annual planning process Developed for total shop Broken down by Department

A monthly review process

9

Indicates need to react to current trends Place additional purchases Address slow selling merchandise Adjust future shipments

Improves profitability Improves profitability Improves opportunity to meet cost of sales

and turnover goals

Stay for the next hour….complete process made very simple!!!

Current Month’s Planned Cost of Sales

+ Next Month’s Planned Inventory

- Current Month’s Planned (or Actual) Inventory

= Cost Buy Plan (Planned OTB)

- On-Order & Reserves & Special Orders (at cost)

= Actual Open to Buy for Month

Department Total Shop

JAN FEB MAR APRIL MAY JUNE

1300 3800 6000 18000 23000 24000

MONTH

C t M th' Pl d C t f S l 1300 3800 6000 18000 23000 24000

50000 60000 82000 107000 120000 113000

50000 50000 60000 82000 107000 120000

1300 13800 28000 43000 36000 17000

0 13520 17761 33411 31343 9948

1300 2500 5000 7000 7000 3000

0 -2220 5239 2589 -2343 4052

Current Month's Planned Cost of Sales+ Next Month's Planned Inventory

- Current Month's Planned (or Actual) Inventory= Cost Buy Plan (planned OTB)

- Current On Order- Reserve & Special Orders

Actual Open to Buy

10

Can cause overstocks in Golf Shops Reserve dollars from Open to Buy plan to

prevent overbuying and increased inventory levels in high Special Order Departments

Failing to hold reserves means every special Failing to hold reserves means every special order taken equates to that amount of additional inventory in your Golf Shop

Each order means you didn’t sell merchandise from golf shop so your inventory was not reduced

Very important to track in shoes and clubs

Major Cause of Overstocks in Golf Shops!!! Benefits Terms, Discounts, Rebates Convenient – Buys all done at once Suggested order done by Rep Suggested order done by Rep

Risks Reps orders based on units shipped not units

sold Discounts and Terms not taken Excessive Inventory – Decreased Turnover –

Increased Markdowns Change of product line mid-season

Planning with Pre-books and Programs Use previous SALES records and adjust to trend Know Vendor Profitability Be prepared – have your own numbers Spend only dollars in Buy Plan!!! Challenge monthly and adjust orders Ensure all Terms and Discounts are received

Programs don’t sell merchandise – the right product, price, and people do!!!

11

Tool for reacting to Open to BuyTrack all vendorsPlan delivery timing Plan floor presentationPlan floor presentationChallenge if delivery dates are not metUse records for choosing vendors next

seasonUse for dealing with tough buying

decisions next season

JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC

1300 3800 6000 18000 23000 24000 22000 20000 13500 6500 3800 10500

50000 60000 82000 107000 120000 113000 93000 75000 68000 63000 60000 50000

50000 50000 60000 82000 107000 120000 113000 93000 75000 68000 63000 60000

1300 13800 28000 43000 36000 17000 2000 2000 6500 1500 800 500

0 13520 17761 33411 31343 9948 1830 0 0 0 0 0

1300 2500 5000 7000 7000 3000 500 500 3000 1500 800 500

0 -2220 5239 2589 -2343 4052 -330 1500 3500 0 0 0

MONTH

Current Month's Planned Cost of Sales+ Next Month's Planned Inventory

- Current Month's Planned (or Actual) Inventory= Cost Buy Plan (planned OTB)

- Current On Order- Reserve & Special Orders

Actual Open to Buy 0 2220 5239 2589 2343 4052 330 1500 3500 0 0 0

VendorShip Date

Date R'cd Description JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC

Vendor A 3/20 Navy/Purple/Teal 1650

5/1 Khaki/White 3000

Vendor B 2/20 1/26 Green/Yellow 1900

3/15 Red/Black 1250

5/25 Tech Pastels 3000

Vendor C 3/1 Grey/Black 2280

4/15 Blue/Yellow 3100

6/15 Red/White/Blue 1800

Actual Open to Buy

Evaluate current Inventory◦ Return to Vendor for credit or exchange

Purchase merchandise that compliments existing inventory

Evaluate number of lines you are carrying Evaluate number of lines you are carrying◦ Challenge duplication in lines◦ Consider lines with pricing incentives

Purchase Off-price merchandise Plan receipts one month prior to your

planned sales

12

Inventory levels should be planned based on cost of sales plan and turnover goal

Each department should be looked at Each department should be looked at individually

Developing an Inventory Plan is the first step to running an Open-to-Buy

Tracy Moffatt

K&K ConsultingK&K ConsultingAGM Education Team

[email protected]

“The Educational Voice in Golf Merchandising”

602-604-8250www.agmgolf.org

All AGM educational materials are protected by U.S. Copyright All AGM educational materials are protected by U.S. Copyright and cannot be reprinted or used without the expressed and cannot be reprinted or used without the expressed

written consent of the Association of Golf Merchandisers.written consent of the Association of Golf Merchandisers.


$ PLAN 0

% OF YEAR 0%


$ PLAN 0

COS % #DIV/0!

AVERAGE INVENTORY


ACTUAL AVERAGE

INV

0

MONTHLY INVENTORY PLANNING

RETAIL SALES PLAN

COST OF SALES PLAN

MONTHLY INVENTORY PLAN

how much inventory do you need orlando 2010 - pga sho · how much inventory do you need? ... open...

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