HOW SCIENCE AND ART INTERSECT
The Cannabis industry continues to grow and, at the same time, is in constant regulatory flux. From federal legalization being an unknown entity to New York state about to open their recreational dispensaries, the one thing that all operators must do well is to institute best-in-class inventory management practices. It will be crucial in their quest for sales and profits.
I have heard this said repeatedly by sales professionals during my career.
“We have too much of what we can’t sell and not enough of what we can sell” and “What do I do with the left-over inventory that is not selling?”
These are the age-old questions that inventory management tries to answer.
WHAT IS INVENTORY MANAGEMENT?
Inventory management is the most crucial discipline within your organization due to the costs associated with owning the inventory (2nd largest expense to any organization besides human capital) and their ability to sell the merchandise profitably.
Three critical aspects of Inventory management,
Planning (The science)
Buying (The art)
Analysis and Insights – (The feedback loop)
The complexity of inventory management lies in defining a three-year strategic plan. Setting a seasonal merchandise financial plan that allows you to identify financial goals for each different segment of product to buy and assess performance. Develop a group of assortment plans to achieve the seasonal financial goals that are put in place for each product group. And lastly, to identify high revenue and profit items to plan and replenish on a continual basis.
WHY IS DATA SO IMPORTANT?
Understanding your data is the number one priority for any retailer because, if done correctly, it will be “The Voice of your customer.” (The current seed-to-sale systems don’t go far enough)
Data enrichment and product structure are essential for proper planning and analysis.
Product structure (hierarchy) needs to be defined at a level that allows for stable groupings of products to be planned, purchased, and sold regularly and annually.
Tip - Hierarchy definition should not be trend based – if it is not repeatable every year, it isn’t right.
With product structure being too granular, your understanding of why a group of product sells or doesn’t will be unclear and not repeatable in future planning and buying seasons.
Product attribution – data enrichment needs to be detailed enough so that a clear understanding of why a product sells or doesn’t materialize during weekly and seasonal analysis.
Without proper attribution for each product offered, you may repeat bad buying decisions over and over again, resulting in continued poor performance at retail.
The definition and understanding of your data are essential.
WHAT DO YOU DO WITH POOR SELLING INVENTORY?
Utilize different merchandising and promotional techniques
Your first markdown is your best markdown
Identify why a product isn’t selling and learn from the reason
WHY ARE PLANNING AND ANALYSIS SO CRITICAL?
Improve sales revenue and profits
Set Strategic and Financial goals
Develop better product assortments
Identify Consumer likes and trends
Mitigate slow-performing products
THE CONSUMER needs to be at the forefront of every inventory decision made at all times.
If you would like to learn more about inventory management and how we can help, please reach out to Eric Prengel at firstname.lastname@example.org
Eric Prengel is a highly respected and innovative apparel and consumer goods executive who brings more than 25 +years’ experience working with premier brands/retailers specializing in profitable growth through best in class go to market strategies. His skills at brand development (Architecture), merchandise and financial planning, and supply chain optimization has helped contribute to the successful advancement of many global brands and retailers