optimizing inventory purchasing & stocking with sales data - lead tool
TRANSCRIPT
How to Optimize Inventory Purchasing/Stocking
with Sales
Chase Shiels CEO, Co-founder
10+years in inventory & operations, Shiels Lumber. Prior to Shiels, inventory and sales at Beechmont Auto Group
Kyle Cheslock VP Sales
Former senior enterprise consultant at dotloop. Former sales team leader at dotloop.
Who the heck are these people?
Background• 10+ years lumber distribution, manufacturing, dry kilns
• 130 year old family business specializing in imported & domestic hardwoods + white pines
• Nine core markets ranging from retail to industrial pattern & casting work to high end fixtures to custom millwork, many retail yards as customers
• Inventory management, vendors, equipment, IT
• Three years automotive retail • E-commerce, marketing, inventory & sales velocity optimization,
online sales • Build inventory turn + sales velocity model for Porsche • Toyota, Chevrolet, Honda, Volvo, Audi, Maserati, Porsche • 150+ new leads/mo
• Three years+ building sales software focused on management (CRM), enablement, and data analytics
Agenda
• What is optimized inventory purchasing?
• The “global truths” of purchasing and sales
• The economics of purchasing as it relates to sales
• Establishing a solid foundation: product mix
• Mapping inventory to sales
The more you know about what you’ve already done the better equipped you will be to forecast what you will do.
If you do not have a CRM system in place to track sales as well as a system to track purchasing - you will be shooting in the dark!
Data is your friend
“You make all your money when you sell”
Monthly Sales $1,000,0000 Operating Expense $250,000 Purchases $500,000 Income $250,000
Monthly Sales $1,000,0000 Operating Expense $250,000 Purchases $800,000 Income $-50,000
DO:
DO NOT:
It’s just math
The Basic Assumptions
• We have control over supply
• We cannot control demand
• Therefore: you can significantly impact your bottom line through
purchasing and stocking the right inventory
• “If I don’t have it in stock I can’t sell it…”
What’s in our control vs. what isn’t
Inventory should be demand (sales) driven - not
the other way around!
The Need to Know
• Past Sales data —> establish product mix
• What does your current sales pipeline look like?
• What’s your lead time on products? Keep in mind seasonality - e.g. hardwoods in wet season
• Understand established product mix - it’s not how much you stock it’s what you stock
• Map inventory metric to sales. Eventually - fix purchasing to sales
Looking to the past before we look to the future
Product Mix
• Historical demand: How much of each product and sub product do we sell?
• Future demand: What is current demand for each?
• Lead times: How long does it take to get each?
• Goal: Match your purchases to your sales?
Questions to answer
Product Mix - Simple Example
Product A • 50% sales
• 5 sub products
• All have 5wk lead time
Product B • 10% sales
• 2 sub products
• 10wk lead time
Product C • 35% sales
• 3 sub products
• Lead times varying from 10 days to 2mos
Product D • 5% sales
• No sub products
• Lead time of 8wks
Forecasting
Key items
• Historical sales - where have we been?
• Historical purchases - what have we bought, and how much?
• Future demand - what are our current customers looking for?
• Current stock - do we have the right stock to meet this demand? Product mix!
• Lead times - on the items we don’t have, when can we have them?
• Performance by product type
• Performance by product sub type (i.e. grade of a hardwood, style of a cabinet or flooring line)
• Detect seasonality
• Do historical sales match historical purchasing?
Historical Sales
• Demand each product type
• Demand for each product sub type (i.e. grade of a hardwood, style of a cabinet or flooring line)
• Timeline for buyer purchasing
• Does in stock inventory have capacity to meet forward looking demand? • If yes - excellent! • If no
• Where is the shortfall? • By how much? • Lead times
Future Sales
Past Performance —> optimal stock mix
Future demand —> optimal purchasing scenarios
Eliminate over-purchasing, stocking items that don’t sell = $$$
Putting it all together
Thank You!
LEAD TOOL
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Kyle Cheslock [email protected] + 419.305.1900
Chase Shiels [email protected]