Inventory Question Kinda Asked About
Aug 1, 2017 13:59:40 GMT -5
That Falls Guy, Grimpeur, and 5 more like this
Post by danno44 on Aug 1, 2017 13:59:40 GMT -5
In another thread, it was asked about why products disappear from sites that appear to be popular items.
The following is probably more detail than one wants, but I didn't want to hijack the other thread. So without further ado, an answer to a question kinda asked...
Why do products disappear from retailers websites? Based on my personal experience of almost 30 years of running distribution centers/warehousing/inventory control/purchasing for both retail and manufacturing, here are some basic guidelines that may help explain why products disappear from websites, be they are good selling items and not.
It is a standard operating procedure for distribution centers and/or retail stores to manage inventory by basic guidelines. If an item doesn't produce both in profit margins or in turns (normally both), i.e. how frequently an item is sold and replaced, be it weekly, monthly, quarterly etc it will be discontinued. Unless they can get a great deal on pricing to make it cost effective to sit on a shelf longer than acceptable guidelines.
When I was in the automotive supplier side of business, 52 turns was expected, meaning an item had to be sold and restocked (manufactured in my case) once a week. In a retail hardware business, 12 was the standard (once a month).
There are a lot of carrying cost to have inventory sit on a shelf. Some studies show as much as 20% of the cost on the item that stays on the shelf each month is added the companies monthly operating cost. That adds up over time and eats into cash flow, and messes with balance sheets.
We (my materials management department) looked at it almost as a fixed cost, same as rent and taxes, not good for profitability of a company. We were also accountable to the bean counters to keep carrying cost to a minimum.
Inventory has to be ordered, warehoused, taking up shelf space, counted, moved around at times for various reasons, etc. all this cost money. From the cost of the item, warehousing it and labor to track both physically to the computer systems to maintain.
Product availability is also a factor, what good is it if you can only get an item once or twice a year and it sells out in an hour only to not be replenished quickly. Those items remain in their main system but removed from public view (website) to keep the site clean. Without knowing business details it's all conjecture at this point.
I know no one asked specifically about the details, but it is something to think about when you see a lot of stuff, out of stock, backordered or removed from a site.
A LOT of work goes on behind the scenes and when done properly no one notices. If a fiasco like one online supplier experienced recently, the whole world knows and it's the apocalypse.
Finally, my understanding is there are new tax laws in some states that they have to pay a tax for tobacco on hand each month. So it is a balancing act between the company to order just enough product to hopefully to get them through each month with a minimum amount on hand to keep the taxes (and carrying cost) as low as possible yet still provide products to their customers.
This last factor alone will bring to the forefront inventory management issues that previously went unnoticed by both customers and certainly to the bean counters. I believe this is still a factor with the one site with more out of stock items than normal, they are still trying to set up and figure out a proper system to put in place to make both corporate and customers happy.
thus endeth thy speech.....
The following is probably more detail than one wants, but I didn't want to hijack the other thread. So without further ado, an answer to a question kinda asked...
Why do products disappear from retailers websites? Based on my personal experience of almost 30 years of running distribution centers/warehousing/inventory control/purchasing for both retail and manufacturing, here are some basic guidelines that may help explain why products disappear from websites, be they are good selling items and not.
It is a standard operating procedure for distribution centers and/or retail stores to manage inventory by basic guidelines. If an item doesn't produce both in profit margins or in turns (normally both), i.e. how frequently an item is sold and replaced, be it weekly, monthly, quarterly etc it will be discontinued. Unless they can get a great deal on pricing to make it cost effective to sit on a shelf longer than acceptable guidelines.
When I was in the automotive supplier side of business, 52 turns was expected, meaning an item had to be sold and restocked (manufactured in my case) once a week. In a retail hardware business, 12 was the standard (once a month).
There are a lot of carrying cost to have inventory sit on a shelf. Some studies show as much as 20% of the cost on the item that stays on the shelf each month is added the companies monthly operating cost. That adds up over time and eats into cash flow, and messes with balance sheets.
We (my materials management department) looked at it almost as a fixed cost, same as rent and taxes, not good for profitability of a company. We were also accountable to the bean counters to keep carrying cost to a minimum.
Inventory has to be ordered, warehoused, taking up shelf space, counted, moved around at times for various reasons, etc. all this cost money. From the cost of the item, warehousing it and labor to track both physically to the computer systems to maintain.
Product availability is also a factor, what good is it if you can only get an item once or twice a year and it sells out in an hour only to not be replenished quickly. Those items remain in their main system but removed from public view (website) to keep the site clean. Without knowing business details it's all conjecture at this point.
I know no one asked specifically about the details, but it is something to think about when you see a lot of stuff, out of stock, backordered or removed from a site.
A LOT of work goes on behind the scenes and when done properly no one notices. If a fiasco like one online supplier experienced recently, the whole world knows and it's the apocalypse.
Finally, my understanding is there are new tax laws in some states that they have to pay a tax for tobacco on hand each month. So it is a balancing act between the company to order just enough product to hopefully to get them through each month with a minimum amount on hand to keep the taxes (and carrying cost) as low as possible yet still provide products to their customers.
This last factor alone will bring to the forefront inventory management issues that previously went unnoticed by both customers and certainly to the bean counters. I believe this is still a factor with the one site with more out of stock items than normal, they are still trying to set up and figure out a proper system to put in place to make both corporate and customers happy.
thus endeth thy speech.....
