Controlling Your Inventory Investment In POS Software

Controlling the inventory investment is the single most important aspect of running a retail business. Planning merchandise buying in direct relation to sales and stock turn rates is the key to ensuring the right investment at the right time. The best way to monitor this is through a well-conceived Open-to-Buy (OTB) plan.

Simply stated, OTB involves developing monthly inventory plans by department. If a retailer needs $5,000 of inventory (at retail) on January 1 and needs $6,000 on February 1, then the retailer obviously will need to receive an additional $1,000 of merchandise before February 1 arrives. If the store plans to sell $500 during January, the store will need a total of $1,500 to be sure that $6,000 is available for sale on February 1. That is the easy part of an OTB plan.

The hard part is knowing if $5,000 or $6,000 is the right amount. That’s where ProphetLine can assist. We offer formulas that calculate the optimum inventory level based on the merchandise classification. We will help you develop sales, markdown and stock turn rate plans for your classifications. Then we will provide you with the recommended monthly inventories that you should maintain in order to stay on track.

Developing a plan is half the battle. The next step is executing the plan. That means monitoring your ability to meet the sales projections and stay within the inventory budget. Mathematical analysis can spot trends more efficiently than intuition. That’s the secret to staying with your plan and managing your inventory for the greatest financial gain.