Timing is Everything- Especially With Your Inventory

Every Christmas, we hear about (or experience for ourselves) the frustration of a retailer running out of a hot item. I-Pods were a good example. My 7 year-old is obsessed with Webkins- a small stuffed animal with a code that allows you to play with animal on-line. Before Easter, my “Better Half” had me stalking store locations for this toy- to the point of finding out when the next shipment was coming in. Was it like drugs- are they coming across the mountains in South America on mules? Seemed like pretty serious stuff- at least to 1st graders.
Think about the retailer who runs out of the Webkins. Clients are upset and may go elsewhere to buy the item- particularly if it’s a holiday or birthday gift. They can’t wait. The retailer loses the first sale (the Webkin) and the possibility of other sales during the same visit (candy, cards, and other toys). Since you couldn’t fill the order, will the client come back again? Will they go to a store they consider to be more reliable? Running out of inventory has huge consequences.
One reason the Webkins didn’t make it may be due to shipping issues, particularly containerized shipping. Assume that a toy is manufactured overseas. The toy are packed into 20 or 40-foot metal boxes and loaded onto container ships. When they arrive on the West Coast, they continue across the country by rail. “Shipping typically accounts for…3% to 4% of the total cost of a container.” The retailer needs to consider several things: will the goods arrive at my store when promised? Are there factors that my hold up the shipment (union issues, shortages, Homeland Security issues, etc.)? If so, how do I address it with my clients? Do I make commitments that the product will arrive by a certain date? If I can’t commit, do I refer them to a competitor that I know has the product?
The Lesson: Invest the time to understand the shipping/ shortage issues related to your inventory- particularly for “hot” products.
Your Homework: When was the last time you ran out of product that was in high demand? How many clients were inconvenienced? How did you handle the issue?
(Source: “Shipping Rates Push Rates”, Wall Street Journal, 5/21/07)