Revolutionizing Your Inventory

Challenge your definitions every day for every SKU at every store.

Ensure your head is always available.
Keep your belly trim.
Cut down your tail.

Are you struggling with low inventory turnover or cash flow issues?
It might be time to take a closer look at your product mix.

Are all products created equal?
NO, right!

But when we measure our inventory, we often act like everything is the same.

For example, we ask how many days of inventory we have in a category. But while some products might sell out in 30 days, others might sit on the shelf for 180 days unless we offer a big discount.

𝐖𝐞 𝐮𝐬𝐮𝐚𝐥𝐥𝐲 𝐭𝐫𝐞𝐚𝐭 𝐚𝐥𝐥 𝐩𝐫𝐨𝐝𝐮𝐜𝐭𝐬 𝐭𝐡𝐞 𝐬𝐚𝐦𝐞, 𝐛𝐮𝐭 𝐭𝐡𝐞𝐲 𝐝𝐨𝐧’𝐭 𝐚𝐜𝐭𝐮𝐚𝐥𝐥𝐲 𝐬𝐞𝐥𝐥 𝐭𝐡𝐞 𝐬𝐚𝐦𝐞 𝐰𝐚𝐲.

Only a small number of products (the top 20%) make up most of our sales (50%), while a lot of products (the bottom 30%) don’t sell at all (5%).

That’s why we need to put a process in place to classify our products as “Head”, “Belly,” or “Tail”.
Then, we can use this information to guide our merchandising efforts.

For example:

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We want to make sure we have plenty of “Head” products in stock. These are the top sellers, and they can be different in different locations. Once we identify the “Head,” we want all relevant stores to have them available so we can maximize sales at full price.

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We want to get rid of “Tail” products as soon as possible. These are the slow sellers, and we can move them to stores that need them or offer discounts to clear them out. This will reduce margin erosion and keep our products fresh.

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We want to give “Belly” products a chance to shine. These are the middle-of-the-road sellers, and we need a process to expose them and move them up to “Head” or down to “Tail.”

By following these steps, we can make the most of our inventory and drive sales.
Got any thoughts on this approach?
Leave a comment below and let us know!