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.
๐๐ ๐ฎ๐ฌ๐ฎ๐๐ฅ๐ฅ๐ฒ ๐ญ๐ซ๐๐๐ญ ๐๐ฅ๐ฅ ๐ฉ๐ซ๐จ๐๐ฎ๐๐ญ๐ฌ ๐ญ๐ก๐ ๐ฌ๐๐ฆ๐, ๐๐ฎ๐ญ ๐ญ๐ก๐๐ฒ ๐๐จ๐งโ๐ญ ๐๐๐ญ๐ฎ๐๐ฅ๐ฅ๐ฒ ๐ฌ๐๐ฅ๐ฅ ๐ญ๐ก๐ ๐ฌ๐๐ฆ๐ ๐ฐ๐๐ฒ.
Only a small number of products (the top 20%) make up most of our sales (50%), while a lot of products (the bottom 30%) donโt sell at all (5%).
Thatโs why we need to put a process in place to classify our products as โHeadโ, โBelly,โ or โTailโ.
Then, we can use this information to guide our merchandising efforts.
For example:
๐
We want to make sure we have plenty of โHeadโ products in stock. These are the top sellers, and they can be different in different locations. Once we identify the โHead,โ we want all relevant stores to have them available so we can maximize sales at full price.
๐ฟ
We want to get rid of โTailโ 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.
๐ค
We want to give โBellyโ products a chance to shine. These are the middle-of-the-road sellers, and we need a process to expose them andย move them up to โHeadโ or down to โTail.โ
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!