Keeping it under wraps

Every fashion business owner performs a daily balancing act between minimising stock and keeping sufficient garments on hand to meet demand. To assist your business find the right balance, Matthew Nolan provides some valuable tips.

Excess safety stock
The simplest way to avoid running out of stock is to keep plenty on hand.  But careful assessment of the seasonal demand for individual product lines is essential to avoid blanket policies such as holding 30 days stock of all items at all times.  Coupling this with seeking a reduction in supply timeframes and improved reliability from your suppliers will mean "just in case" stock can become "just in time" stock.

High margin, high turn
Garments with high margins mean more profits for your business and when they turn over more often these profits are generated faster.  Wise business owners focus their buying on garments that will sell swiftly at suitably high margins, differentiating their buying and stock holding policies based on the differing demand and profitability characteristics of individual product lines.

Centralise
Multiple stores, warehouses or manufacturing facilities can lead to higher inventory levels, or ‘double holding’ of some stock lines.  If you operate in multiple locations, consider centralising the bulk of your stock where possible, keeping levels in remote locations to a suitable minimum.

Reduce product lines
Having too many product lines means that stock for each of these has to be held, which can lead to excessive inventory levels.  Before ordering for an upcoming season it’s prudent to rationalize or refocus your product portfolio to ensure that only suitable garments are included.  For manufacturers it may also be possible to increase the use of common components, further reducing inventory levels.

Control
Appropriate ordering and control of stock can have a huge influence on your profitability.  Orders should only be authorised by suitably experienced staff and be based on carefully considered re-order triggers that ensure safety stock levels are maintained yet minimized.  To minimize shrinkage stock should be accounted for and stored securely.

Invest to cut inventory
Investing in research and design can improve efficiencies for every fashion business, with particular opportunities to improve stock holdings through an ever increasing array of emerging technologies.  Retailers and wholesalers can analyse every sale and item of stock to identify trends and inefficiencies, enabling more accurate forecasts.  For manufacturers, an investment in research and design can substantially shorten production cycles and cut inventory holding requirements.

Don’t go broke on a bargain
When bulk discounts are offered, carefully consider the impact of holding the stock and tying up your working capital. Whilst discounts are great, the stock will be expensive to hold and store.  It may also be out of fashion before it’s sold or subject to shrinkage that quickly absorbs your potential profit margin.

Planning
Taking the time to map out future stock needs is regarded as essential by prudent business owners in today’s market, but having reliable sales expectations upon which to base these projections is vital.   Avoid the trap of allowing ambitious sales projections to determine your stock levels, instead keeping their growth realistic when compared with historical experiences.

If a number of the above points sound familiar and your business does have excess or out of fashion stock, investing some time in liquidating these garments as soon as possible to unlock the tied up cash, allowing it to be used productively elsewhere in your business.

By  Matthew Nolan