Managing your stock – 3 case studies

As this will be my last post here before the site is officially transferred, I wanted to combine the themes that I write about most; management, the Israeli economy, and mentoring.

Actually, I was prompted to write this blog, as I watched the news of several large chains in the UK suffering from sale figures that had frozen in the snow outside their shops. With some ironic timing, this week I visited three small retail outlets in the Jerusalem area, all with ambitions to expand sooner rather than later. I admit that at least one of them is a client of mine. All of them have one common management problem, but they have reacted in a different manner.

CASE STUDY 1: Adam sells toiletries. His shops are in areas with lots of passers-by, although his specific locations just misses out on the main buzz. When he set out around five years ago, he had great ambitions to “stock ’em high, price low” and have a rapid turnover. What he was left with was large stocks of unsold goods. His advertising constantly missed the target groups. Jerusalem did not seem so golden.

Adam brought in a business mentor, who first of all structured a long-term cash flow chart. Rule numero uno – Stock could not be bought if sales did not reach set targets. Although this was a painful process – setting targets, learning to live with excel charts, losing the ‘freedom’ to purchase at will – Adam persisted. Times were tough, but gradually the debts were reduced. He even bought in a design specialist, who restructured the interior set up of the selling space. Despite snow in the Holy City in January, sales are up over 25% for the past 6 weeks.

CASE STUDY 2: David operates a series of shops near where he grew up and lives in central Jerusalem. About two years ago, he opened another outlet in a sector that was not familiar to him. Since then, although sales have remained positive, cash reserves have been plummeting.

As David acknowledges, his business coach did not spend too long mapping out the history of the company. One look at the shelves revealed that they were laden with stock, much of which had dust on it. The ratio of stock to monthly sales was absurdly high. And it was impossible to know the true value of the items, because nothing had been entered onto the cash register.

David’s approach was more simplistic than that of Adam. Yes, he did instruct his staff to commence registering stock and also new purchases, a task that became very lengthy, drawn out, and not terribly accurate. In parallel, he simply cut purchases of new items by around 75%. The effect? It is not just that David found hundreds of thousands of shekels remaining in his bank account, while sales continued apace. He is now planning to open another outlet.

CASE STUDY 3: Moshe’s enterprise is set up in a similar fashion to David’s business. At first, Moshe also took a similar approach and re-evaluated his purchasing policy. However, once the cash flow began to improve, Moshe returned to his old ways, and that is when his bank manager started to become very nervous. What is now called for is a new and immediate appraisal of what he really sells in his shop. Moshe will need to establish a way to identify his best sellers, as well as those items that leave him a true profit.

And the lesson? Big or small, a populous country or a city of 800,000 people, selling toiletries or electrical goods, you have got to manage your stock – numbers, best sellers, profitable items. Otherwise, you start taking out loans to fimance new purchases. In other words, your money remains on the shelves and not back in your pockets.

(I will send out a full notice about my new website, enabling followers to pick up the next postings).

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Explore posts in the same categories: Business, Israel, Jerusalem

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