InTents October/November 2022 - 46

business | management
Build a graveyard
Once you have run your obituary and
identiied the dead items, we need to
perform some tasks to help prevent further
bleeding. As I mentioned above, we have
been losing money on these products in
the form of carrying costs. Carrying costs
accumulate at an average of 25% annually.
For example, an item that originally cost us
$1.00 will actually end up costing us $1.25
by the time we hold it in our inventory for
an entire 12 months.
The irst task is to shut off the faucet.
Carrying costs
accumulate at an
average of 25%
annually. For example,
an item that originally
cost us $1.00 will
actually end up costing
us $1.25 by the time we
hold it in our inventory
for an entire 12 months.
Turn off the automatic replenishment
controls for all the items on the list. We
do not want to buy more. Incidentally, the
worst thing that can happen on day 1 of
the 13th month is that someone will buy
a dead item. Suddenly, we think there
is new life in the product. Out come the
shock paddles and we are ready to give
mouth-to-mouth to a stiff. Dead is dead.
Let the item rest in peace. Change the
controls in your system to identify the
item as non-stock.
The next step is to remove the living
from the dead. It is one thing to make an
item stink on paper; it is entirely more
effective to make it stink visually. Create
a dead stock graveyard. Move all the dead
items to your newly created cemetery.
Don't hide the cemetery in the back of the
warehouse. We want it visible. We really
want the owner to be able to see all the
old money accumulated in one place. It
tends to give additional motivation when
we see a visual representation of the
total problem. Some distributors have
added their creative side to the project.
A few well-placed tombstones would not
be out of order. Who says you can't have
fun in the warehouse?
If you are anything like me, this next
suggestion will resonate. I hate to lose
money. When selling a dead item, our irst
inclination is to give a discount so that it
will disappear. Remember, you have already
accumulated an additional 25%
46 intents oct-nov 2022
in carrying cost. I'm no math major, but
if you bring the sell price down and our
costs have gone up, the math isn't too
good. Perhaps we need to give ourselves a
ighting chance at some cash. My suggestion
is that you jack up the price on any
dead item by 300%. Since you are going
to give someone a discount anyway, why
not start from the highest point? When
someone calls, do you really think that
you are the irst person they have tried?
Most likely, the previous ive companies
they called didn't have it. Gotta love supply
and demand.
Hire a mortician
The inal step is to turn the list over to the
mortician. Hire a dead stock manager to
liquidate your dead inventory. Wait a minute,
doesn't this sound like throwing good
money after bad? If you structure the position
right, it will be a positive contributor to
your bottom line. Look for a part-time employee
for this position. I happen to like retirees
for this job. Pay the person a commission
on the dollars recovered-not on gross
proit dollars. We are probably going to be
selling things below what we paid for them.
I have seen commission ranges from 25%
to 50%. Do what works for you. The sole
mission of this individual is to make your
inventory obituary disappear in 30 days because
something new will die every month.
A consistent running of the inventory
obituary will yield tremendous bottomline
results. At the beginning, the list will
seem like an insurmountable task. Over
time, and with the efforts of a diligent
dead stock manager, the list will reduce
to an acceptable level.
If you need some suggestions on methods
of dead stock disposal, please feel free
to contact me or look for articles on our
website. Good luck.
Jason Bader is the managing partner at
The Distribution Team. He can be reached
at Jason@DistributionTeam.com.

InTents October/November 2022

Table of Contents for the Digital Edition of InTents October/November 2022

InTents October/November 2022 - Cover1
InTents October/November 2022 - Cover2
InTents October/November 2022 - 1
InTents October/November 2022 - 2
InTents October/November 2022 - 3
InTents October/November 2022 - 4
InTents October/November 2022 - 5
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