How to Optimize Inventory Purchasing/Stocking

with Sales

Chase Shiels CEO, Co-founder

10+years in inventory & operations, Shiels Lumber. Prior to Shiels, inventory and sales at Beechmont Auto Group

Kyle Cheslock VP Sales

Former senior enterprise consultant at dotloop. Former sales team leader at dotloop.

Who the heck are these people?

Background• 10+ years lumber distribution, manufacturing, dry kilns

• 130 year old family business specializing in imported & domestic hardwoods + white pines

• Nine core markets ranging from retail to industrial pattern & casting work to high end fixtures to custom millwork, many retail yards as customers

• Inventory management, vendors, equipment, IT

• Three years automotive retail • E-commerce, marketing, inventory & sales velocity optimization,

online sales • Build inventory turn + sales velocity model for Porsche • Toyota, Chevrolet, Honda, Volvo, Audi, Maserati, Porsche • 150+ new leads/mo

• Three years+ building sales software focused on management (CRM), enablement, and data analytics

Agenda

• What is optimized inventory purchasing?

• The “global truths” of purchasing and sales

• The economics of purchasing as it relates to sales

• Establishing a solid foundation: product mix

• Mapping inventory to sales

The more you know about what you’ve already done the better equipped you will be to forecast what you will do.

If you do not have a CRM system in place to track sales as well as a system to track purchasing - you will be shooting in the dark!

Data is your friend

“You make all your money when you sell”

Monthly Sales $1,000,0000 Operating Expense $250,000 Purchases $500,000 Income $250,000

Monthly Sales $1,000,0000 Operating Expense $250,000 Purchases $800,000 Income $-50,000

DO:

DO NOT:

It’s just math

The Basic Assumptions

• We have control over supply

• We cannot control demand

• Therefore: you can significantly impact your bottom line through

purchasing and stocking the right inventory

• “If I don’t have it in stock I can’t sell it…”

What’s in our control vs. what isn’t

Inventory should be demand (sales) driven - not

the other way around!

The Need to Know

• Past Sales data —> establish product mix

• What does your current sales pipeline look like?

• What’s your lead time on products? Keep in mind seasonality - e.g. hardwoods in wet season

• Understand established product mix - it’s not how much you stock it’s what you stock

• Map inventory metric to sales. Eventually - fix purchasing to sales

Looking to the past before we look to the future

Product Mix

• Historical demand: How much of each product and sub product do we sell?

• Future demand: What is current demand for each?

• Lead times: How long does it take to get each?

• Goal: Match your purchases to your sales?

Questions to answer

Product Mix - Simple Example

Product A • 50% sales

• 5 sub products

• All have 5wk lead time

Product B • 10% sales

• 2 sub products

• 10wk lead time

Product C • 35% sales

• 3 sub products

• Lead times varying from 10 days to 2mos

Product D • 5% sales

• No sub products

• Lead time of 8wks

Forecasting

Key items

• Historical sales - where have we been?

• Historical purchases - what have we bought, and how much?

• Future demand - what are our current customers looking for?

• Current stock - do we have the right stock to meet this demand? Product mix!

• Lead times - on the items we don’t have, when can we have them?

• Performance by product type

• Performance by product sub type (i.e. grade of a hardwood, style of a cabinet or flooring line)

• Detect seasonality

• Do historical sales match historical purchasing?

Historical Sales

• Demand each product type

• Demand for each product sub type (i.e. grade of a hardwood, style of a cabinet or flooring line)

• Timeline for buyer purchasing

• Does in stock inventory have capacity to meet forward looking demand? • If yes - excellent! • If no

• Where is the shortfall? • By how much? • Lead times

Future Sales

Past Performance —> optimal stock mix

Future demand —> optimal purchasing scenarios

Eliminate over-purchasing, stocking items that don’t sell = $$$

Putting it all together

Thank You!

LEAD TOOL

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Kyle Cheslock kyle@4megroup.com + 419.305.1900

Chase Shiels chase@4megroup.com