Factors affecting stock levels
In addition other factors affecting stock levels include purchase order quantities and delivery schedules and reliability of the supply chain.
By and large you will not be able to arrange better delivery schedules (brewers and other suppliers like fixed delivery windows that are not always best for you), however, if you can get deliveries to suit, your stock quantities can be reduced, saving valuable cash resources and improving liquidity without jeopardising sales.
Sales policy can also have a strong influence in stock levels and should be managed with a view not just to achieving maximum sales but also to minimise your financial investment in working capital. Sales can influence this by directing policy towards a higher turnover of goods, selling goods bought at bargain prices faster and clearing slow moving items.
Minimum stock levels are not always the best option as you may want to take advantage of special offers or volume discounts (let alone factor in the risks of temporary stock shortages) but these decisions should always be taken based upon the financial advantages of over stocking outweighing the cost of financing that stock. Remember high stock values affect cash flow.
Every business has slow moving items and products that become dead stock. Such items use valuable cash resources and turning such stock into cash benefits the business and provides additional funding for more profitable items or other necessary areas of expenditure.
Dead stock costs you money
Dead stock will hold your pub back, the only way to fix a dead stock problem is to deal with it. Start by understanding the scope of the problem. How much dead stock is there, what is its value and how old is the stock? You need to be able to answer these questions easily. If you can’t, you need to put a stock taking system in place which will enable these questions to be answered on an on-going basis.
As soon as stock that is under-performing has been identified, it is time to do something about it. Here are some ideas for getting rid of dead stock and still making some money from it:
Relocate the stock
It may be that a stock item is dead because it is in a dead location. The first step of dealing with dead stock is to move it to a better location. There are situations where a product range has been moved four or five times before the “sweet spot” location was found. If at first you don’t succeed …
Change the price
Price may be the problem. It will be your natural inclination to assume that an item may be too expensive, however, there are situations where an increase in price has helped it sell. Pricing a product too low can take it off the radar of some customers, remember the old Stella tag line of “reassuringly expensive”?
Hold a “Sale”
Choose the day(s) of the sale carefully to maximise customer footfall and sales. Talk to your suppliers and supplement your dead stock with items they want to get rid of and be sure to mark this up to deliver a healthy margin. Promote the sale to your own customers a week or two leading up to the sale. Make it sound like this is a once in a year opportunity. Invite a community group to run a charity event at the same time.
Ask the supplier to take it back.
If stock which is not performing was recommended by a supplier, invite them to take it back and provide you with a full credit in return for your continued commitment to them. Good suppliers will do this as long as the stock is in a saleable form.