If you do not provide on-time delivery of your product, you are going to give yourself and the buyer a headache. And, it’s going to cost you and them.
Now, more than ever, if you are importing from Asia, you and your retailers are at risk for significant impact/delays due to the West Coast port dispute. There is no telling when business will return to normal. As such, allow for safety stock:
- Get your product on a boat or plane much sooner than you normally would have in order to avoid not having product to sell. Boats are backed up…and you are looking at 3+ weeks in delays.
- Start manufacturing ahead of schedule to allow for this delay.
- Consider what impact this will have on you financially (do you have the cash on hand to pay for this inventory that will need to be produced sooner than expected and for it to sit on a boat for weeks on end and/or pay for it to be air freighted at a higher cost?).
The Product-based entrepreneur’s headache when evaluating inventory needs:
We are faced with managing cash flow. We don’t want to manufacture and/or import too much inventory because that costs us in manufacturing fees, shipping, storage, and possible financing. However, we can’t under produce because then we are not selling product. And, clearly we need to be selling product to keep all cylinders running.
We must properly project inventory needs. This is a best-guess game based on familiarity with the past, present, and future landscape of our business, industry, and outside influences.
The past: review prior sales data. What have you done month over month, year over year? How does seasonality impact your sales? Did you have past press hits, place ads, and/or participate in promotions that may have skewed your sales? Did you launch at a new retailer where their initial fill impacted your sales? Did you lose any accounts that need to be accounted for? Keeping “financial notes” (notes that impact your sales positively or negatively) throughout the year is one way to remind yourself of these types of influencing factors when you are reviewing past numbers.
The present: Take into consideration any trends that may influence your sales, positively or negatively. You can stay on top of trends by subscribing to industry newsletters/digests, reading headline news, and reviewing media calendars (often posted on national magazine web sites). How are outside influences, like PORT DELAYS, going to impact your business? For example, if your competitor is unable to get their inventory to their retailers on time due to port delays – and you can, that means more sales for you because there is less on shelf to compete with.
The future: You know that Chinese New Year (CNY) is coming up. It’s the same time every year. During CNY, manufacturers shut down or operate on skeleton crews and exports become much more costly and difficult to coordinate. This is supply/demand at its finest. We importers still need our goods; there are less workers to get it to us. Plan for it so you are issuing POs in November, manufacturing in December and/or January, and shipping in January, thus avoiding unnecessary inventory shortages or costly shipping charges. Also, back to those PORT DELAYS…negotiations may continue for many more months. Plan ahead.
The retailer’s headache:
When shelves sit empty, the retailer is losing money. The buyer is evaluated based on many criteria, including how much revenue he/she contributed to his/her category. You don’t want the buyer popping Advil at your expense. Read Vanessa’s upcoming blog on the retailers’ perspective.