cibestpracticefindraft

8/7/2019 CIBestPracticeFinDraft

1/28

Core Inventory Best Practices

The Christian Retail Solutions Committee and an ad hoc team ofvolunteer retailers and suppliers commissioned and produced thisdocument. Their goal is to identify reasons why the Christian RetailChannel generally reports high out-of-stock rates on core inventoryinventory that represents top-selling, highest-turning products andresources. Solving this problem has been identified as the single mostimportant strategy to improve the channels financial health.

Sponsored by CBA InternationalCompiled and written by Eric Grimm

January 2006


2/28

2

AcknowledgementsAn ad hoc team of retailers and suppliers serving on the former Training &

Communications Committee of the industrys Supply Chain Management Committee

commissioned the Core Inventory Best Practices document. That committee has merged,along with the Christian Product Standards Group, into the Christian Retail SolutionsCommittee.

Core inventory has been an industry topic of concern for several years, and variousindustry initiatives sought to address it through media information, training, andspecialized supplier programs. The ad hoc team realized it would be helpful tospecifically outline issues and create a standardized approach and common language fortrading partners to improve in-stock positions on core inventory and business success.

CBA appreciates the committee members hard work, time commitments, andwillingness to share expertise for the benefit of all Christian retailers, their continuedsuccess and professionalism, and the accomplishment of their mission and purpose.

Beverly Channell Wellspring, Des Moines, IAMichael Covington The Masters, Clovis, NMBrian Vandergraff The Munce Marketing GroupDavid Wilson Rainbow Family Bookstore, Cleveland, OHGary Davidson Thomas Nelson PublishingCris Doornbos Cook Communications Ministries (formerly with Zondervan)Kent Wilson NavPressJanet McDonald Spring Arbor DistributorsKelly Gallagher Evangelical Christian Publishers Assoc.Mike Hockett CBAEric Grimm CBA


3/28

3

Core Inventory Best P ractices

Table of Contents

Introduction 4Goal 5Core Inventory Definition and Use 5

Industry Initiatives . 6Current Conditions . 6Why Are Industry Core-Inventory Out-of-Stock Rates So High? . 8Best Practices 10Implement an effective core inventory program . 10Analyze current-stock sales patterns 10Use computer technology . 11Cycle count inventory quarterly ... 11Use multiple core-inventory lists 11Develop collaborative trading practices .. 11Collaborate during difficult sales periods or economic trials . 12

Conclusion 12The Surveys ... 13Retailer Core Inventory Survey .. 14Supplier Core Inventory Survey . 23

Bibliography . 28


4/28

4


Introduction

Core inventory performance is foundational to improved financial performance in theChristian Retail Channel. This document seeks to present best practices to develop aneffective core-inventory management program and overcome industry confusion aboutwhat exactly core inventory is, how to manage it, and how to start an effective core-inventory program.

This paper represents information, opinions, and perspectives gathered from retailers,suppliers, and retail experts. A survey of retailers and suppliers about core inventory

practices served as the basis for this document, as did industry reports and individualcomments during the past several years.

The document was prepared with the help and support of the Christian Retail SolutionsCommittee. A committee task force worked to identify key issues and commissioned thesurvey. There were 167 retailer responses and 58 supplier responses. The retailerresponses represent about 7% of total retail membership, and are statistically significantto support general conclusions made in this paper.

CBAs goal in the production of this paper is to help retailers and suppliers work morecooperatively and collaboratively to meet customer needs. At its heart, core inventory

represents what customers want and what they are voting for with their dollars. Theserecommended best practices aim to help trading partners develop new ways of thinkingabout meeting customer demand and expectations. It also will help identify quick ways toincrease cash flow and inventory turns. Christian retail has special ministry requirementsnot found in other retail segments. These requirements may mean stocking slower-moving product to meet specific ministry objectives and create broad product selectionunparalleled in competitive retail channels. However, optimizing overall inventoryperformance is part of good retail discipline and excellent Christian stewardship.


5/28

5


GoalImproved cash flow, revenue, and profitability have been identified as critical issues

facing the Christian Retail Channel. Effective core inventory management is the single

most important tactic that can address these critical issues. The goal of these bestpractices is to improve core-inventory in-stock rates to improve retail cash flow andprofitability.

Core Inventory Definition and UseCore inventory generally refers to a percentage of those products that contribute most

significantly to overall sales and profitability. A minority of respondents to the coreinventory survey used various product-to-sales ratios. As a general rule and best practice,core inventory is the 20% of products that generate 80% of store sales. However, somedefinitions are more precise, such as the 10% of products that produce 90% of sales. Thisdefinition results in more focused

inventory evaluation of a moreprecise list of products.

The survey revealed 48% ofretailer respondents consider coreinventory as products I deem asnever-outs based on intuitiveperception and interpretation.While this approach may bevaluable for some productselection, actual product-performance analysis based on

sales and inventory data is mosteffective to improve inventoryand financial performance.

Industry confusion exists because of numerous supplier-driven core-inventoryprograms linked to specific supplier promotional and buying terms. When retailers areasked about core inventory, they often say, Which one?

The survey revealed that retailers with highest sales volumes use multiple coreinventory lists to identify and stock top-selling products. Retail analysts say a retail bestpractice is to determine store core inventory by local-market sales demand, supported andenhanced by comparison to national and regional core-inventory and best-seller lists.

The survey shows:

42% of retailers use a core-inventory program produced by their POS system. 32% use a supplier-specific core inventory program.

23% create a core inventory program based on their own calculations.

14% use a third-party system, such as Above The Treeline.

9% use the CBA quarterly core inventory program.

8% use some other core inventory program.Mike Hockett, CBA training and consulting manager, said retailers should strive to

create core lists based on their specific customer base. That typically involves multiple

Categories Managed

by Core Inventory?

Music

25%

Gifts

10%

Other

7%Books

32%

Bibles

26%


6/28

6

supplier product lines. He says core-inventory analysis is critical to generate positive cashflow quickly.

Each retailer has to determine the stores core inventory as it relates to its specificlocal market and customers, he said. Thats what Wal-Mart does. The company createslocal product and category assortments based on local interests and sales demand.

Industry, supplier, or group core-inventory lists can help retailers identify andcompare product and sales trends for the local market. These lists reveal customerdemand based on proven sales performance, helping retailers identify specific titles andproducts not currently in stock that local customers might purchase. A core-inventory listproduced only from a store POS system can limit a retailers product selection. As RyanDunham of Zondervan points out: if a product is never in the store, it wont appear on astore core list, even though it may appear on other industry lists as a strong seller.

Core inventory listswhether industry or store-developed listsshould be based onactual demand revealed by sales reports, rather than sell-in lists (lists that reflect salesinto a retail store, but not through to end-user consumers).

Industry InitiativesSeveral industry initiatives aim to improve inventory performance and help developeffective core-inventory programs by building effective, comprehensive retail systemsthat benefit the entire Christian Retail Channel. These include:

A standardized e-commerce system (Electronic Data Interchange): Automatestransaction processes, supports quicker ordering cycle times, increases transactionaccuracy, and eventually will automate the entire transaction process from dataanalysis and reporting, to purchasing and receiving, to reconciling and billpayment.

Standard product-category coding system (Christian Product Category

codes): Helps better analyze inventory performance by product category. This

gives retailers and suppliers tools to implement category-management strategies.Category management more effectively identifies and meets customer needs,improves store merchandising, and improves analysis and sales. The CPC codingstructure is being reviewed for inclusion into the general publishing industrysproduct-coding standard. The goal is to simplify product-category lists andsupport a single coding standard for all North American publishing.

Retail management tools: CBA and various companies are developing tools forbetter inventory data and performance visibility, decision making, and inventoryoptimization, including Above The Treeline, Triunison, EyeOnInventory, SpringArbor Distributors CoreValues and Collaborative Inventory Managementservices, and others.

Retailer coaching and consulting services: Developed through CBA, TheParable Group, and independent consultants, these services support retailers instore operations and analysis to help improve performance.

Supplier-driven core inventory programs: Based on supplier product lines andperformance, these programs aim to improve supplier product-line performance instores. These lists can be very important in selecting products with highest salespotential and greatest contribution to store success.


7/28

7

Assisted Inventory Management standards: Testing of technology andprocesses are under development to help retailers and their trading partners shareinventory and product information to optimize sell-through and develop effectivecore-inventory programs. These standards identify various levels of cooperationand collaboration between retailers and their suppliers. They also identify

standard EDI documents that facilitate data exchange and product visibility tosupport such trading relationships.

Core inventory research: A survey of retailers and suppliers helped clarifydefinitions and identify challenges and solutions as a foundation to this bestpractices document.

Back-room transaction and processing research: This work aims to improvebusiness processes and cut operating costs that facilitate improved inventoryperformance. The study identified inventory management and forecastinglimitations as critical problems facing retailers. It also identified processing andreplenishment problems that reduce in-stock rates on core products.

Current conditionsRetailer core-inventory in-stock rates compared to supplier, industry, and other core

lists generally have been low. The core inventory survey found stores with highest salesvolumes used multiple core inventory lists and programs, while lowest performing storesused fewif anycore lists.

The survey found about 20% of retailers has no core-inventory program at all. About45% of these stores had annual sales volumes between $125,000 and $350,000, but 36%of these stores had annual sales volumes of less than $125,000. This indicates potential

opportunities for retail growth and improvedperformance.

Stores with highest sales volumes reported using

multiple core inventory lists and programs, especiallystores with more than $850,000 in annual sales. Listsused include their own lists generated by a POS system,supplier core inventory lists, third-party programs (suchas distributor/wholesalers and marketing groups) and theCBA industry core inventory list.

However, in-stock rates on core products continuelower than expected. Suppliers who have corporate product-line core inventory programsreport continued high out-of-stock rates despite sales rep monitoring, coaching, andinventory assistance; however, out-of-stock rates have improved under these programs.One supplier reported an overall increase in core in-stock rates under a company core-

inventory program from 35% (65% out-of-stock rate) to about 52% (48% out-of-stockrate).A study by one industry organization found as high as 57% out-of-stock rates on top-

selling Christian products.Of the 20% of core-inventory survey respondents (stores representing annual sales

from $125,000 to $1.5 million) who compared out-of-stock rates to the CBA industryquarterly core-inventory list, about 22% reported 0-15% out-of-stock rates, 43% reported16%-30% out-of-stock rates, and about 19% reported 31%-45% out of stock rates.

Retailers who use

multiple coreinventory lists

typically have

higher sales.


8/28

8

Why Are Core Inventory Out-of-Stock Rates So High?Retailers say financial constraints and supplier policies are main reasons why they are

out-of-stock on core inventory. Suppliers say financial concerns and replenishment speedare top issues, plus a third top-rated issue is incorrect product-sales forecasts or marketing

projections.Retailers:Retailer financial constraints reflect limited open-to-buy budgets and slow inventory

turns. These problems constrain retailers from regularly meeting supplier purchase termsand gaining adequate return on inventory investment.

Supplier policies include minimum-order and quantity discount breaks that oftenforce higher-than-needed stock purchases that tie up cash in inventory. They alsoencourage delaying purchases to achieve minimum purchase levelsbuying for discountinstead of turnsrisking out-of-stock status on corestock. These problems are similar to core-inventoryproblems identified in other retail channels.

Supplier credit policies also may constrain retailersability to stock faster-moving product. Unilateral orarbitrary changes in supplier credit policies often limitquantity and merchandise retailers may purchase. Creditholds or restrictions mean retailers cant purchaseproduct, resulting in missed sales and reduced cash flow.

Suppliers:Suppliers financial constraints often are driven by

success or failure of new-product releases, which affectcash flowas do slow- or no-pay customers and otheroperational or financial circumstances. Cash-flow

constraints may impact supplier financial policies, such as promotions and sales,purchasing terms and discounts, credit and collection requirements on outstandingcustomer balances, and special negotiations.

Supplier response to financial circumstances trickles down to retailers in the form ofhardening or softening of collection policies, promotional and pricing programs andincentives, fulfillment and replenishment practices, and other system or strategic tactics.Tactical business responses may be arbitrary and unilateral, surprising retailers. Forexample, a supplier tightening informal credit and collection policies may not be aslenient with term periods and make cash demands more aggressively, which could resultin retailers unanticipated credit holds that prohibit new or replenishment purchasing.

Additionally, aggressive sales techniques may create retailer incentives to overstock

inventory relative to demand, constraining cash flow, reducing inventory turns, anddriving longer inventory-carry and its related costs. Retailers exchange what theyperceive as added margin and profitability for possibly lower cash flow and longerinventory carrywhich often cancel margin benefits gained from the original purchase.

Replenishment speed affects supplier core-inventory in-stock rates. Fulfillment delaysfrom printers to publishers or from publishers to wholesalers/distributors means higherout-of-stock rates and lower fill-rates to retailer customers, resulting in slower inventoryturn and lower cash flow.

Several fac tors

contribute tocore-inventory

prob lems

requiring more

trad ing pa rtner

collaboration to

solve them.


9/28

9

Among factors suppliers attribute to delayed replenishment are inability to anticipatedemand or returns because of little shelf-level data (demand feedback), deficient productforecasts and marketing projections, and slow cycle times caused by production delaysmanual transaction processes, or other factors.

Additionally, complexities of one-to-many ordering, shipping and fulfillment

processes (meaning many transactions and processes to serve many retail companies)delays replenishment speed and increases unit costs, especially when compared to one-to-one or one-to-few processes as seen in consolidated retail channels.

Incorrect forecasts and sales-and-marketing projections lead to over- and under-production. Producing less-than-demand quantities results in higher out-of-stock rates.Producing more than demand results in higher inventory investment, decreased cashflow, and higher returns rates and costs.

1 2 3 4 5

Better terms 10% 11% 19% 28% 32%

Change supplier policies 9% 21% 27% 22% 20%

Improved technology to track and monitor inventory 7% 16% 22% 22% 33%

Improved replenishment speed 7% 15% 33% 25% 20%

Improved replenishment accuracy 14% 20% 36% 14% 17%

Improved supplier fill rates 11% 20% 35% 20% 14%Regular supplier follow-up and contact 11% 20% 29% 23% 17%

Understand the importance and value of core inventory 7% 9% 17% 31% 36%

Better forecasts of future product sales 4% 7% 24% 34% 31%

What are the solutions?

Retailers say understanding, terms, and technology are mostimportant solutions to improve core inventory performance.

Least to most im ortant


10/28

10

Best Practices

These best practices were formulated through committee discussion and consensus toimprove retailer financial performance through improved core-inventory management.

1.) Retailers should implement an effective core inventory program. Core-inventory management may be phased from a simple best-seller-list stocking strategy toan intermediate department or category core inventory plan, to a full category-management program.

To begin core inventory management, retailers should compare existing industrycore-inventory lists to store inventory, then plan ways to purchase top-selling productsnot stocked and sustain reasonable in-stock rates on them. This could include identifyinga portion of top selling titles, such as the top 100 or top 500, as a preliminary core-inventory goal.

This single activity and investment strategy can significantly improve retail salesperformance, retail consultants say.

2.) Retailers should analyze current-stock sales patterns to determinewhich merchandise has not sold in reasonable time. This analysis mustconsider and balance the stores mission and ministry to ensure appropriate productselection and customer service for targeted consumers. However, retailers must get rid ofdead stock so they can free up cash to get the rightstock.

Reasonable time periods relate to store goals forinventory turn and return on inventory investment.Without operational core-inventory programs,retailers have been known to stock unsold items for

years because merchandise wasnt monitored orbecause emotions dictated keeping non-performinginventory. Retailers unfamiliar with how to identifyand plan targeted inventory turn rates and grossmargin return on inventory investment should pursue training or seek expert assistance inthis area.

Once a primary core-inventory program is established, retailers should expand andphase in core-inventory management by department and category. This strategy helpsretailers identify specific local-customer needs, tastes, and desires by specific productcategories. With this kind of demand information, retailers can alter product assortments,reallocate floor space, adjust merchandising and promotions, and execute several other

tactical strategies to improve inventory performance.Managing core inventory by department and product category leads to implementing

more precise category-management. Category management provides retailers with morecustomer-demand information by product or product type to optimize inventoryperformance.

Category management treats each product category as a separate business unit withspecific performance goals, merchandising strategies, and customer-service supportdirectly related to retailer goals and mission. For more information, see Category

Balanc e store m ission

and ministry w ith

profitable inventory

performance.


11/28

11

Management: An Emerging Strategy For Independent Retailers To Compete in HighlyCompetitive Environments, an introductory booklet available through CBA. ContactCBA Member Services.

3.) Use computer technology. Technology is an important tool to gather required

information and generate needed reports to effectively manage inventory and identifycore-inventory. A retailer best practice is to install, learn, and use POS or relatedcomputer technology for store operations. Technology use speeds data gathering andreporting, giving retailers more time to effectively manage the store and its inventory.

4.) Cycle count inventory quarterly. Accurate inventory data is crucial toeffectively manage inventory. Cycle counting inventory (counting a portion of inventoryon a frequent, rotating basis) ensures POS or computer data accurately reflects the storeson-hand inventory, providing crucial data for key operational and financial reporting anddecision-making.

Various cycle-counting methods exist based on company size and sales volume. The

industry has accepted a general best practice of counting all store inventory quarterly.Most retailers (45.8%) responding to the core inventory survey said they count inventoryonly once annually. About 28% count semi-annually and slightly more than 20% countquarterly. Only 6% count inventory monthly.

To learn cycle-counting techniques, contact CBA Member Services or watch forspecialized CBA or other related training programs.

5.) Retailers should use more than one core-inventory list. Top-performingretailers participating in the industry research use more than one core-inventory list todevelop a store core list, including a POS-generated list, supplier lists, and the industryquarterly list. Some retail-management software, such as Above The Treeline, canautomate such comparisons among multiple core-inventory lists recorded in the software.

The industry core-inventory survey indicates 40% of respondents POS systems cancompare the stores inventory to an external core inventory list. About 22% said theirsystem wouldnt do that, and about 37% didnt know if the technology could or not.

6.) Develop collaborative trading practices. Collaborative inventory managementarrangements between retailers and suppliers can optimize core-inventory management.Retailers and suppliers should determine a mutually agreeable level of collaboration. Thatcould range from sharing basic inventory and sales information to a co-managed process,to a full vendor-managed or -assisted arrangement.

Prior to any shared arrangement, trading partners should agree on anticipatedcooperative goals, results, or outcomes as measured by key inventory performancemetrics, such as inventory turn, return on inventory investment, in-stock rates, etc.

Collaborative arrangements should be monitored periodically to evaluate and improveinventory performance and goal achievement.

The industrys Assisted Inventory Management Task Force has defined and outlinedlevels of participation and is promoting the use of standardized electronic documents tofacilitate information exchange on inventory levels, sales, and pricing. Seewww.Christiansupplychain.org.


12/28

12

The Voluntary InterIndustry Commerce Standards Committee (VICS) also identifiesseveral levels of collaborative trading practices as part of its Collaborative PlanningForecasting and Replenishment (CPFR) process model. See www.vics.org.

7.) Collaborate during difficult sales periods or economic trials. Effective

core-inventory performance during challenging financial times requires greaterretailer/suppler cooperation and collaboration to achieve win-win results.Trading partners should develop shared goals and plans by optimizing sell-through

and improving cash flow through cooperative inventory planning and execution.Emphasis should be on agreed upon business-performance objectivesfor example,inventory turn and return on inventory investmentand debt payment.

Shared data should be used to create sales forecasts based on actual current andhistoric demand. These forecasts cannot be created accurately without historic, multi-yearsales data and current sales-trend information.

Retailers should: Be prepared to share appropriate inventory, sales, and sales history information

with collaborating trading partners. Identify products by supplier that contribute most to cash-flow generation,

profitability, and growth. This does not mean to emphasize sales over ministry ornot carry products that have proven ministry support and serviceinventorychoices based on store mission, ministry, and strategy. However, the industrysbroad product selection must be analyzed in terms of how to optimize financialperformance and stewardship while balancing deep concerns for ministry. Thisbalancing must be aimed at local-market and customer dynamics, economics, andsales and service capabilities. What are your customers asking for and buying?What ministry and sales opportunities exist if you stock products and resourcesthat have demonstrated sales potential across the industry?

Identify products not contributing to cash-flow generation for possible return,markdown, or to support customer-traffic building opportunities, such as sales andpromotions.

Suppliers should:

Consider whether blanket credit holds are in the best interest of either party,especially if it can be demonstrated that certain products have sell-throughcapability to generate cash flow, replenish product, and meet debt-serviceagreements. This is not meant to encourage credit support of retailers in seriouseconomic troubles or inability to pay back debts, rather to work out a reasonableaction plan to continue sales and customer service in mutually beneficial ways.

ConclusionProfitability and cash flow are foundational measurements of business success. Core-

inventory management is an important tool to improve financial performance and achievethat success, while at the same time supporting effective retail ministry.


13/28

13

The Surveys

The Core Inventory Best Practices survey had retailer andsupplier components. These surveys are presented here toshow actual responses and comments from each one.


14/28

14

Retailer Core Inventory Survey Responses167 Responses, August 22, 2005

1. How large is your selling space in square feet?

Largest: 22,000

Smallest: 400

3,889 Avg. square feet

2,600 Median

159 Companies

6 with two locations

165 Total stores

2. Approximately how many SKUs do you carry in your store?

20,605 Avg SKUs carried

200,000 Highest

4 Lowest

11,500 Median

106 Total companies

Note: It's obvious some respondents don't know know what SKUs are. Severalstores reported SKU counts as 1,000; the lowest SKU counts were 4, 7, 200,600, 700, and 750.

3. What is your annual sales volume?

Choice CountPercentage of Sample

AnsweringPercentage of Sample

AskedPercentage of Total

Sample

Less than $125,000 33 19.50% 19.30% 19.30%

$125,001-$350,000 48 28.40% 28.10% 28.10%

$350,001-$550,000 31 18.30% 18.10% 18.10%

$550,001-$850,000 20 11.80% 11.70% 11.70%

$850,001-$1.5 million 19 11.20% 11.10% 11.10%

$1.5 million-$2 million 12 7.10% 7.00% 7.00%

$2 million-$4 million 3 1.80% 1.80% 1.80%

More than $4 million 3 1.80% 1.80% 1.80%

136


15/28

15

4. How often did you cycle count your inventory in the last 12 months?




Sample

Monthly 10 6.00% 5.80% 5.80%

Quarterly 34 20.50% 19.90% 19.90%

Semi-annually 46 27.70% 26.90% 26.90%

I only count inventory once a year 76 45.80% 44.40% 44.40%

166

5. What POS system do you use in your store?




Sample

Booklog 16 9.60% 9.40% 9.40%Bookstore Manage 72 43.10% 42.10% 42.10%

IBID/IRT 29 17.40% 17.00% 17.00%

Revelation Retail 1 0.60% 0.60% 0.60%

Other (please list) 49 29.30% 28.70% 28.70%

167

6. Does your POS system have capability to identify your store's core inventory and compareit to an external list?




Sample

Yes 66 40.00% 38.60% 38.60%

No 36 21.80% 21.10% 21.10%

Dont know 63 38.20% 36.80% 36.80%

165

7. Which core inventory programs do you use (check all that apply)?

Choice CountPercent of Sample

AskedPercent of Total

Sample

My own based on my POS system 72 42.10% 42.10%

My own based on my own calculations 40 23.40% 23.40%

I use a third party system (such as Above The Treeline,

EyeOnInventory, a consultant, etc.) 24 14.00% 14.00%

A supplier-specific program (such as Zondervan, ThomasNelson, EMI-CMG, etc.) 55 32.20% 32.20%

Industry CBA Quarterly Core Inventory list (STATS) 16 9.40% 9.40%

I dont manage by any core inventory program 33 19.30% 19.30%

Other (Please list) 13 7.60% 7.60%


16/28

16

8. How do you define core inventory?

Choice Count

Percent ofSampleAsked

Percent of TotalSample

Percent of products 38 22.20% 22.20%Generate percent of sales 37 21.60% 21.60%

Product I deem as never outs based on intuitive perceptionand interpretation 82 48.00% 48.00%

I don't know 28 16.40% 16.40%

Note: of the 75 (43.8%) of respondents who answered the two-part question, most indicated theydefine core inventory as 20% of products that produce 80% of sales. One respondent indicated 25% ofproducts account for 75% of sales, one said 30%/70%, and three didn't compute correctly.

9. If you manage core inventory, which categories do youmanage (check all that apply)?

Choice CountPercent of Sample

AskedPercent of Total

Sample

Books 140 81.90% 81.90%

Bibles 117 68.40% 68.40%

Music 111 64.90% 64.90%

Gifts 44 25.70% 25.70%

Other 32 18.70% 18.70%

10. Approximately what percent of your total inventory is being managed under some form

of a core inventory program?




Sample

percent: 76 46.30% 44.40% 44.40%

Unable to calculate 88 53.70% 51.50% 51.50%

164

Note: The 76 retailers answering this question said on average 56% of the store is managed undersome form of core inventory program, with a median of 60% of the store being under some form ofcore inventory program.


17/28

17

11. What is your annual inventory turn ratio?

Choice Count

Percentage ofSampleAnswering

Percentage ofSampleAsked

Percentage of TotalSample

Turns per year 47 28.70% 27.50% 27.50%

Approximate turns per year 61 37.20% 35.70% 35.70%


164

Note: Of the 108 respondents who reported turns, 2.9 was the average turn rate, with the highestturns at 5 and the lowest at 0.7; the median is 3.

Actual Turns:

47 Total companies

2.9 Avg. Turns5 Highest

0.7 Lowest

3 Median

12. What is your gross margin return on inventory investment?




Sample

$ 18 12.30% 10.50% 10.50%

Approximate GMROII $ 18 12.30% 10.50% 10.50%


146

Note: Of the total responses, $2.14 was the average reported GMROII. $4.33 was the highest and$0.60 was the lowest; $2.50 was the median.

Actual GMROII responses:

18 Total Responses

$2.05 Avg. GMROII

$3.99 Highest

$0.36 Lowest

$2.16 Median


18/28

18

13. Have you ever compared your out-of-stock rate with the CBA quarterly core inventory list?




Sample

Yes 33 20.40% 19.30% 19.30%

No 129 79.60% 75.40% 75.40%

162

14. If you have compared your out-of-stock core inventory rate with the CBA core inventorylist, what is your out-of-stock rate?




Sample

0-15% 8 21.60% 4.70% 4.70%

16%-30% 16 43.20% 9.40% 9.40%

31%-45% 7 18.90% 4.10% 4.10%46%-55% 2 5.40% 1.20% 1.20%

56%-75% 3 8.10% 1.80% 1.80%

76%-85% 0 0.00% 0.00% 0.00%

86%-100% 1 2.70% 0.60% 0.60%

37


19/28

19

15. There are many reasons why stores are out of stock on core inventory. Please tell us how muchyou agree or disagree with these reasons. Rank each question as to importance on a scale of 1 to 5with 5 ranking highest in importance.

Topic 1 2 3 4 5Not

AnsweredNot

Asked

Purchase terms arent flexible enough 26 24 46 31 22 22 0

Replenishment speed is too slow 27 43 40 18 21 22 0

Financial (open to buy, capital limitations, orcash flow) 15 20 23 33 65 15 0

Supplier out of stock 26 40 44 22 20 19 0

Supplier policies (minimum orders, quantitydiscount breaks, etc.) 17 19 34 46 36 19 0

My inventory management system isinadequate 42 32 37 18 20 22 0

Incorrect forecasts or marketing projections ofproduct sales 27 37 40 34 12 21 0

Inventory inaccuracy 34 43 40 20 10 24 0

Percent of responses # Stores:

Purchase terms arent flexible enough 17% 16% 31% 21% 15% 149

Replenishment speed is too slow 18% 29% 27% 12% 14% 149

Financial (open to buy, capital limitations, orcash flow) 10% 13% 15% 22% 44% 149

Supplier out of stock 17% 27% 30% 15% 13% 149

Supplier policies (minimum orders, quantitydiscount breaks, etc.) 11% 13% 23% 31% 24% 149

My inventory management system isinadequate 28% 21% 25% 12% 13% 149

Incorrect forecasts or marketing projections ofproduct sales 18% 25% 27% 23% 8% 149

Inventory inaccuracy 23% 29% 27% 13% 7% 149

15a. Other

Item Frequency Percent

(Not Answered) 152 88.90%(Unique responses) 19 11.10%

(Total) 171 100.00%


20/28

20

Comments:

>My own inadequacies

>Unclean industry data in STATS. Seasonal titles, hardcover/softcover issues or OP titles listed.Need cleaner data! Need accepted benchmark core by store size.

>Just began to look at Core Inventory w/Above the Treeline.

>Limited knowledge of core inv in marketplace but CBA and Parable have changed that - nowthere are NO EXCUSES! Core of individual companies is a small % of over all core whichcauses stores to have to much inventory of one company.

>Some core titles are already dated and I have sold thru on titles that will not generate much salespecifically to my store.

>Wrong product mix.

>Room for "core" product.

>We are very small and don't know how to do core inventory,...but would learn!

>Too much other work not enough profit to have staff to do product returns offer customer serviceclean restock all that must be done!

>Using distributors.

>Size of selling space.

>Time to manage.

>Don't trust supplier-provided core lists.

>Time management.

>Knowing your customer base in your own area.

>Time needed to do correctly.

>Space Limitations.

>I don't carry CBA core inventory.

>Many times a supplier's core list is not what my customers are looking for.

15b. Other

Topic 1 2 3 4 5 Not Answered Not Asked

Other 2 0 0 3 16 150 0


21/28

21

16. What do you see as the most important solution to maintaining high in-stock rates on coreinventory? Rank each question as to importance (rank 1 to 5 with 5 ranking highest inimportance).

Topic 1 2 3 4 5

Not

Answered

Not

AskedBetter terms 15 16 28 43 49 20 0

Change supplier policies 13 31 40 33 30 24 0

Improved technology to track and monitor inventory 10 24 33 33 49 22 0

Improved replenishment speed 11 22 49 37 29 23 0

Improved replenishment accuracy 20 29 54 20 25 23 0

Improved supplier fill rates 16 29 51 30 21 24 0

Regular supplier follow-up and contact 17 30 43 34 25 22 0

Understand the importance and value of coreinventory 11 14 26 49 56 15 0

Better forecasts of future product sales 6 10 36 52 47 20 0

Percent of responses # Stores:Better terms 10% 11% 19% 28% 32% 151

Change supplier policies 9% 21% 27% 22% 20% 147

Improved technology to track and monitor inventory 7% 16% 22% 22% 33% 149

Improved replenishment speed 7% 15% 33% 25% 20% 148

Improved replenishment accuracy 14% 20% 36% 14% 17% 148

Improved supplier fill rates 11% 20% 35% 20% 14% 147

Regular supplier follow-up and contact 11% 20% 29% 23% 17% 149

Understand the importance and value of core inventory 7% 9% 17% 31% 36% 156

Better forecasts of future product sales 4% 7% 24% 34% 31% 151

16a. Other


(Not Answered) 158 92.40%

(Unique responses) 13 7.60%

(Total) 171 100.00%


22/28

22

Comments:

>Use of Above the Treeline

>Again, Parables and CBA are making the difference with the over all core from the industry vs. onepublisher at a time. Parable has just created a way to track core items so they don't get returnedbecause of low sales - updated quarterly.

>Top sellers sold at secular stores at larger discount.

>Specific to our region.

>Supplier policies need to include mgmt tools for O.P. D.T. pre-notification w privilege to return or getcredit for stock on hand, mark down credit for supplier current super saver pricing, lower minimums forfree shipping-2 compete w/ discounters & $$supplier.

>Use one source i.e. distributors frequently

>Time improve if terms easier

>Lower back stock

>Improved customer relations

>My ability to do cycle counts.

>Vendor cores need to reflect their items in a universal core list instead of their "top" items

>Easier returns on old stock>Need to know what is coming and when on auto ship programs

16b. Other

Topic 1 2 3 4 5 Not Answered Not Asked

Other 0 0 1 1 11 158 0


23/28

23

Suppliers Core Inventory Survey Responses58 Responses, August 22, 2005

1. Approximately what percent of your total product line do you manage as core inventory (or"never-out") product?




Sample

Percent: 22 38.60% 37.30% 37.30%

Percent (Approximate): 21 36.80% 35.60% 35.60%

We dont use core inventory tomanage our product line 12 21.10% 20.30% 20.30%


1a. Follow up on supplier definitions of core inventory:

"Never out'

definition: 25/75 80/20 35/65 5/95 50/50 60/40 100 1/99 10/90 30/70 33/66 15/85 28/72Respondents 1 11 1 2 4 1 8 1 1 1 1 1 1 34

Percentage 2.9% 32.4% 2.9% 5.9% 11.8% 2.9% 23.5% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 100%

Note: There was a broad range of supplier definitions of what percent of products account for the highestcontribution to income as "never outs"

2. My company is a :




Sample

Publisher 26 45.60% 44.10% 44.10%

Music supplier 2 3.50% 3.40% 3.40%

Gift & Specialty supplier 16 28.10% 27.10% 27.10%

Apparel supplier 3 5.30% 5.10% 5.10%

Software supplier 1 1.80% 1.70% 1.70%

Other (please list) 9 15.80% 15.30% 15.30%

TOTAL 57Other company types listed:Stationary, distributor for all church supplies, candy, children's product, apparel, books, gifts,DVD/VHS supplier, literary/publisher consulting agency, communion bread manufacturer.

3. How often did you cycle count your inventory in the past 12 months?

Choice Count Percentage of SampleAnswering Percentage of SampleAsked Percentage of TotalSample

More than monthly 7 12.50% 11.90% 11.90%

Monthly 7 12.50% 11.90% 11.90%

Quarterly 17 30.40% 28.80% 28.80%

Semi-annually 9 16.10% 15.30% 15.30%

We only count once a year 16 28.60% 27.10% 27.10%


24/28

24

4. What is your fill-rate on your core inventory products?




Sample

Less than 70% 2 3.50% 3.40% 3.40%

71-75% 0 0.00% 0.00% 0.00%

76-80% 0 0.00% 0.00% 0.00%

81-85% 2 3.50% 3.40% 3.40%

86-90% 3 5.30% 5.10% 5.10%

91-95% 8 14.00% 13.60% 13.60%

96-100% 28 49.10% 47.50% 47.50%

Not applicable 6 10.50% 10.20% 10.20%


Total 57

5. Does your company provide any of the following retailer incentives or servcies for stocking

your core-inventory products (check all that apply)?

Choice Count Percent of Sample AskedPercent of Total

Sample

Special terms for stocking our coreinventory 19 32.20% 32.20%

Regularly updated list of our coreinventory 14 23.70% 23.70%

Vendor managed inventory (VMI)program 4 6.80% 6.80%

Free freight on core inventory 13 22.00% 22.00%

We provide no special incentives for

retailers to stock our core inventory 29 49.20% 49.20%Other (Please list) 5 8.50% 8.50%Other comments: No core inventory POP materials Various discounts and free freight offers Free freight when qualified Free product incentives

6. What is your annual inventory turn rate?




Sample

Turns per year 12 19.30% 18.60% 18.60%

Approximate turns per year 19 33.30% 32.20% 32.20%


Total 58


25/28

25

Actual Turns Estimated Turns

Total count: 12 Total count: 19

Avg. Turns 2.41 Avg. Turns 3.58

Highest 6.00 Highest 10.00

Lowest 1.10 Lowest 1.0Median 2.85 Median 3.00

7. What is your Gross Margin Return on Inventory Investment?

Choice CountPercentage of

Sample AnsweringPercentage ofSample Asked

Percentage of TotalSample

$ 5 9.80% 8.50% 8.50%

Approximate GMROII $ 5 9.80% 8.50% 8.50%


Total 51

Note: Answers to the approximate question were expressed incorrectly, indicating either amisunderstanding of GMROII or an inability to accurately calculate it.

Actual

Total Count 5

Avg. GMROII $ 3.16

Highest $ 4.70

Lowest $ 2.62

Median $ 2.93


26/28

26

8. There are many reasons why a supplier might be out of stock on best-selling products.Please tell us how much you agree or disagree with these reasons. Rank each question'simportance on a scale of 1 to 5 with 5 ranking highest in importance.

Topic 1 2 3 4 5

Not

Answered

Not

AskedPrinter/Supplier terms 25 4 11 8 3 8 0

Printer/Supplier policies(minimum orders, quantitydiscount breaks, etc.) 22 6 10 9 4 8 0

Replenishment speed is too slow 8 6 17 8 14 6 0

Financial issues (capitallimitations, cash flow, etc.) 16 9 10 5 11 8 0

Production or manufacturingproblems 5 10 18 13 5 8 0

My inventory managementsystem is inadequate 23 6 12 8 3 7 0

Incorrect forecasts or marketingprojections on product sales 9 8 12 17 8 5 0

Inventory inaccuracy 26 12 6 4 4 7 0

Topic 1 2 3 4 5 Responses:

Printer/Supplier terms 49.0% 7.8% 21.6% 15.7% 5.9% 51

Printer/Supplier policies(minimum orders, quantitydiscount breaks, etc.) 43.1% 11.8% 19.6% 17.6% 7.8% 51

Replenishment speed is too slow 15.7% 11.8% 33.3% 15.7% 27.5% 51

Financial issues (capital

limitations, cash flow, etc.) 30.2% 17.0% 18.9% 9.4% 20.8% 53Production or manufacturingproblems 9.8% 19.6% 35.3% 25.5% 9.8% 51

My inventory managementsystem is inadequate 45.1% 11.8% 23.5% 15.7% 5.9% 51

Incorrect forecasts or marketingprojections on product sales 17.3% 15.4% 23.1% 32.7% 15.4% 52

Inventory inaccuracy 48.1% 22.2% 11.1% 7.4% 7.4% 54

8a. Other 8b. Other

Item Topic 1 2 3 4 5

Not

Answered

Not

Asked(Not Answered) Other 0 0 1 2 5 51 0

(Unique responses) 7 11.90%

(Total) 59 100.00%

Comments: Retailers waiting to order until late; Large purchases by single customer; Lead timesfrom China; Inadequate Customer systems to provide good forecasts for demand; Retailers' salesforecasts; Tying up inventory at events; Seasonal


27/28

27

9. What do you see as the most important solution to maintaining high in-stock rates on coreinventory? Rank each question as to importance (rank 1 to 5 with 5 ranking highest inimportance).

Topic 1 2 3 4 5Not

AnsweredNot

Asked

Better terms from ourprinters/suppliers 18 9 11 6 6 9 0 50

Change printer/supplier policies 18 12 15 2 2 10 0 49

Improved technology to trackand monitor inventory 7 12 9 12 10 9 0 50

Improved replenishment speed 2 6 10 19 14 8 0 51

Improved replenishmentaccuracy 6 9 13 16 7 8 0 51

Improved printer/supplier fillrates 13 8 13 9 7 9 0 50

Better data visibility to planproduction and fulfillment 11 5 8 12 14 9 0 50

Better forecasts of futureproduct sales 5 3 8 16 21 6 0 53

Responses

Better terms from ourprinters/suppliers 36.0% 18.0% 22.0% 12.0% 12.0% 50

Change printer/supplier policies 36.7% 24.5% 30.6% 4.1% 4.1% 49

Improved technology to trackand monitor inventory 14.0% 24.0% 18.0% 24.0% 20.0% 50

Improved replenishment speed 3.9% 11.8% 19.6% 37.3% 27.5% 51

Improved replenishmentaccuracy 11.8% 17.6% 25.5% 31.4% 13.7% 51

Improved printer/supplier fillrates 26.0% 16.0% 26.0% 18.0% 14.0% 50

Better data visibility to planproduction and fulfillment 22.0% 10.0% 16.0% 24.0% 28.0% 50

Better forecasts of futureproduct sales 9.4% 5.7% 15.1% 30.2% 39.6% 53

9a. Other


(Not Answered) 58 98.30%(Unique responses) 1 1.70%

(Total) 59 100.00%

9b. Other

Topic 1 2 3 4 5Not

AnsweredNot

Asked

Other 0 0 0 0 1 58 0


28/28

Bibliography

Retail Out of Stocks: A Worldwide Examination of Extent, Causes and ConsumerResponses, Thomas W. Gruen, Daniel S. Corsten. Grocery Manufacturers of America.2002Out Of Stocks Equals Lost Sales!!, A presentation by Andy Buteux of Procter & GambleThursday, May 27, 2004, at the Uniform Code Councils Uconnect Conference;Anaheim, CA.Category Management: An Emerging Strategy For Independent Retailers To Compete in

Highly Competitive Environments, Eric Grimm. CBA. 2003

cibestpracticefindraft

Documents