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Monday, October 8, 2007

Danger Lurks In Your Inventory

Inventory has a way of finding a way to growing and expanding like a wild fire. The justification is usually that ‘if we don’t have it we can’t sell it’, so a connection is made that translates as ‘the bigger the inventory we have, the more sales we’ll make’. If only it were so.

Carrying an unnecessary amount of stock can be a dangerous thing. If it’s not properly managed it becomes the equivalent of money that’s depreciating at an increasing rate and can actually drop below zero value. Be aware of the danger and don’t let this situation develop.

Some businesses manage to trade quite profitably without much inventory at all. ‘Just in time’ manufacturing processes created a whole new outlook on parts inventories that made maintaining huge stockpiles of components obsolete and saved manufacturers a lot of money. This line of thinking can be successfully applied to just about every inventory situation.

Using JIT effectively is predicated on having accurate sales forecasts and that’s the basis of any inventory management strategy – knowing what the demand for a product is most likely to be period by period (say, monthly) into the time ahead, usually the next 12 months or so. Orders for components or retail items can then be placed just far enough in advance to get them there when you estimate they will be needed. The need to retain huge inventories was eliminated.

The first step in inventory management is to have your expected demand figures in place item by item since, of course, some items turn over more quickly than others and some will need to be replenished more frequently.

This sort of analysis can be very revealing. For instance, look at the age of what’s in stock as well as how quickly each item turns over and the search will soon find some real opportunities to cut down on the number of items there. It’s also possible to discover some items in the inventory that haven’t moved for so long they’re virtually obsolete. So it’s not just the total value of an inventory that’s important, it’s what it consists of bit-by-bit.

Now look at the profit margins the business earns on each item in the inventory. Relate this to the turnover rate for each item and some surprising facts will emerge. Finding items that turn over slowly and generate low profit margins should ring a huge alarm bell that perhaps these products can be either dropped from the range or sourced from suppliers ‘on demand’.

Inventory on its own doesn’t sell itself. Certainly a business wants to be able to provide its customers with fast moving, high margin items with the least possible delay, and that’s where the focus should be. In most businesses the ‘80/20’ law applies to the products they sell – 80% of the turnover comes from 20% of the products. It makes sense to have those 20% of products dominate your inventory and find alternative ways to handle the less important 80%.
If an organization’s inventory is made up mostly of those ‘80%’ products it’s time to do some housecleaning. All they’re doing is depreciating from year to year and that capital could be better employed in selling more of the 20% products. Liquidate them and free up the capital for more productive uses. They can always be repurchased when and if required.

Monday, October 1, 2007

Be Yourself & Sell Yourself

One way or another business is all about selling our self. You have to sell you to your customers, to your bank and other sources of funds, and even to people you are meeting for the first time in a social situation. ‘Selling’ really means just being yourself in a way that’s interesting to your audience.

That’s why, to make the right kind of impression on others when selling something, you can’t just commit a sales pitch to memory and deliver it – part of the process involves selling you to the prospect as well. You have to open up to people and let them see who you really are so they know they can trust you.

Think about a salesperson you’ve met whom you really liked - someone who left you with a positive impression, even if they did manage to part you from your money. Chances are pretty good that they didn’t just try to sell you something, but rather that they spent at least the first part of your time together getting to know you. And when you’d completed the transaction you walked away feeling you’d got to know them as well.

Subconsciously, what customers really want to do is to learn something about you and to feel that you want to learn something about them. They want to connect on a personal level and make the occasion one in which they’ve met a new acquaintance, even if the ultimate result is that they buy something from you. People don’t want to deal with strangers and will always prefer to purchase something from someone they feel they know.

How can you become this special kind of person when you’re trying to sell something? It’s not difficult and it will be something you enjoy doing. Here’s some tips.

Have all the answers

Remember that people come to you for knowledge and information they don’t possess. It’s up to you to prepare yourself for their questions by learning all you can about your products and how they relate to people’s needs. Anticipate what it is that customers will want to know and be ready with the answers. This will enable you to be a lot more helpful and reassuring.

Create an outline of the sale

This is not as hard as it sounds. Most selling situations go in a fairly similar, and therefore predictable, way. They always begin with a greeting and an introduction, then move on to questions and answers, finally ending with a close and hopefully a sale. Customers are on your territory and probably expect you to control the situation to some degree, so even before you greet a customer have in mind how you want the sale to go. It will make both of you more comfortable if there’s a structure to your conversation.

Get to know the other person first

Make the first part of every conversation about them, and not about you or what you’re selling. Make a point of finding out some personal details, starting with their names and what sort of work they do.

The most important thing to find out is just what they want from you. It may well be just advice at first, or possibly information about your product. Before you give an answer probe for a bit more information about their needs; if they ask a question it’s an indication that they are aware of a need and hope you’ll be able to satisfy it.

Relax and let things happen

You know your products and their benefits, you’ve prepared for this conversation, you’ve outlined how things will go, you’ve got to know the other person – now just relax and let the sale take place. Take the lead but don’t push, and be confident that you’ve got something this customer wants. If not, you’ll both recognize it as the discussion progresses and no harm done.
And most important of all, be yourself. Don’t try to become someone who’s the perfect salesperson or has ‘personality plus’. They want to meet someone who’s genuine and sincere – someone who’s just like them but with more knowledge about something they need. That’s you!