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Hello Everyone:

I need help. I am a wildlife biologist by training and my reward for being a good biologist was to be promoted to Program Manager over one of our Wildlife Education Centers. My question is this: our gift shop has annual sales of about $12,000/year and of this our sales of merchandise is only about $9,000/year (the other $3,000 is hunting & fishing licenses). The inventory for this gift shop is currently $46,428.24. (This seems out of balance to even to a wildlife biologist). For those of you who have training in business, is there a rule of thumb regarding how much inventory a gift shop should carry based on its sales?

Thanks,

Walter

bflynn's picture

The answer to that question is "It depends". :)

What is your lead time for reorder? How much does a lost sale cost you versus the cost of carrying inventory? (for each item) The answers to those questions tells you how much of an item you need to carry. You do good statistics on your items and you can make pretty good estimates of the demand.

The trick is that "good statistics" part. Some of your samples will be too small. Some will depend on things going on around the world and around your city. Where a product is placed in the store will affect it. And there will be seasonal variability.

If you're willing to do all that work, you could increase the profitability of the store. But given the low volume, it might just be better to look at past sales, compute basic statistics and set your desired inventory level to average + 2 standard deviations for most items. Reorder when you get down to average - X standard deviations, where X depends on the reorder lead time.

You don't need to get highly sophisticated with it. KISS is your principle.

Brian

mwlane2's picture

Brian:

Thanks for your reply I am interested in looking at past sales & computing basic statistics to set our desired inventory level to average + 2 standard deviations for most items. Reorder when you get down to average - X standard deviations, where X depends on the reorder lead time.

If I understand correctly, this process would be...

Our avg. sales of Snakes of the South East are 3 copies/mo. and the SD is 2 copies a months worth of inventory would be 7 copies of Snakes of the South East.

Am I understanding the process correctly?

Thanks - Walt

bug_girl's picture

That sounds about right to me. And I'm with Bryan with "it depends."
Who are your customers?
What are the past patterns?

One other factor for us (one of my many hats involves a bird sanctuary) is shipping, which has become much more costly. So, for some items that move reliably, we have more stock, since we save by buying in bulk.

We don't have very many high ticket items (a couple of really expensive coffee table books), and a lot of what are, frankly, tchotchkes. We have a lot of families that come through, and that lets everyone have a [i]thing[/i] from the sanctuary.

It also lets grandparents buy stuff for their kids. (Ok, I bought an alarm clock for my sister that croaks like a frog. But that's totally different, and it was really cute.)

I'd talk to the people you now manage and find out who your customers are. I also spent some time in the store seeing what goes on first hand.

Probably the most useful thing I've done as a new manager is to spend a day or two letting my directs show me what their jobs really entail. As a result, I've mended a swan wing, inseminated a cow, and really bonded with my directs in a way that the O3s didn't quite get.
I have a much better sense of what the demands on their time are, and they got to see me covered in poop.

win-win for everyone, apparently.

mwlane2's picture

Dear Bug Girl:

Thanks so much for your reply. I enjoyed hearing the perspective of another Natural Resource Manager. I will work with the gift shop mgr to determine our customers (anglers, hunters, and visitors to the nature center) to see if we can break those categories down even further. The gift shop mgr will have to help me with the past patterns. The cash register doesn't capture what was sold just (concessions, license sales and donations). I would love to have a way to track the inventory at the point of sale (I am working on getting a computer out these so we'll see if my request is approved.)

You raise a really good point about shipping gas was over $4/gal recently and fortunately is now below $3 but it still affecting our costs.

Our rationale for our stock seems similar to yours. We want to have quality items at prices that allow everyone (especially the kids) to leave with something.

For what it is worth - we are all about clocks that chime wildlife vocalizations! (How else could I know it is quitting time if I didn't hear the Tufted Titmouse?! :o)

I will definitely take your advice and get out and work with the staff. This is a very diverse operation (Fisheries, Wildlife & Forest Mgt + a wildlife education center with lots of different programs and live animals in the teaching collection. - Lots of ways to get dirty - I think you would like it.

Thanks for taking the time to respond.

Walt

bug_girl's picture

Feel free to PM me anytime!
Our cash register is also vintage, and I have not yet mastered it's intricacies. There are a bunch of inventory programs/templates online that are free, and perhaps others can suggest some for you.

Another major problem for us is damage and, recently, theft.
We have a whole bunch of these really neat stuffed birds

http://www.onlinenaturemall.com/plushbirds/easternplush.htm
(not our store, but the quickest example I could find), and they tend to either leave in pockets or be jumped on by kids.

We have a whole rack of singing birds that don't sing :(

Unsupervised kids are probably our biggest issue.

AManagerTool's picture

I loved reading this thread. Tufted Titmouse....:D

I would also imagine that your inventory could be varied by season? Sort of a primitive Just In Time approach?

bflynn's picture

[quote="mwlane2"]Brian:

Thanks for your reply I am interested in looking at past sales & computing basic statistics to set our desired inventory level to average + 2 standard deviations for most items. Reorder when you get down to average - X standard deviations, where X depends on the reorder lead time.

If I understand correctly, this process would be...

Our avg. sales of Snakes of the South East are 3 copies/mo. and the SD is 2 copies a months worth of inventory would be 7 copies of Snakes of the South East.

Am I understanding the process correctly?

Thanks - Walt[/quote]

Walt, sorry I lost this thread.

You understand correctly. The time frame should be your reorder time frame. If you reorder every 3 months, the number is not 21. As the time window increases, the sales become more regular and the SD will go down.

Let this be your guideline. If you have something hot, don't feel bound to stick by this.

Brian