This is not a story about transshipping. It’s a guide presented by Mike Cofield, CEO of 18-store Custom Sounds & Tint, TX and President of the Mobile Electronics Specialist of America (MESA) buying/marketing group.
At the MESA Summit in Denver, Cofield told members that getting rid of dead inventory can make or break a retailer.
Most 12 volt retailers keep about 25 to 35 percent of bad inventory, which can be described as goods you wouldn’t reorder once you sold them; mainly aging or out of date products. For every $500K in sales your shop brings in, your store could generate another $15 to $25K in extra income if you set up a plan to get rid of that bad inventory, Cofield said.
He implemented a plan 14 years ago and got rid of 22 percent of his inventory. He’s put $363,000 into his checking account as a result. Custom Sounds’ share of bad inventory is now only 1.7 percent.
First, be aware of your inventory, you have a lot more dead weight than you think. “Everyone thinks their inventory is clean, but if you look at it item by item, you’ll find all kinds of stuff you don’t need or want.” He added, ”The sales guys only want to sell new stuff. They walk past it every day until it’s invisible. If the unit was going to be sold on its own, it would have been sold a long time ago.”
Next, set up a plan for salesmen to follow and make them accountable for doing so. Cofield assigns every salesmen six items a month in old inventory: two easy, two hard and two extra items. He requires employees sell at least 2 of the six items a month in order to stay employed. If they move 4 they get a $100 bonus for the month. But if they habitually fail to sell two a month, it’s usually a sign they aren’t motivated to work at the store.
Cofield has fired dozens of employees over the years out of many hundreds of employees over the year on this score. (Custom Sounds currently has 60 employees). “Here’s the key. Whatever your plan is, there must be accountability and you must report the results back to the staff so they know whether they are achieving their goals,” he said.
Overall, Custom Sounds’ staff is on board with the inventory program. “They understand it’s good for the company. The guys that refuse to participate are usually your problem employees anyway. Because the program is specific in its goal,…your personal feelings with regard to employees no longer enter into the equation, so the decision is unemotional,” he said, when it comes to firing if necessary.
Custom Sounds is so aggressive that it puts items in the ‘get rid of’ pile before they’ve been discontinued.
“It can mean the difference between staying or going out of business,” Cofield said.
Photo of Mike Cofield via Founding Austin