Mr Specialist Gets Rid of Inventory

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Mike Cofield

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.

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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35 percent of bad inventory, which can be described as goods you wouldn’t reorder once you sold them; mainly aging or out of date products.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

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12 Comments

  1. I think one of the important things none of the comments (or even Mike) mentioned here is that when you implement a strong process-driven plan to move inventory in a timely manner, it becomes less of a probability to have “dead” inventory. Whether it’s inventory that isn’t selling through as often or there’s a time component (such as end of a model, new models on the horizon), having a plan is important because your process already handles that well before it becomes an issue. That aging inventory just turns into spent piles of money that is unavailable for use toward newer, more appropriate inventory until it moves, so why in the world would an astute retailer not implement plans to regularly move the aging inventory well before it’s deemed “vintage” product? —-Todd Ramsey—

  2. Having sat with Mike at prior MESA events, I can assure you that he is in the business of nurturing, and rewarding his employees. While he makes several comments about firing someone, I have every confidence in saying “He would never do it out of spite”, but rather repeated Lack Luster performance. Firing someone is just the nature of the beast. Thanks for the input Mike!

  3. What is the accountability for the person who bought the stuff that isn’t moving? And what tools are they using to make sure they aren’t buying duds?

    1. Thanks Juan. This is a great question. Purchasing and sales must recognize that we are all part of the same team. Ultimately, the accountability to have an item sell through rests with the guy that bought it. The first thing is that the buyer should create and (most important) publish to the staff a list of all items in each major category that will be purchased on a regular basis (The Merchandising Mix).This is one of his tools. This Mix should be arrived at with input from sales to help avoiding buying the duds. The buyer and sales staff also needs to recognize that it is virtually impossible to buy in perfect quantities of every item and that sometimes products simply don’t sell at the anticipated rate, or don’t sell at all, and so the buyer is then tasked with making sure he has a plan in place to sell thru all items that move too slowly (or not at all) in a timely fashion at accepted profitability levels. In our case, that plan is the 4-A-Month Program. If the buyer simply mis-buys all the time in terms of both quantities and the product mix, then it may be time to turn purchasing over to someone else (fire the buyer). The buyer must pay attention to the staff’s needs, and the staff needs to help the buyer as well. Teamwork, teamwork, teamwork. I hope this answers the question. – Mike Cofield-

  4. mike great point! inventory is always a challenge even for a distributer or especially for a distributer ,it doesn’t surprise me that you figured out a good way to address it .I remember how you cleaned my clock in backgammon a few years ago !

  5. I would hope even the extra hard items are at least reasonably possible to sell. But assigning a few nearly impossible items to a particular employee would be a good way to fire them “with cause”. Wink wink.

    1. Thanks Luke. Just so everyone knows, we have never used the 4 A Month Program to create a reason to fire anyone.- Mike Cofield-

  6. “Here. Sell this old proprietary cable to someone by the end of the month or you’re fired.” Sounds legit.

    1. If you were in the presentation then you would know that isn’t what Mike is doing. I say in the presentation and it is very smart. It is focused on selling electronics, speakers etc that are sitting around. It also isn’t talking about remotes and cables and unsellable product. We are in the process of implementing the program in our store and our staff is already excited about it.

    2. Thanks for the reply. We do not include totally unsellable products of the kind you specify in the list of items we want them to sell. We want to set our staff up to succeed, and reward them financially when they do. This is why there are 2 very easy items to sell, 2 harder and 2 extra. Our desire is to reward those who participate, assist those who are trying but need help, and only firing those who simply refuse to participate. We are a team, and the goal is to succeed and reward. We paid out over $20,000 in bonuses to the sales staff due to this program.

    1. Thanks for the comment. You are correct. We sometimes buy things we shouldn’t due to pressure or error. Avoid the pressure to buy what you don’t need, but if you end up buying something you probably shouldn’t have, make sure you have a plan to turn it back into cash as quickly and profitably as possible. You really can’t fault the reps and vendors for trying to sell you stuff. That’s their job. Our job is to resist buying what we shouldn’t and getting rid of stuff we buy. Even losing a little money on it is better than sitting on it forever. -Mike Cofield-

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