Make Informed Inventory Management Decisions

When it comes to stocking new product lines, distributors often rely on gut feeling, rather than data-backed decisions that are available from their distribution software systems. They hope the product sells and is well-received by customers. Sometimes this strategy works, but most often it backfires and the new products end up as dead stock in their warehouses. Distributors should tap into their ERP systems and data to make informed decisions.

“If you can just get people to learn how to run the right reports, their life gets a whole lot better, and then the light comes on and it just starts to make sense,” says Bader. “But if they can’t use that software to help them make management decisions, it’s a lost cause.”

Coupled with the data, distributors should then structure decisions through a committee of managers that consists of the sales manager, purchasing manager, warehouse manager and controller. This group can then decide which items are best suited for its customer base.

First, distributors should review the product, review pricing and determine what the advantages the product holds over the current product they’re carrying. Next, if it makes sense from a purchasing standpoint and a business standpoint, distributors should talk to their salesforce about an item and find out what customers might think.

“Look at what customers would be typical customers for the particular product,” says Jim Ambrose, president of jimambroseworkshops.com. “Then have the salespeople do some auditing on who uses it, how much they use, what they like and don’t like.”

Sometimes a new product may be similar to another product in a distributor’s inventory. If unsure how the product will be received in the marketplace, distributors can call two or three of their customers and gauge their level of interest in the new line.

“Say, ‘I’m thinking about putting this in stock and you would be the most likely to purchase it. How excited are you about this on a scale of one to 10? What would you pay for it?’” says D. Bruce Merrifield Jr., president of The Merrifield Consulting Group, Chapel Hill, North Carolina. “The best marketing is talking to the absolute best right person for 20 minutes.”

Distributors may also find it beneficial to have customers test the new product before fully committing to stocking it on their shelves.