by Aaron Timmerman, product and pricing analyst, for the Resolutions for Independent Pharmacies blog series
Part of maintaining profitability in the front-end is proper inventory control. If you have inventory that isn’t turning over at the rate it should, there are options for moving those products.
How do you identify slow sellers? Products that are considered slow-moving are those that don’t have much consumer demand in your store. They were strong enough on a national level to make it to shelf, yet there they sit, all dressed up and ready, but going nowhere. Products that are slow sellers present a two-fold problem. Because they aren’t selling, they aren’t making you a profit. They’re also taking up valuable shelf space that could be used for products that sell better and do generate profits.
It’s critical to identify and manage your slow sellers because when you do, it will lead to increased profits and potential savings. I recommend conducting a thorough review of your approach to inventory management. A heightened awareness of your inventory turnover should result in significant short-term and long-term results.
Do you utilize your POS system for inventory management? Whatever your method, make sure you focus on:
- Inventory turnover rate
- Length of time to sell inventory
- Costs associated with keeping inventory on shelf (opportunity cost)
- Gross profit of product
- Forecasted future inventory movement based on current and historical data
The profits generated from slow movers should be compared to the costs of keeping them. You may see the benefit in moving those products out to make way for better selling items. However, you might find that once you make an effort to drive traffic to these products, they become popular and worth continuing to carry. In my next post, I’ll offer some ideas for ways to move slow sellers.