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Changing Times for In-Season Orders

April 10, 2009

A few weeks ago, I blogged that I thought early buys, as we have know them for years, are changing. In the past few days, I am realizing how we handle in-season buys need to change, too. I am getting low on some of my bread and butter extruded aluminum. Normally, I would create a truckload fill-in order. This year, I am concerned about taking on that additional debt load. When the invoice comes due for this truck, so will my early buys. If business continues the upward trend I have been seeing for the past month, no problem. But if business takes a sudden decline, paying for this and other fill-in orders could become problematic.

A couple of days ago, I was discussing this problem with another retailer, Keith Guidry, of Percy Guidry’s in Lafayette, Louisiana. He gave me an idea whose time, I think, has come. Instead of waiting to place one large fill-in order after his warehouse has gotten very low, he orders an extra set or two for stock whenever he orders a custom order. What a great idea! He spreads his billing out over a longer period of time; and, he is able to keep his inventory fairly stable to avoid stock outs.

I thought about this again yesterday when I was talking to a vendor who visited my store. He was telling me how difficult his factor was making it for his customers to get credit. His factor was charging him more to insure his accounts while giving him less coverage. In addition, the factor had cut credit limits in half (or more) for many of his customers. They were doing this without any warning; so, he never knows what a customer’s credit limit will be from one day to the next. He was at his wits end and trying to find a new way to do business.

It occurred to me that Keith’s idea of continuously ordering small amounts of stock inventory could work for vendors, too. First, and most important, the vendor and their factor would be exposed to less risk. Instead of delivering a $35,000 truckload of furniture and hoping they will be paid for it, they would be sending out smaller shipments which would be easier for the retailer to pay. If problems occur, they could stop shipments before the retailer is into them for a whole truck. True, they still have risk, but instead of facing the loss of a full truck they stand to lose only a portion of a truck.

The second benefit for the vendor would be he could keep his plant continuously busy. The peaks and valleys of having to fill truckloads one day and LTL’s the next would be evened out.

Finally, both of the vendor and the retailer would be able to respond more quickly to market changes. Consider, as an example, the fill-in truckload that I am getting ready to order. I will be ordering goods that I am out of. This means they sold well in the first quarter of the year. Suppose consumer demand changes over the next few months and they want something different than my customers purchased in the first quarter Well, I guess that leaves me S. O. L.  However, if I were just bringing in one or two sets with every custom order, I could change what I was ordering on a dime. Seems like a win-win situation for everyone.

If my model for ordering in-season goods is to change, my vendor’s model of how to price these orders will have to change, too. Right now, these smaller orders are subject to a smaller discounts. I think I should get the same discount on these orders as I get on a full truck. I know that sounds counterintuitive; but, I’ll bet the cost of insuring a full truck and the deductible the vendor will have to eat if the truck is not paid for would be much greater than any discount the vendor would give me on my smaller orders. And, after all, my orders for the year will still be the same.

In the past few months, everyone has been saying businesses will have to think out of the box to get through these tough economic times. I believe that is true. I also believe that shouldn’t change when times get better. It’s easy for us do the same thing year after year. As they say, "Don’t change a winning game." But just because it is easier, doesn’t mean it’s right. Early buys have been the same on as long as I can remember. In-season stock orders have been placed the same way year after year. But these things are just not working during this present situation. Maybe it’s a sign that they have served their usefulness and it is time for our industry to look for better ways to do business.

Yours in confused retailing, Bruce