Quantity of Stock Needed for Launching Operations
In the dynamic world of fashion, effective inventory management is crucial for a successful product launch. Syama Meagher, CEO of Scaling Retail, a global consulting company for startup and growth stage fashion businesses, shares her insights on how to manage inventory effectively.
Adjusting Stock Levels
Rather than relying on guesswork, adjust stock levels based on actual sales data. Start tracking inventory using MS Excel or inventory management systems like Stitch Labs, Unleashed Software, or Megaventory.
Keeping Track of Inventory
When launching a new business, it's essential to keep track of inventory levels. For startups, a lean inventory approach is recommended. Begin with a basic 1:2:1 model (e.g., 1 small, 2 medium, and 1 large per product variation).
Planning for Paid and Organic Traffic
To determine how much stock to hold, plan for both paid and organic traffic. For organic traffic, account for smaller volumes initially due to slower, unpredictable growth. For paid traffic, inventory planning should account for the estimated number of customers that will complete a purchase based on conversion funnel percentages.
Estimating Sales Volume
Estimating sales volume involves considering projected sales from both organic and paid traffic sources, website conversion rate, traffic volume, and advertising reach.
Assessing Marketing Strategy
Assessing the marketing strategy involves determining reliance on organic traffic (SEO, social media) or paid channels (ads, influencers). Incorporate consignment and gifting strategies into launch plans to gain visibility and plan inventory accordingly.
Accounting for Lead Times
Accounting for lead times means factoring in how long it takes for inventory to be replenished. To calculate the required inventory to have on hand before replenishment arrives, determine your supplier lead times and calculate the amount of inventory needed to cover sales during these lead times.
Planning for Safety Stock
Planning for safety stock ensures continuity of sales during unexpected demand surges. Safety stock is typically based on variability in demand and lead time; more uncertainty calls for a higher safety stock level.
Determining Anticipation Inventory
If expecting demand surges (e.g., launch promotions, holidays), include anticipation inventory to prepare for these periods. This is extra stock secured ahead of time based on forecasted spikes.
Calculating Cost of Goods Available and Inventory Value
To calculate inventory for a new fashion business launch, perform comprehensive demand planning combined with inventory valuation and forecasting techniques. Sum your beginning inventory cost plus planned purchases at cost to find the cost of goods available for sale. Use an inventory valuation method compatible with your business (FIFO, LIFO, Weighted Average Cost, or the retail inventory method for retail fashion).
Adjusting for Market Conditions and Obsolescence
Evaluate inventory for obsolete or slow-moving items, especially relevant in fashion where trends change fast. Write down or reserve inventory if needed according to the lower of cost or market value rule.
Coordinating With Suppliers and Monitoring Performance
Work closely with suppliers to confirm they can meet delivery timelines and volumes required for your forecasts. Continuously track inventory performance indicators (turnover, fill rates) and adjust forecasts accordingly.
By following this step-by-step approach, you can launch your fashion business with inventory levels aligned tightly to expected sales while mitigating risks of overstock or stockouts. If you want, I can also provide specific calculation examples or templates. As the business grows, utilize inventory management systems to manage and track inventory effectively.
- In the realm of startups, it's essential to manage inventory effectively, such as using technology-based inventory management systems like Stitch Labs, Unleashed Software, or Megaventory.
- When launching a new fashion business, planning for paid and organic traffic is crucial in determining how much stock to hold, accounting for the estimated number of customers that will complete a purchase based on conversion funnel percentages.
- Proper inventory management also involves assessing the marketing strategy, determining the reliance on organic traffic (SEO, social media) or paid channels (ads, influencers), and incorporating consignment and gifting strategies to gain visibility.
- Adjusting stock levels should be based on actual sales data, and planning for safety stock ensures continuity of sales during unexpected demand surges.
- Education and self-development in the industry, specifically in online-education platforms, provide valuable insights into effective inventory management, business, entrepreneurship, finance, education-and-self-development, and fashion-and-beauty.
