STRATEGY & TACTICS - TAKING STOCK

How has the pandemic impacted your business’s stockroom? Retailers take a closer look at how planning strategy and creative thinking can help mitigate difficulties with inventory management.

WORDS BY ROSA SOPHIA

Proper inventory management is the basis of any structurally sound business. In the July issue of Mobile Electronics magazine, Jeff Cantrell of Jackson Car Audio in Jackson, Tenn. shared recommendations in his article entitled “The Basics of Inventory Tracking.” This month, we take a closer look at some of the strategy behind inventory management, and how it’s been impacted by the COVID-19 pandemic. As the industry reports shortages in various brands due to disruptions in the supply chain, retailers consider potential solutions and the bigger picture.

Jeff West, president of Benchmark Audio, Inc. in Springfield, Ill. said he believes manufacturers will learn more than retailers when it comes to supply issues surrounding the pandemic. “We can order as much as we can afford, but if they can’t ship it due to not anticipating a business spike in time, and not noticing trends [soon enough] or ramping up production to ensure the supply line isn’t affected, [then we won’t get that product],” he said. “Distributors got hammered early on with backorder problems. Shops like that were probably affected earlier than some of us who have mostly direct accounts.”

In recent months, Benchmark Audio has experienced inventory shortages of one to three brands. About 80 percent of the business’s purchases are made directly through vendors, West said. The rest comes through a distributor.

Creating a Merchandise Plan to Anticipate Sales

Each year, West said he sets a merchandise plan. He decides what products from each vendor Benchmark Audio will carry, and how many of each. “Recently, it’s been a challenge,” he said. “If the vendor can’t sell an order on a particular SKU at a certain price point, I am using other vendors to fill voids caused by supply line issues.” West added that this works sometimes, but not all the time.

His main rule of thumb when it comes to designing a merchandise plan, he said, is to come up with a “good, better and best product selection” as well as entire families of product. The goal when

crafting the plan is to ensure that if a client comes in looking for an entire Kenwood system, Benchmark Audio will be able to supply amplifiers, speakers, a head unit and everything else needed for the project.

The shop offers entry-level products at lower price points, mid-level products for the second-time buyer and products for the high-end consumer. West called this the “fourth- or fifth-time system builder who has the financial means to justify higher-ticket items.” The important thing, he said, is the shop needs to be able to appeal to all buyers.

“With that merchandise plan concept in mind,” he continued, “I’ll [create] a grid where we’ll take all the Kenwood head units, for example, that I want in certain price points as you go up in features [and] I set my plan in January for the year.”

Additionally, West said he sticks to the plan no matter what. “That’s how I’m basing annual decisions from one year to the next, on how the past year has been,” he explained. “Our inventory system generates popular items, best-selling and worst-selling.”

When the pandemic began, Benchmark was already better off than other shops in terms of stock, he added.

Learning to Recognize Shifting Trends

The shop had already expected increased numbers this year due to other stores closing in the area prior to COVID-19, as well as what West called Benchmark’s “staying power” in the community. Even a local Best Buy refers work to West’s facility. “I’m coming up on my 40th year in the industry in December,” he said, adding that his business has been open for over 23 years. “I manage the business based on exposure, experience and track records.” As a result, he explained, he recognized when trends had begun to change.

“We were getting booked out farther and farther. We’re booked out three weeks in advance now, and that’s been going on for ten weeks,” he said. “I saw that trend before COVID, early on, and I started ramping up orders anticipating a killer year. Sure enough, it continued, and because I caught the trend early, I was able to load up on quite a bit of inventory.”

Still, he added, the shop is beginning to run low on electronics and devices such as head units. The facility ordinarily has a stock area with shelves lined with product, but right now, there’s little available beyond speakers and subwoofers.

Finding Other Solutions During Product Shortages

During recent inventory issues, the main focus has been finding other solutions in order to continue assisting customers. Josh Felts of Custom Automotive Restyling Specialists in Nashville, Tenn. responded to a recent MEA survey with how his business has been managing shortages: “We’ve struggled to get basic install necessities through normal distribution channels,” he said, “and our marine audio equipment has been scarce. We have had to adjust our ‘no outside equipment’ policy to allow us to turn labor hours. It has helped us stay very, very close to our year-to-date numbers from last year.”

West said his team has taken to selling display items, leading to bare-looking display boards in the showroom. “That’s a pet peeve of mine,” West added. “Displays should be full.” While Benchmark’s reputation in the local community is solid, West said a new customer coming in for the first time might get the wrong impression if displays are scant. Still, retailers have had to think creatively to deal with recent issues as a result of supply difficulties.

Pat Lee of Certified Autosound and Security in Canada said that when product isn’t available, it’s just a matter of finding a different solution. Due to its location in Canada, the business has to wait for vendors in the United States to get product before they can receive it, too. “We have to be more creative and have more forethought,” he explained, adding that retailers can start with

Due to product shortages during the pandemic, Benchmark Audio has taken to installing display items, which unfortunately leaves holes in theshowroom’s display boards.

what’s available and what the customer is hoping to find. If the desired product isn’t in stock, he said, “What’s my alternative in that price point? We shift gears so we can have something to sell in the price point we need.” However, Lee added, Certified remains loyal to the brands they carry. “There have been times when we’ve had to get alternatives from other manufacturers, but everyone has been great to work with. For the most part, we’ve been able to shift gears to sell something that’s available,” he added.

At his shop, Felts said, “When I have not been able to get a required product through my normal channels, I ask the customer to source the product.” Felts’s shop has been short one to three brands as a result of the pandemic, he added.

Know the “Model Stock”

Through experience, West said, a business owner learns how to anticipate what’s needed for the coming year, and this all revolves around software. Benchmark Audio uses QuickBooks Point of Sale software for sales transactions, and invoices of product purchased from suppliers. “Both direct accounts from national brands, as well as distributors, are input into our software, which is the inventory management side of it,” he explained. “Once invoices have been entered with quantities of product, the inventory management system shows what’s in stock and what’s not in stock.”

West said the software allows for the addition of “model stock,” meaning the quantity of each item the store wants to stock based on sales history. The goal, he added, is to turn inventory at least three to four—maybe even five—times per year. Sometimes a shop will turn inventory more frequently because of price points and popularity, he said.

“If you have $50,000 worth of inventory, you want to turn that inventory at least three times per year,” West said. “You determine how many times you’re turning inventory based on averages. There are certain times of year during which you’ll be bringing in more of some products, like seasonal items such as remote starters, but you know what your average inventory is month to month and year to year based on sales track records.” While the software will manage the inventory, West said retailers then have to be diligent and disciplined to stay on top of it.

Spot checks are made prior to submitting an order. Then, once a year, Benchmark manually checks inventory for tax purposes. “On New Year’s Eve, we do a physical inventory to determine what the actual cost of goods is,” he said.

Certified Autosound uses a point-ofsale system called Lightspeed OnSite, according to Lee, who said it does a very good job of balancing inventory between stores and handling invoicing. “It allows us to do a live look-up between multiple locations,” he explained.

Take it One Day at a Time

West feels companies have ramped up production of dash kits and accessories, so those products seem to be in good supply. “The main electronics are still a major weak link,” he added, noting that vendors are having difficulty filling Benchmark’s orders.

West said the month of August is covered in terms of product, “But I hope we start seeing product releases soon, because before too long, we won’t have any inventory left.”

In Mobile Electronics magazine’s July survey, Don Amann of Unexpected Creations in Edison, New Jersey said the best thing to do in the midst of these challenges is “take them in stride” day by day. His shop is still able to offer services that don’t require unavailable products, he said, and they were also fortunate in that they were already well-stocked.

For Benchmark, West noted, business already skyrocketed by the middle of February—prior to COVID-19 shutdowns. “I haven’t had a year like this since 2007,” he said. Because they offer vehicle interlock systems and safety equipment, the shop was able to stay open. West feels the industry is fortunate in that it can provide these essential services.

“I chose the right line of work 40 years ago,” he added.