Scheduling when and how much inventory to purchase is one of the most important business decisions you will make each season. Excessive inventory translates to valuable cash flow not working for you. On the other hand, too little inventory causes lost revenues and profits.
Sales projections are challenging to establish, especially if you’re a start-up or have limited sales history. One approach is to use the 80-20 rule. Normally, he bulk of your sales are coming from 20% of your items in terms of styles, colors, and sizes. You need to focus on ensuring you have the right amount of the 20% of inventory.
Knowing the lead times from your clothing manufacturer is another important consideration. If your products are coming from overseas, you will need to account for production time, ocean freight, U.S. customs clearance and ground freight. It is often wise to allow for extra time just in case there are unforeseen delays. By working closely with your clothing manufacturer, a timeline can be developed according to your budget, to ensure that purchase orders are issued at the right time.
Another key consideration is the seasonality of the apparel items you are carrying. When importing, starting to look at fall/winter gear in the months of March/April is generally a good idea. For spring/summer merchandise it would generally be good to start looking at issuing Purchase Orders in the months of October/November.
By carefully pre-planning the order process in a strategic manner, taking into consideration the right quantities, the seasonality of the products, and your apparel manufacture’s timeline and capabilities, you can successfully streamline your inventory. This will translate to higher sales, better customer satisfaction, and greater profits.