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Sales personnel must master inventory management knowledge and skills in the process of handling business. Inventory management has two aspects: one is the 1.5x principle, and the other is inventory turnover, which are elaborated below.
- The 1.5x Principle
The 1.5x principle is one of the main contents of inventory management. It is a safety stock principle summarized from the sales practices of many companies. The specific data is based on the customer's sales volume in the previous period and serves as the basis for recommending orders to the customer in the current period. Stocking according to the 1.5x principle is one of the job responsibilities that sales personnel must master. It is a marketing strategy to proactively strive for customer order quantities and always grasp the customer's sales situation. It is built on the basis of increasing customer sales and benefits, thus winning customer trust and making it easy for customers to adopt.
The 1.5x principle is also a scientific basis. However, like many marketing laws, it must be flexibly mastered and applied to avoid mechanical application. For example, if special circumstances arise (such as weather, holidays, etc.), appropriate changes should be made, otherwise it will affect business.
When used well, the 1.5x principle can ensure that customers have sufficient inventory, reduce the possibility of stockouts and sellouts, ensure that customers can buy the products they need at any time, and help customers not miss every opportunity to close a sale.
(1) The Relationship Between the 1.5x Inventory Principle and Making Orders
During sales visits, sales personnel should suggest a reasonable order quantity to customers. This is called "making orders" and is one of the tasks that sales personnel must do when visiting customers. The so-called making orders is to suggest a reasonable order quantity to customers based on their sales in the previous period, combined with new promotional activities, seasonal opportunities, weather, and other factors, and to mobilize them to order according to the suggestion. When making orders, the data recorded on the customer card must be used. Therefore, the prerequisite for making orders well is to correctly fill in the customer card. Only in this way can the 1.5x principle be effectively used for inventory management, improve the efficiency and effectiveness of visits, and expand sales as much as possible. This is also one of the key responsibilities of sales personnel and directly affects sales.
Some sales personnel work with the mindset of "taking orders." Taking orders is different from making orders; one is passive, the other is active. Taking orders means the initiative is in the hands of the customer, while making orders is proactive, as it is an order plan made after studying the customer's sales and inventory. Obviously, the two working methods have completely different effects. Making orders ensures accurate grasp of the customer's sales situation and also ensures the most effective use of the customer's funds, space, energy, and time, creating maximum profit.
(2) Steps for Making Orders
"Making orders" should follow the steps below:
Step 1: Check the data on the customer record card;
Step 2: Calculate the actual sales since the last visit;
For example: the inventory quantity at the time of the last visit; the order quantity at the time of the last visit; the customer's current inventory quantity at the time of this visit. The sales representative has filled in these data on the customer card during visits. When calculating sales since the last visit, the sales representative will use them, so these data on the customer card should be accurate.
Step 3: Suggest a new order quantity.
When suggesting a new order quantity, emphasize the 1.5x safety stock principle. The specific calculation method is as follows:
Safety stock quantity = actual sales since the last visit × 1.5
Suggested order quantity = safety stock quantity - current inventory
(3) How to Get Customers to Accept the Order Plan Under the 1.5x Principle
In actual work, many sales personnel are very clear about the above steps and can accurately calculate the order quantity according to the 1.5x principle, but they cannot get orders that conform to the principle. How can this situation be avoided?
The key lies in mastering the skills to make customers accept suggestions when making orders. Some customers do not understand the benefits of making orders according to the 1.5x principle. Sales personnel must be able to make customers understand:
The order quantity suggested according to this principle is relatively reasonable, ensuring that customers maintain an appropriate amount of inventory, avoiding stockouts, and making efficient use of shelf space;
With a certain amount of inventory, consumer purchase needs can be met, and no sales opportunities will be missed;
The 1.5x inventory principle can help customers effectively use space and funds, avoiding losses such as product backlog, ineffective occupation of funds and space;
The 1.5x inventory principle combined with inventory turnover can ensure that customers always provide consumers with fresh products, which can improve the point-of-sale image and drive the sales of other products;
Let customers understand that the work sales personnel do is to help customers better meet consumer needs and increase customer sales and profits;
Sales personnel must use their knowledge and skills to gain customer trust. Once this trust is established, customers will accept the suggestion of making orders according to the 1.5x principle.
If sales personnel strictly follow the visit route and frequency for sales, and have a certain cycle for each customer visit, they can also inform customers that the 1.5x safety stock can effectively ensure that customers neither run out of stock nor overstock during this visit cycle.
- Inventory Turnover
Inventory turnover is a main content of customer inventory management and one of the important job responsibilities of company sales personnel. Products sold to customers cannot be sold out immediately; they will last for a period of time, and inventory always exists. For food, it is more complicated because there is a shelf life issue. Therefore, inventory must be managed scientifically and effectively.
(1) What is Inventory Turnover?
The main content of inventory management is inventory turnover. What is inventory turnover? It includes two types: front-line inventory and backup inventory turnover. Front-line inventory refers to bulk products displayed on shelves or in the retail shopping environment; backup inventory refers to goods stored in warehouses for replenishment. The content of inventory turnover includes the turnover of front-line inventory and backup inventory. It requires sales personnel to, on the one hand, replenish goods on the customer's shelves in a timely manner to ensure that the product display in the shelves meets the standards of vividness; on the other hand, follow the principle of first-in, first-out for inventory turnover, with the aim of ensuring that the products provided by customers to consumers are always fresh. In fact, so-called inventory turnover is to circulate the products on the shelves that have not been sold yet according to the principle of first-in, first-out.
Inventory turnover is a daily task that sales personnel must do during sales visits to ensure that customers provide consumers with products with the latest production date. Inventory turnover is not only one of the important responsibilities of sales personnel, but also to guide and influence customers to do daily inventory turnover. Sales personnel must make customers understand:
Inventory turnover can effectively and directly stimulate sales. Obviously, if the goods displayed on the shelves are sold out and not replenished in time, many sales opportunities will be lost, and the products stored in the warehouse cannot be sold either. Lost sales opportunities will never come again.
No inventory means no profit. Products not on the shelves cannot be sold. Reasonable product inventory is the simplest way to ensure that there are goods to sell.
Promote restocking and help customers correctly prepare product inventory. Most customers decide the variety and quantity of orders based on their inventory situation. If the products in the warehouse are almost gone or already gone, the store owner will order. Therefore, if sales personnel help customers put their inventory products on the shelves and empty their warehouses, they will naturally order.
Sales personnel help customers replenish shelves during daily visits, which not only stimulates sales but also saves customers' time and their own time. This work is not only the responsibility of sales representatives; senior sales supervisors and managers should also help customers with inventory turnover when visiting retailers, and also influence customers to help with timely replenishment. Excellent companies and sales personnel understand that sales work is not just about selling products to customers; it is not complete until consumers purchase and actually start consuming fresh products. To ensure that consumers buy fresh products, following the principle of first-in, first-out can avoid product expiration, avoid customer returns, better meet consumer needs, and ultimately win sales and profits for customers.
(2) How to Conduct Inventory Turnover?
How to conduct inventory turnover? Sales personnel should promptly replace defective products according to company regulations and standards, manage customer inventory, strive to be professional advisors to customers, and proactively provide comprehensive inventory management services, not just "taking orders." To achieve this, sales personnel must:
Have comprehensive knowledge of company products, such as shelf life, the meaning of codes, product storage conditions, etc. For example, placing products in direct sunlight will cause fading, affecting quality and making them difficult to sell.
Secondly, sales personnel must understand the applicable scope of various packaging and the amount of inventory. That is, by understanding consumer and customer needs, understanding the knowledge of various brands and packaging, and recommending the correct packaging and brand product mix to customers, this is a prerequisite for ensuring that customers are selling products that meet consumer needs and for customer management.
Thirdly, deeply understand the principles of inventory turnover. There are three principles that must be followed: manually turn over the displayed products on the shelves; implement the first-in, first-out principle; record the inventory quantity in the customer card.
In addition, inventory turnover also requires methods and skills. Comprehensive product knowledge can help master shelf life, storage conditions, and the best timing for consumer purchases; familiarity with the applicable scope of various packaging and inventory levels can help sales personnel judge the distribution standards implemented by different retailers and set appropriate inventory levels based on the retailer's shipment situation; opportunity forecasting can help sales personnel think more rationally and consider some factors affecting business in advance, such as seasonal effects; understanding business and space constraints helps you develop different business propositions based on these situations and successfully sell to retailers to gain cooperation and opportunities to promote performance improvement; merchandising activities can obviously increase sales through on-site sales stimulation.
For another example, inventory turnover has many tangible benefits for customers. Mainly, helping customers manage shelf and backup warehouse inventory can save customers' time; it can save the manufacturer's time; accurate inventory turnover can also help understand inventory levels at any time, judge sales conditions, and do replenishment work well; and so on.