"Rules" to Inventory Management
Alegria Rule:
First, I’m going to call this the Alegria
rule. One day our new Alegria rep walked
through the door. She looked at her products
on the wall and exclaimed “you guys don’t
understand our brand”. We liked the shoes
but in our conservative buying habit we only
carried a few black and a few brown models.
She pulled out a couple of wild patterns
and colors from her sample bag and said
“you should try these”. OK, so a lesson
learned. Alegria is now our third strongest
brand; not because the wild colors out sell
black and brown, but because the display
space commands attention. Lesson: keep it
interesting.
80/20 Rule:
Number two is the 80/20 rule. This rule
normally refers to the wholesale trades
where 80% of your sales come from 20%
of your customers. In this case I’m going to
define it as 80% of your sales come from
20% of your SKUs. Here’s an example: We
are a large Birkenstock dealer, one of the
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Pedorthic Footcare Association www.pedorthics.org
only Birkenstock specialty retailers in Idaho.
We carry most of their models in most of
the colors in both regular and narrow
"In puzzlement I took
a walk around the
store, all the walls
and free standing
displays are packed.
I decided to count
the SKUs. Wow, 336
different brand/
model/color options.
How can this be?"
widths from size 35 to 49 Euro. That said,
80 percent of our Birkenstock sales are in
the Arizona model, in two colors, from size
37 to 44. Can we afford to be out of any of
this 20% of our SKUs? Definitely not! Lesson:
we can afford to have a hole in the Granada
Birkibuc blue in size 35 but I never want to
be missing the Arizona Habana in size 43.
Photo: @iStock.com/scanrail
In puzzlement I took a walk around the
store, all the walls and free standing displays
are packed. I decided to count the SKUs.
Wow, 336 different brand/model/color
options. How can this be?
There are three “rules” that apply to
inventory management. Here is my list: