BACK OFFICE
Stock control
Your biggest investment in your business is your stock and business is done to
make profit. Often it is said that retailers’ ears are in their back pockets; don’t
try and talk sense, talk profit, then they‘re all ears. We talk to Paul Oosthuizen
from Essential Hardware regarding the issue of stock control.
What is turnover? Sam Walton the founder
the saving far exceeds the cost of carrying
in your business is your occupational cost. To
of the largest retailer in the world, once
the stock. The current cost of carrying stock
use this resource profitably one must calculate
said “He who does not understand turnover,
varies according to factors such as rental,
the yield per square metre of the business.
does not understand retail.” Sales generate
prime rate, inflation, insurance costs and the
Understanding the interaction between
revenue; Turnover generates profit.
like. It can safely be calculated at a minimum
your rate of sale, stockholding and profit
of approximately 2,5% per month. Thus the
generation capabilities is crucial in delivering
than the cost of the capital required to
saving of the extra 5% is negated if the stock
the required results.
purchase stock measured against the projected
is not completely sold out in two months. The
rate of sale. Will the rate of sale justify the
average turnover in the hardware industry
could be used: Stock turnover X Gross profit
purchase by conforming to the targeted stock
is below 6 per annum. Only some carefully
% should be larger than 140. The factor of 140
turnover requirement, if not, the required profit
managed businesses and corporates achieve
could vary and is established according to
objectives will be compromised.
six turnovers per annum. The majority of
the yield required by the retailer and should
retailers in this industry turn stock over less
be established after the Nett Profit targets
than four times a year.
had been agreed. Thus, if turnover is six then,
The cost of carrying stock must be lower
What is the true cost of carrying stock? One
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