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Making The Sales Call - Inventory Management (1.5 Rule)

 


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During the Sales Call ( Visit to the Customer ), the most important task of the Salesman is to Generate Order. Here we put stress on word “Generate" instead of “Take" order. To take is passive way by definition of the word. This means that in this case Salesman mostly just pick the order given and prepared by the outlet owner. To generate is an active process where the Salesman leads the process. He assess the needs, propose order quantity, create back-up Profit Story that will support him with his proposal, overcome objections and conclude the sales.

In order to really master this process, the Salesman must be equipped with specific tools and sets of knowledge. One of the most important thing is the skill and knowledge of Inventory Management in the outlet. By default you may think that this is the job of the outlet owner, since he orders, he pays product, store it, sell it further etc. The truth is that outlet owner is managing too many things at same time: outlet premises (rent, utilities, maintenance ), staff (employment, training, supervision), legal obligations (accounting books, taxes ) and on top of all this he have many product categories, among whom your portfolio is one out of many.

From this it is clear that the outlet owner can never be more focused and trained than your properly trained Salesman. During the process of Order Generation, for every SKU individually, it is important to take many things separately: sales history, trends and expectations, seasonality, strength of the brand, safety stock, etc.

The Inventory Management model of “Rule 1.5" offers you a good balancing of Order Generation, taking into account History, Trend and Safety Stock. The Formula for the Rule 1.5 is:

ORDER = WEEKLY SALES x 1.5 - STOCK

Explanation: Order is created on the base of the last week sales, but is increased by 50% for case that sales increase, than is reduced by the current stock. This is in accordance with the policy of keeping of Safety Stock. In case that sales increase in the next period, the stock is safe until the next sales visit. If the opposite happens, meaning that the sales in the next week is lower than in previous, there is no fear of overstocking, since the formula will balance the next order (reduce it).

The orders are increasing while the sell-out goes up, but also decreases in the period when the sell-out is declining. This makes this mechanism of Inventory Management very useful for both, the Supplier and Customer, since it secures fluent supply of products, avoid OOS, balance capital invested, decrease obsolete stocks, increase consumer's shopping experience and maximize profit.

This model is suitable for all FMCG products. The model is explained in more details in a free tool kit at http://www.biz-development.com/Sales/4.6. Sales Call.htm

Laurus Nobilis has 11 years of experience in FMCG business. He has been working in different functions, primarily in Sales Department and Supply Chain. In 2007 he has started the http://www.biz-development.com web site dedicated to development of managerial skills and knowledges necessary for running the business.

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