Feb 16, 2023
Not hearing about a client or distributor for a long time; increased inventory costs due to leftovers; unsatisfied customers for lack of inventory… do any of these ring a bell to you? Companies often face difficulties in their relationship with distributors due to a lack of clear communication, payment delays, inventory problems, or customer service. The question is, what can we do to address these kinds of issues?
Central to the relationship between a company and its distributors is the price and the amount of product stock to be sold. That is why having the information about the re-stocking date and amount can help boost customer satisfaction and keep your distributors loyal. In this article, we will discuss the importance of knowing this data, and the best ways to calculate it.
To start with, let’s identify the problems that can be solved thanks to knowing the date and amount of your customer's next order:
Therefore, having this data can help you make informed decisions about inventory management, improve operational efficiency, and enhance customer satisfaction. But you will be wondering, how can I calculate that? There are two approaches to estimating the re-stocking date and amount of your points of sale:
First of all, it is important to track all customer interactions and sales activity. If you have a tiny customer portfolio this can be done manually, if not, you will probably need a CRM (Read our article “Everything you need to know when choosing your CRM” to learn more). To calculate the re-stocking date and amount, you will need to look at each customer’s past buying behavior and spot any pattern in their past orders: Do they usually order each 2 months? Or every 2nd week of May and 1st Tuesday in November? Do they order 100-120 boxes of the product?
This way, you will also be able not only to understand the buying behavior of each of your customers but determine production levels and how much inventory you need and when.
The inventory turnover rate is a measure of how efficiently a point of sale is selling and replacing its stock. Determining this factor will help you understand the seasonality of each of your customers; for instance, how long it takes for each POS (Point Of Sale) to sell all the ordered products. Here's the formula you should apply to calculate it:
Inventory Turnover Rate = Cost of Goods Sold (COGS) / Average Inventory Value where Average Inventory Value = (Beginning Inventory v + Ending Inventory) / 2
It's important to note that the inventory turnover rate should be evaluated over a set period of time, such as a month or a year, to reflect the POS's performance accurately. A high inventory turnover rate indicates that the POS is effectively selling and replacing its stock (so it will need to re-stock more frequently), while a low rate may indicate overstocking or slow sales (so it will re-stock less often, which means the salesperson will need to reach out less frequently).
This second approach will tell the salesperson to reach out to one customer or another depending on their efficiency to replace their stock, while the first one will provide an actual re-stocking date for all customers, regardless of how efficient they are at managing their stock. This will help to keep your business running smoothly and prevent stockouts, which can result in lost sales and damaged customer relationships. However, you may find it difficult to calculate the re-stocking date and amount of all of your customers when you deal with more than a hundred. If you aim to do this work manually, you need a lot of time and focus, and make the analysis regularly; since customers change rapidly and there is a risk that your prediction remains outdated and static. Thus, why devote your work to this time-consuming and repetitive activity when you have tools that can do this for you?
Fructifi works with an algorithm that coordinates sales and marketing approaches based on customer order data. Thanks to its AI, sales reps know when each client should be placing their next order – and are notified if they don’t. They receive an up-to-date action plan: the list of customers they should contact by priority order based on their individual drop-out risk and relative weight in the portfolio.
Moreover, the re-stocking date can be used as a filter to create dynamic customer lists which can be integrated into marketing automation scenarios. In this way, marketing comes as a precious support tool for sales reps, who can focus their time on high-ROI actions, and revenue and margin grow.
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