R.T.V.s

In response to my Inventory Renovation article yesterday, a reader responds:

Hmm, interesting .......... I agree with most of your comments but not surprisingly, you failed to mention as retailers, we should demand Return To Vendor privileges based on a minimum of 10% of annual sales with any given supplier. How did you forget to open that for discussion? :)

RTV privileges are also emphasized in ARMS training.  When I first took my management training, it seemed awkward to ask a vendor to take-back older merchandise in favor of new, but now many suppliers are willing to negotiate returns or they might even have a standard policy in-place.

As a supplier, I like to see conscientious management of inventory, and have worked with several retailers to stock-balance, remount, return and exchange merchandise to help improve their inventory position.  As suppliers begin to add this incentive to their operation, it comes with a cost (carrying costs, refurbishment or remanufacturing,) and that cost can only flow in one direction; back toward the retailer.  That cost to the supplier may be mitigated by increased orders by the retailer who uses stock balancing and the other inventory renovation techniques successfully.

The best time to ask a vendor about returning merchandise is when you are ready to use your “open-to-buy” for new merchandise.  If you have a record of fast-selling skus that have been reordered since the rep’s last visit, you can say, “okay, we’ve ordered $15,000 worth of merchandise that has been identified as “fast-sellers,” we’ve sold another $15,000 which we won’t be reordering because they were slow-sellers; but would like to look at replacing them with newer designs.  May we return these $3,000 worth of older designs for credit against our order today?”  That’s a perfectly acceptable 10% return scenario to many willing suppliers.

As an operating system, ARMS method is a highly effective way to run any sort of retail operation.  As more retailers judiciously reorder fast-sellers, and pledge opens-to-buy to vendors in exchange for RTV privileges, I think more suppliers will be open to extending those privileges.  More on opens-to-buy tomorrow…