Inventory Management

Let’s talk about one huge area of the business that, if managed poorly could put any game store out of business – Inventory Management.

The goal of inventory management is to ensure you have the inventory you need to sell to your customers, without over-stocking.  In a perfect world, a customer will always see the exact item they want in-stock; while every other item they aren’t going to buy is out of stock.  Of course, a series of bare shelves that have nothing but 1 item doesn’t offer a whole lot of confidence on the state of the shop either.   And of course not every customer knows what they want until they see it – so part of the goal of inventory management is to have enough stock for casual browsers too.

One of the methods recommended for managing your inventory is what they call an ‘open to buy‘ system.  It basically is a budget that tracks your inventory dollars based on what you have sold previously and what your goals are for inventory.  However, while it can track individual product items, it generally is better used at a higher level (e.g. full categories like board games, rpgs, etc).

Instead, what we use is a minimum stock quantity method , keeping a specific level of product in-stock at any one time. When that level is reached, we re-order to bring us back to our maximum quantity levels.  The advantage of such a system is that theoretically, we will never run out of stock for our bestsellers since we’ll always have sufficient quantity of them.

A major disadvantage – we’re keeping track of stock (even if most of this is automated) on a granular level.  If an item goes from a slow-seller that we want to keep 1 copy in-stock at any one time to a medium seller (where we might want to keep 2 copies in); we have to manually update the information.

The system also doesn’t automatically account for slowing demand.  Most games slow in demand over a period of time; and it’s something we have to manually adjust for.

The other disadvantage is that we often face ‘inventory creep’.  With the minimum stock level method, as we continue to add new inventory on an on-going basis to the store, old inventory has to be manually ‘removed’ from circulation.  If we don’t manually adjust this on a regular basis and for example the next ‘hot’ item is Descent : Journeys into the Dark 2nd Edition which is a more expensive game, we can expect to see our inventory numbers creep up.

Right now, as we grow we just manually review these numbers in the balance sheet and hope to adjust every few months; though we’ve begun looking at a more vigorous and consistent method to ensure we aren’t putting all the profits the company generates into new stock!