By: Furniture World Magazine 
Decisions that impact cash flow, warehouse operations sales performance and image must be properly planned.


Merchandising decisions impact cash flow, warehouse operations, sales performance, and image; yet many buyers in our industry operate basically from the seat of their pants. Buying decisions are often unplanned reactions to special deals, the newest hottest item, or something that a buyer has fallen in love with. Merchandising processes should rely on detailed information, should be well planned and therefore, by necessity, be labor intensive.

The number one reason that companies go out of business is poor cash flow. There are several things that well run organizations do to appropriately maintain cash flow. At the top of the list is a strong and consistent focus on merchandising processes since well-run organizations recognize that their number one physical asset is their inventory. Having a good computer system aids in the processes of understanding merchandise performance, and this allows you to be able to drill-down to each merchandise category, each vendor and ultimately to each item. Smaller operations with limited SKU’s may be able to handle the processes manually. However, not maximizing the use of a good computer system will preclude growth.

Merchandise is an asset. It is, unfortunately, a depreciating asset. Sitting on shelves in a warehouse it is best viewed as piles of money sitting under a mattress or buried in the backyard. You may be comforted to know that you own the asset, but every day its value diminishes. Excess inventory should be viewed not as case goods and accessories, but rather as piles of cash loosing value daily. Expenses associated with excess inventory are approximated below. These costs total about $20 to $30/$100 on average. That means that a $100 item in inventory today will become a $130 item one year from now.