For a District Manager who regularly travels between different stores, and for Store Managers, Weeks of Stock can be a very useful number. Weeks of stock is: $ inventory divided by average weekly sales for that category/department, etc.
Inventory level: $8,000.00
Total sales of product for the past 6 weeks is: $12,000.00
Average weekly sales = 12,000 / 6 = of $2,000.00
Weeks Stock = $8,000.00 / $2,000.00 = 4
I’m going to tell you a little bit about how you can make good use of the Weeks of Stock report and, also, what to beware of. For instance:
The period of time used for the average may include (or leave out) some significant business period which may distort the average weekly sales
It may not be accurate, depending on input to the POS, shipping delays or any number of different reasons
You may not be in a position to know what the ‘correct’ number should be
As a District Manager, I used the Weeks of Stock report to see which store was in need of more inventory and which store could afford to give some up. If every store needed inventory in a certain category, then it was time to contact buying, or merchandising or allocation – whichever one is relevant in your organization. If the season was ending then we did not ‘need’ inventory.
The Weeks of Stock report can show you where there are glaring stock deficiencies and glaring overstocks. The knowledge gained from this report is of paramount importance if you want to have your inventory in the right place for maximum impact on sales. Even when the discrepancy is glaring, you need to contact the Store Manager and get their opinion on your findings.
You are cautioned not to move merchandise or make a big scene with your Allocation department based on subtle differences in the numbers between one store and another because, as mentioned above, there certainly could be some errors in the data.
As for the period covered by the Weeks of Stock report, it can go wrong if it is impacted by a particularly strong sales period, or if it is the very beginning or very end of a season or shipping period.
Obviously, if you are looking at a report showing high weeks of stock on products that have just arrived in the store, then that would be reasonable. What would warrant further attention, though, is if 12 out of 14 stores have a high number of weeks of stock in a particular category/department or even a single product and 2 stores do not. Perhaps there is a good reason for this and, if so, you would know what that reason is – but perhaps there isn’t a good reason. What the Weeks of Stock number does is alert you that something may be going wrong. Perhaps two stores were inadvertently missed during allocation.
So, we are not looking at this report to ascertain an exact, most accurate number of weeks of stock. We are looking at it to see if anything jumps out as a problem – or possible problem. I said the Weeks of Stock report can be very valuable, but it must be used only as a tool which, when used in conjunction with your experience and your understanding of what is going on with regard to inventory in your stores, can help you solve problems and, perhaps, move inventory to a store where it is needed more urgently to produce better sales results.