Stock levels

How much stock is too much?

There’s no single number, because it depends on how fast each product sells. Work out its days of cover: units in stock divided by average units sold per day. More than a year of cover is a good line to start from, and it’s the one Verity uses.

How to work out days of cover

Days of cover = units in stock ÷ average units sold per day

Average over the last 90 days, so one big weekend doesn’t fool it, and count each size and colour as its own product.

The belts have more than a year of cover: at that rate, the 80 you hold last 400 days. The coats have no days of cover at all, because they sold nothing and there’s nothing to divide by. That isn’t a big number, it’s dead stock.

How much do I actually need?

Enough to last until your next delivery arrives, plus a buffer. If your supplier takes 14 days and you keep 7 days of buffer, reorder when days of cover drops below 21.

That’s why the socks are the ones to worry about. 40 in stock sounds fine, but selling 4 a day, it’s 10 days. With that 14-day supplier you’re already 4 days late.

When is it too much?

Verity’s line is more than a year of cover: the cash is real, the sales are slow. It’s a line to start from, not a rule, and three things move it:

• Seasonal lines. Compare cover with what’s left of the season, not with a year. 300 days of cover on a line that stops selling in spring is a markdown waiting to happen.
• New products. Divide by the days you’ve had them, not by 90. A product you’ve had for 30 days hasn’t had 90 days to sell.
• Products that ran out. Days with nothing to sell count as days without sales, so the average comes out low and the cover long.

What do I do with stock over the line?

Stop reordering and let it run down: that frees the cash without touching your margin. If you need the cash sooner, here’s which stock to discount first.

See which products go over the line in the tour’s Excess stock report, on an example shop.