A successful sourcing strategy
Do you still buy by feel? Are you constantly wondering which products to order, when and how much?
In this class, look at how to use simple methods to make this decision even better.
In this lesson, we will go through 4 steps:
- Step 1: Create categories
- Step 2: Establish minimum inventory per product
- Step 3: Determine order size by product
- Step 4: Analyze and make adjustments
Step 1: Create categories
Divide your range into 3 categories:
A. Runners
B. Average
C. Soft runners
Do you have less than 200 products in your assortment? Then two categories will do for now (hard and soft sellers).
You decide which products are hard and soft sellers. This can be based on both numbers or sales.
Need a guideline? Typically, you see that the 5% best-selling products often account for 70% of your sales. So place these products primarily in category A.
The next 25% make up category B and the remainder place you in category C.
Tip
Just starting out? If so, look at the numbers initially and categorize the top 5% of your assortment under Category A.
| Products | Demand (units/month) | Category |
| Phone case I-phone 6 | 1000 | A |
| Powerbank A-Solar | 1200 | A |
| Samsung Galaxy phone case | 200 | B |
| Selfie Stick wireless bluetooth | 180 | B |
| Selfie Stick wireless bluetooth | 30 | C |
| Phone case Oneplus I | 20 | C |
Step 2: Establish minimum inventory per product
The minimum inventory per product helps you place a new order with your suppliers on time, so you can always deliver to customers. After all, a new order from a supplier is not in your warehouse in five minutes.
Minimum inventory per product is the answer to the question: how many products do I sell during the time the new delivery from my supplier is on its way?
For example, do you sell 3 to 10 copies of a category A product per day and it takes 7 days for your order to arrive at your warehouse? Then make sure you always keep (7 x 10 = ) 70 products in stock.
With category B and C products, you don't have to be as strict and will probably be fine with 70-90% of minimum stock.
| Products | Demand (units/month) | Category | Minimum stock |
| Phone case I-phone 13 | 1000 | A | 500 |
| Powerbank A-Solar | 1200 | A | 600 |
| Samsung Galaxy phone case | 200 | B | 90 |
| Selfie Stick wireless bluetooth | 180 | B | 75 |
| Selfie Stick wireless bluetooth | 30 | C | 10 |
| Phone case Oneplus | 20 | C | 7 |
Step 3: Determine order size by product
To keep your inventory low, you prefer to order small quantities more often. However, a longer delivery time, ordering costs and quantity discounts may change your mind.
Our tip: Don't be tempted by this too quickly. After all, extra inventory can add unnecessary cost and risk.
Step 4: Analyze and adjust
This last step is actually an ongoing process. Once you have ordered based on the first three steps, it is important to analyze the results on an ongoing basis.
Are the products still in the right category? Is the minimum stock still correct? Or can I change it based on the latest sales figures? Have I estimated the order size correctly?
Are you in danger of still being stuck with stock of a category C product? Then it may be advisable to buy even more defensively in this category. And vice versa. In short: turn those knobs!
Tip
Maintaining minimum and maximum inventory of a few dozen or even hundreds of products may be manageable. With thousands of products, it becomes very difficult. Make sure you use an appropriate program to save time and avoid mistakes.