This morning was my first day back to work in 2021. Ah! The New Year! The possibilities seem limitless. 2020 is over and NOW I can have a fresh start! With all the dreams of what may come dancing in my mind, I sat in my car, waiting for it to defrost and began to notice that my car was in the EXACT SAME condition that it was in on December 31st. Coffee cup in holder, gum wrappers scattered randomly, crumbled protein bar parts in the kids’ car seats. It was a disaster, frankly. It made me realize that if I don’t take care of some of the less sexy work of cleaning up the messes from 2020, then 2021 would be more difficult than I want it to be.
Then I thought about how you, dear Customer, maybe having the same feeling of enthusiasm for the New Year but may have to slow down and take care of some cleanup. So that’s what I want to help you with today and in particular, inventory cleanup. Let’s talk about how skipping this part can cost you money.
Having a good grip on your inventory in this down economy can make or break your center’s operations budget. One of the challenges we see our customers struggle with is that the person placing orders for the redemption area often isn’t the same person who is unpacking and putting it on the wall. Why is this a potential problem?
👉 Because when you order redemption products on our website you pay in dollars. When it arrives at your door, the value of the items has changed to tickets. This value perception shift between order placement and arrival often leads to the mistreatment and neglect of your redemption inventory.
Typically, our customers have an idea of what they want their redemption COGs to be (16–20%) but struggle to measure it. Setting and meeting COGs goals for every other area of your center is fairly straightforward. Redemption COGs get fuzzy because of the ticket rate exchange.
That’s why you and your redemption employees should have a good understanding of the ticket equation and how it affects your COGs. Here’s an Operational Toolkit that can help you with your ticket system. In it, you’ll find a Cost of Goods Calculator that shows the cost and return on each item in your redemption program.
The COGs calculator considers all factors of your redemption COGs: your ticket markup, the subsequent ticket value rounding, your game payout percentage, etc. To use the calculator, download it from the toolkit and input your numbers into the pre-set formulas.
Outside of the hard cost of the product itself, inaccurate inventory management wastes time and sets you back from your COGs goals. Have your employees ever scrambled to find a vendor to overnight an item because your POS system said you had 100 of something, but you actually only had 5? We know you have… we’ve taken those calls! 😉 Leave firefighting to the firefighters, folks. Here are 3 foundational ways to prevent that fire from ever starting:
1 | Take a monthly physical inventory: Taking a physical inventory means physically taking count of all items in your redemption program. Start by doing this weekly for a month. Doing this allows you to get a good grip on issues that may be happening in your redemption operations (bad scan-outs, employees eating the candy, damage by customers, theft, etc.)
2 | Don’t forget the backroom inventory: Not counting your backroom inventory throws off COGs as well. The shelves in your redemption space may be empty, but you have 3 cases of what’s supposed to go there in your closet and don’t know it. This leads to your redemption center getting bogged down with more inventory than it can turn within a set financial period. Over-ordering often leads to reduced profit margins.
3 | Update your cleaned up inventory in your Card Reader System. You’ve taken a physical count of all your inventory but it does no good if your POS system says you have 112,000 finger traps when you actually have 789. You have to clean that up too. Your card system Partner should have training on how to clean out/clean up your inventory, but if you can’t get a response from them, hit us up and we can provide some video training for EMBED and Intercard systems.
Let’s recap. Watch out for these offenders of proper COGs management👇
Scanning out products incorrectly (not having a standard in place for employees to adhere to when scanning out items at the counter). Not doing regular physical counts AND not updating your POS inventory to match the physical count.
Bad inventory management ties up cash and will make your New Year harder than it needs to be. Even if you’re good at sticking to a redemption budget, having bad data to base your re-order decisions on does you no good. Cleaning up your inventory from top to bottom will give you a boost into the New Year, lower wasted dollar spend and provide you the knowledge that you’ve done the dirty work that gives you a truly clean start!
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