10 Steps to Prep Your Department for ‘Judgment Day’

The late Belgian businessman Andre Leysen once said in 1998, “Company directors always have to prove that things are going better. They are judged like politicians, only worse, because elections are held every three months.”

Welcome to the world of retail, right?

In fact, every three months, our produce department did a physical inventory. As that day grew closer, it was looked at by many with impending doom. After all, like Leysen’s decades-old quote attested, it was akin to judgment day — and even the most experienced produce managers held their breath as they began their quarter-end inventory.

It needn’t be so worrisome.

Consider, quarter-end inventory is not unlike writing a common daily order. The produce manager or assistant first takes inventory of what items are already on hand. (You do take a physical inventory each day before writing an order, don’t you?) This provides a good visual of how much of something you have and what you had on hand yesterday, the day before and so on, as well as how much of something you anticipate receiving.

That’s the thought process for just one item, and there are hundreds of items you need to order. You’re also under pressure to submit your order before a deadline.

Inventory? All you do is take inventory. Every day. So, why the stress? Simple. In the back of your mind, you wonder: Will my gross profit margin be acceptable? Will I rank in the upper, above average, safe zone? (I have written a column or two that dissects that topic.) Will my shrink be in line? What are they (store managers, produce directors, etc.) focusing on this quarter? Inventory turns? Margin? Shrink?

So, yeah. Inventory can be stressful. However, most of the stress is self-inflicted. Here are a few tips to surviving the quarter-end inventory.

1. Do not reduce your goods on-hand on inventory day. Plan to have an adequate, normal amount of stock as you approach inventory. You still need to be in business, so treat the day as normal as possible.
2. Maintain a clean and orderly department. This goes for any day, but especially during inventory. Having scattered, multiple stacks of like items, too much inventory or being disorganized is a recipe for mistakes. Rather, insist that there’s a place for everything, and everything needs to be in its place. Keep the backroom and cooler debris-free, swept, mopped, organized and well lit.
3. Know your on-display inventory amounts. You’ve stocked that orange display a thousand times. You should know that it holds approximately 12 cases (or whatever it is). Same goes for everything. This is included in your inventory.
4. Preparation is key. As inventory eve approaches, you should have your tools at the ready (inventory sheets, hard copy or digital), with a couple of sharp pencils. Ensure everything is neat, organized and easily accessible.
5. Schedule enough help so that if you anticipate a busy period, you have enough coverage to maintain stock levels. This is so you can break free to get started focusing on taking your inventory, uninterrupted. Include your assistant, if possible. Begin when your company directs (usually around 6 p.m. or so).
6. Start with front-end inventory, estimating case quantities. Proceed down the wet rack, then carefully work your way around every other fixture, taking care to count displays outside your perimeter, include those pesky knee-knocker drawers loaded with items, the racks of dry dips, croutons, dried fruit, dressings, etc.
7. Continue into your backroom and cooler, where counting should be much easier. Account for every nook and cranny, every pallet of product that may be lurking in the back dock area or any outdoor or remote displays.
8. Take a final walkthrough. I can’t say how many times I missed something so obvious, such as a rack of bulk foods, holiday shippers or a lobby display.
9. Submit your inventory. Chains tend to vary widely on how to proceed with accounting steps after inventory, so just follow yours as directed.
10. Be consistent. As much as possible, try to be consistent from one inventory to the next. For example, if you end up with around, say, $35,000 in your cost of goods after one inventory, the next one should ideally match that; so, avoid wild swings in inventory, which may adversely affect your results.

Quarter-ending inventory should not be any more stressful than writing an order. Order closely each day, rotate faithfully. Keep an eye on your billing and pack sizes, and report discrepancies for prompt credit. Do regular checker ID tests, keep current with merchandise transfer or other paperwork. Run things neat and organized.

When you do things right, day after day, your ending inventory and quarterly results will be just fine. Count on it.

Personal Note: It is with deep sadness to learn of fellow Packer columnist Joe Watson’s recent passing. We worked closely together over the past few years, judging many Packer and PMG merchandising contests, with Joe sharing his many insights and humor. Joe was a true produce professional and a gentleman, devoted to his faith and family, and a dear friend. He will be missed.

Armand Lobato’s more than 50 years of experience in the produce business span a range of foodservice and retail positions. He has written a weekly retail column for two decades.