Controlling Stock Volume in Uncertain Times
As Featured in BII News – Autumn 2020 edition
As if 2020 hasn’t been difficult enough for publicans, we are now fast approaching yet another challenge. In previous years, the ‘back to school’ period in early Autumn would see the start of serious planning for Halloween, Christmas and New Year. But this year, predicting the right levels of stock volume for the season ahead will be a whole new ball game.
Well performing pubs have traditionally excelled at forecasting for the upcoming season. Where typically stock orders would be based on the evaluations of previous years of success, this year’s predictions will have to account for a host of different scenarios. From the best case scenario: a fully vaccinated population returning to normal; to the worst case scenario: a second full lockdown. With all these uncertainties, can pub operators forecast accurately?
The challenges of forecasting
‘Death by Cashflow’ can be the slowest and most painful end to a business. It is by far the overriding concern for operators at the moment. Whilst controlling costs is key, cash flow is seen by many as a higher priority than profit. Operators need to safeguard their businesses by holding more money in the bank. A key part of this is keeping less money tied up in stock, or seeing it wasted by poor stock management.
Revenue figures for reopened businesses so far have been relatively encouraging, but they are not guaranteed to remain stable post COVID-19. The worry is, that if ordering isn’t controlled properly, the revenue made now, may not meet supplier invoices that are due for payment in 60 days’ time.
A practical solution that some sites have introduced, is to offer a reduced menu or offering. But this too brings its own challenges. There is a very fine line between running a site at minimal stock levels, whilst ensuring it doesn’t run out of products for customers.
Maintaining a reasonable selection of choice is a must. Most customers are flexible, meaning that if their first selection isn’t available, they may opt for a proposed alternative without begrudging having to do so. However, when restricting your offering too much, a customer may become frustrated if no appropriate alternatives are available once products do go out of stock.
Tips on forecasting stock volume for winter and beyond
So what should pub operators consider when forecasting for the last quarter of 2020 and beyond?
Sales turnover in past years will be almost impossible to use as a gauge for this year. Instead the demand seen over the most recent months of trading will be a much better indicator for forecasting. Establishments that are perceived to be well managed, clean and safe will help relax guests, reassure them about their spending decision and encourage return visits. Ensuring a good level of communication and signage in regard to the safety measures in place is crucial. This will help towards sustaining a certain base of return customers in the run up to key events and, if well monitored, can be of great help in predicting demand for future events.
Monitoring bookings and maintaining a deposit ledger will be equally important to help you anticipate stock requirements. Since party bookings tend to be made closer to main events like Christmas, it is all the more important to delay ordering products. At the same time, establishing clear guidelines regarding deposit terms and advertising these early will encourage customers to book sooner rather than later. If refunds due to local or national second lockdowns are guaranteed, then it is also imperative that you are able to honour these without hesitation. So don’t be too hasty to spend large on deposit ledgers and ensure monies are available for refund at all times.
The common approach of ‘pledge ordering’ in early autumn, by committing to bulk discounted purchases for December, must surely be on hold for this year. If pubs do intend to make bulk discount orders, they should research this thoroughly and make these at shorter notice than usual. Seasonally pitched products, such as a new cranberry flavoured drink, may have a limited shelf life. Even if the shelf life extends past December 2021, one has to consider whether they really want money tied up on the shelf in a store for that long if stock isn’t sold.
It is widely reported that in a recession or any period of socioeconomic restriction, consumers will purchase less often, but will trade up in quality of offer. Therefore, don’t be tempted into heavy discounting or lowering the quality of products you’d normally serve. Whilst venturing out less often for low spend social occasions and restricted by the ‘6 maximum’ rule, customers will continue to celebrate birthdays and events as much as they can. The consumer will take less risk and seek a quality step up from their normal.
Ultimately, the cornerstones of good stock level planning still remain, but they may need to be re-visited. In particular, operators should:
- re-visit par stock holding levels
- review their management of petty cash spending and delivery frequency
- re-check security of exterior stores
- check ‘use by’ dates of seasonal stock orders and maintain a constant eye on local trends, national news and virus developments.
- maintain excellent service and professional, safe management. Stock control is much easier if you know customers are coming back.
If you need help with forecasting stock volume and you’re interested in a quote for our stocktaking services, then fill in the form on this page.