As a young boy in Oklahoma, from '60 to '64, my favorite teams were the Bud Wilkinson's Oklahoma Sooners and Vince Lombardi's Green Bay Packers. Vince always said that football was just blocking and tackling, and the team that did it best won. That is why Paul Hornung could run that same famous sweep, and everybody knew what it was, but he scored anyway. Your business is the same.


How do you reorder?

Eight years ago we started a series on Blocking and Tackling and how getting back to basics can, in the long run, help your company. We have talked about purchasing, safety stock, automatic calculation of reorder levels, lead times, and deviation factors. These are all well and good, but the lack of solid technology investment coupled with the time demands of a food busines owner's every day life makes that a difficult feat for the small, under 15 Million, distributor/processor. Calculating reorder levels is very complex and most high end purchasing systems use the formula that is published on North Carolina State business site. But what do you do if you just want to start without all that expense?

Today we’ll look at the basics. No matter what system you use it should have a reorder level that you can set. But setting reorder levels is not enough you need to look at usage (velocity) and most important the profitability of an item. That will help determine the contribution of an item. Contribution is the total Gross Profit of an item contributed over a period of time. It is not always the highest Gross Profit item, but the one that contributes the most.  This simple sales analysis sorted will give you this data.

Description Cases Extended Price GP $ GP %
USDA Choice Pre Cooked Prime Rib 36 17569.59 $1,929.03 10.98%
Beef Flank Steak 11 7679.03 $1,413.93 18.41%
Beef Ribeye Steak Fresh 10 4961.26 $1,332.73 26.86%
Maple Honey Turkey Breast Oven Browned 18 2592 $712.80 27.50%
Strip Loin Choice 7 2991.38 $599.28 20.03%
Cut Split Chicken 2.5# 14 1889.76 $379.20 20.07%
All Natural Sea Scallops 5 1770 $354.00 20.00%

Highlighted are the items you do not want to be out of so they are the ones that should have reorder value. In addition you see the ABC code for that item is A. So taking those 4 prodcuts that are your highest “contributors” with the most velocity you want to segregate them using the ABC code so you can start setting reorder levels. Once you have set the reorder levels you can then make sure you have enough in stock with a simple roerder report.

Start keeping reorder levels for the top 10 contributors to your margin and you will see that you will have enough stock using this simple technique that won’t break the bank. The 80/20 rule.


Issue 598 - Setting the Standards


We'll keep following last week's thread about Inventory Management and Profitability.   Food is a very unique industry, so making sure we measure ourselves against our industry cousins is important to understand the standard we are measured against. Got to know the other guy's score to see if you are a winner. Again focusing on inventory value and getting it right is one of the two key elements of our T&E analysis.

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