JUN 2013

DAYSPA is the business resource for spa & wellness professionals! Each issue covers the latest in skin care, spa treatments, wellness services and management strategies.

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PROFIT CENTER Quantity and Order Assessment ABC Facial Mask Desired minimum stock # units 12 # of sales per week Working in harmony, all of these components are part of the decision process. Once you're settled on the minimum number of product lines for your spa, you'll want to create an "approved" list of items from each manufacturer. Each item that you carry in a particular size has its own SKU (stock keeping unit) or ID number. Maintaining a minimal total SKU count is key to keeping inventory costs under control. If you've been in business for a while, you can simply analyze what is regularly selling, but if your spa is new, this process will take time. Either way, evaluate your selection of SKUs on a continual basis. You may have to resist the assistance offered by product reps to place orders, because your and their assessment of your quantity needs may differ. Never let anyone pressure you on SKU selection or quantities; carry only what makes sense for you and your clientele. Next, identify the maximum quantity to stock, and the minimum point at which a re-order should be triggered. Factor in order frequency and the time it takes to receive an order (see diagram). It takes work to identify these numbers for every SKU that you carry, but once it's done, the reordering process becomes much easier. (Most spa management 15 # of orders per month 1 # of days to receive order 5 Order quantity when minimum is reached 60 software can handle this task quite effectively, though you'll need to make some seasonal adjustments. Professional or back bar products are more difficult to track because only small portions are used for each service, and therapists often switch out one product for another from within a given protocol.) BUILD A BUDGET Beyond understanding your required units of inventory is the importance of creating and living with a budget for inventory procurement. An existing spa will have a base of retail and professional product usage data to build from. To help establish your inventory budget, Charles Compton, president of retail consulting firm Mars Solutions, has a rule of thumb: "The amount of dollars of inventory you have on hand should be no less than three months' and no more than six months' worth of your monthly sales, valued at wholesale." Let's look at this in practice. Suppose you only sell • Use FreeInfo #59 110 DAYSPA | JUNE 2013

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