Honey, I Shrunk The Inventory

Working at T-Mobile I learned a lot about Operations. I learned that T-Mobile’s inventory has more items than just phones. It contains items such as handsets, covers, headphones, chargers, and other accessories. The inventory is counted at least once a month and the process involves manually counting each SKU (Stock Keeping Unit) in the front of the store and in the back of the store where the inventory is locked. After each count the result is compared to the inventory at the beginning of the month plus new-ordered inventory minus the sales and minus all the items that have been returned for various reasons. In theory the manual count should equal to the remaining inventory on file, but in real life it doesn’t happen.

Honey, I shrunk the Inventory

In real life the store manager uses personal judgment when opening large business accounts and he is able to give some SKUs for free. Sometimes when the employees sell or return the SKU they may accidentally scan a different SKU (each color or pattern of the certain cover has its own SKU!). Sometimes the returns are not scanned correctly, and sometimes it happens that a phone cover falls under a closet. In real world there is a certain percentage for which the loss is acceptable.

When the loss of inventory is bigger than a set percentage it becomes an issue. That may indicate that there is theft in the store, or mishandling of inventory or perhaps just plain incompetence. The steps to fight the high “shrink” percentage include a weekly count of the inventory, daily reports, probations and write-offs for the employees who are caught for scanning wrong items at POS or not scanning them at all. The store managers are being judged by the “Shrink” metrics, their salary and performance reviews can be seriously affected by the higher percent of “Shrinkage”.

Another metrics that affects managerial performance is traffic conversion. It is measured on daily and monthly basis and it’s designed to measure sales productivity. Each store has a device mounted inside of the store, just above the door, and it measures the number of people who walk-in. Then the number of sales is divided by number of “walk-ins” and that ratio represents the sales conversion rate. A low conversion rate shows low productivity and it means that the store manager should step up his game.

One of the ways to fight a low conversion rate is to make sure that the sales associates talk about current promotions. That they look at the customer’s account to see if the customer has any type of need and that need has a solution in a form of a product they can offer. That the employees are asking the customer the right questions that may help discover other needs. So next time when you are paying your bill or buying something at your carrier’s store consider whether or not you think of the sales representative’s questions as product pushing or simply discovering customer needs.

2 thoughts on “Honey, I Shrunk The Inventory

  1. This is a very interesting article in that it gives casual readers, and individuals otherwise unfamiliar with inventory management measures present in retail stores, a glimpse as to what really goes on behind the scenes. Having worked in retail before, I too have discovered the meaning of large shrink. It can be devastating for a store of any kind having too many of its products, originally intended for sale and profit, deemed lost/stolen/damaged. Additionally, I found it interesting as to the tactic T-Mobile uses to count the number of sales versus walk-ins. I believe that it is crucial for individuals to understand, at least on a basic level, the necessity for efficient and functional operational management structures no matter their career path or consumer choices.

  2. Someone understands me!

    Working retail means asking questions and finding out what solution works best for customers. Yet, plenty of them think you are there to take their money by any means necessary.
    Trust me, I get it.

    What caught my attention was that you guys have to do stock count on a monthly basis. I come from a pretty big retail store where it is done only once a year! Keeping in mind that the sku count will be drastically different. Same rule applies though. Scan product, compare to computer stock count, and finally figure out if it’s matching up or if there are big discrepancies.

    As far as productivity goes, we have to keep in mind how many employees there are available to the approximate number of customers that the store is expected to to get. I understand that it is not a set number of customers who walk in but what can definitely be established is the time windows of when the store is visited most often by customers. For example, it takes a customer a couple minutes to look around and if the aren’t contacted, more than likely they will leave which means your store productivity is negatively affected. On the other hand, if all employees are busy and there is a customer waiting, make sure to acknowledge him/her. A simple “Hello, We’ll be with you shortly” or even eye contact and a hand gesture telling them you’re almost done will do.

    I’m sure you guys have your own little ways of contacting customers to 🙂

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