Festive Stock Cover at a Kota Household-Goods Store
Sunil manages the stockroom of a household-goods store in Kota selling three fast-moving lines: steel tiffins (SKU-A), plastic water bottles (SKU-B) and mop sets (SKU-C). Today is 1 October and the festive season begins in 25 days. SKU-A sells an average of 18 units a day over the last 60 days, the supplier lead time is 6 working days, and store policy is to hold safety stock equal to 2 days of average sales. Current stock is 90 units, and a purchase order for 120 units placed 3 days ago is still in transit. SKU-B sells 4 units a day but 240 units are in stock because a bulk order arrived late; the supplier accepts returns only within 15 days of delivery, and delivery was 11 days ago. SKU-C has 380 units, sells 3 a day, and occupies about 40% of the front shelf space. The owner wants both high festive availability and no dead stock.
1. Calculate the reorder point for SKU-A and decide whether a new order should be placed today. Show the working and state what would change if festive demand rises.
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Reorder point (ROP) = average daily sales × (lead time + safety days) = 18 × (6 + 2) = 144 units
Stock position = on hand + on order (not yet received) = 90 + 120 = 210 units
210 > 144, so the position is above the reorder point: do not place another order today. The in-transit consignment, placed 3 days ago with a 6-day lead time, should arrive in about 3 working days, taking on-hand stock to 210.
Wrong answer to avoid: comparing 90 with 144 and ordering immediately. That double-orders and creates the dead stock the owner wants to avoid. The open order is part of the position.
Festive sensitivity: if sales rise 50% to 27 units a day, ROP becomes 27 × 8 = 216 units, which is above the current position of 210. The store is then marginally short by about 6 units - a small buffer order, not a large one. At double demand (36/day) ROP = 288, a genuine gap of 78 units. That is why the order decision should be revisited weekly with actual sales, not fixed for the whole season. Also confirm the 6-day lead time still holds in the festive rush, when transporters are congested; if it stretches to 10 days, ROP = 18 × 12 = 216 and a new order is needed today.
2. What should Sunil do about SKU-B, given the return window and the festive season? Show the numbers behind the decision.
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Cover calculation
- Stock 240 units, sales 4/day → 240 ÷ 4 = 60 days of cover
- Festive uplift is unlikely to help much: water bottles are not a gifting line, so sales may stay near 4–6/day (40–60 days of cover even then).
Return window
- Delivered 11 days ago, 15-day window → 4 days left. This is the binding constraint, not the stock level.
Decision: keep a sensible working cover and return the rest now, in writing, before the window closes.
- Keep, say, 20 days of cover = 4 × 20 = 80 units plus a small festive buffer of 20 units = 100 units.
- Return 140 units and get a credit note with the date and quantity recorded.
Reasoning: every day of delay converts a returnable asset into a permanent liability. Holding 60 days of a slow, low-value, bulky item costs shelf space and ties up cash that the store needs for SKU-A top-ups in the festive peak.
Practical checks before returning: confirm the supplier's condition (unopened cartons only), who pays freight, and whether the credit is a refund or an offset against the next order. If freight is charged, compare it against the cost of a markdown later. If the supplier refuses, move to a bundle offer rather than a deep cut, and stop reordering until cover falls below 20 days.
3. SKU-C occupies 40% of the front shelf with 380 units. What action do you recommend and how would you explain it to the owner who paid for that stock?
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Numbers
- 380 ÷ 3 per day = about 127 days of cover, more than four months.
- It holds 40% of the prime front shelf - the space that should be earning the most per square foot.
Recommendation
- Relocate SKU-C to a lower, rear or corner position. Prime space should go to lines that sell fast or carry festive margin.
- Cut facings from 40% to about 10–15%, keeping the range visible and all variants still findable.
- Stop replenishing until cover drops below about 30 days.
- Move stock with a bundle or multi-buy (mop set + bucket, festive cleaning offer) rather than a store-wide discount, which trains customers to wait for sales.
- Ask the supplier whether unsold cartons can be exchanged - often possible for a slow-moving line.
Explaining it to the owner The owner will hear 'move my stock' as 'admit I bought badly'. Reframe it in money: 40% of the best shelf is producing 3 sales a day; the same space given to a fast festive line at even 12 sales a day earns four times more from the same square feet. The stock is not wasted - it is being held, not sold, and holding it at the front is what makes it expensive. Propose a 30-day trial with a weekly sales report so the decision is evidence-based, and log the write-down risk so it appears in the accounts rather than being discovered later.