MFP Buying Review Workflow

STR measures how much of your inventory was sold during a given period compared to the starting inventory.

Sell-Through Rate = Opening Stock / Sales​

 

Ken says:

"The sell-through rate is one of your most powerful KPIs. It tells us how well inventory is converting into sales. High sell-through rates indicate potential growth for a category, but only if we act quickly. Products must flow onto the selling floor on time, ideally within the first 10 days of the month, to maintain that momentum. On the other hand, if your STR is low, it’s a red flag. It might mean your stock is outdated, wrongly priced, or poorly aligned with customer demand. This is the time to evaluate whether markdowns or SKU reviews are needed to clear slow-moving inventory."

 

 

Markdown percentage measures how much discounting has been applied to sell inventory.

Markdown % = ( Sales / Markdowns )×100

 

Ken says:

"Markdowns are inevitable, but how you manage them makes all the difference. A high markdown percentage cuts directly into your gross profit, so you must aim to control it. Use markdowns as a deliberate strategy to meet your sales budget and attract customers, not as a desperate reaction to aged stock. If your markdowns are creeping up, it’s a signal to revisit your forecasting, pricing, or stock levels. Remember, the best markdown strategy balances clearing inventory while protecting profitability."

 

 

Evaluate how actual sales from the last month compare with next month’s budgeted sales to track performance.

 

Ken says:

"Sales performance isn’t just a number; it’s the lifeblood of your business. Comparing your actual sales to budgeted sales for the next month helps you spot trends early. If sales underperform, it might be because your best-sellers are out of stock. Remember, 80% of your sales come from 20% of your stock, so make sure these items are well-stocked. The better you manage these critical SKUs, the closer you’ll get to achieving your budgeted sales goals."

 

 

Closing stock refers to inventory remaining at the end of a month. Days of stock measures how long that inventory will last based on current sales rates.

 

Ken says:

"Closing stock and days of stock are like a health check for your inventory. Too much closing stock—or excessive days of stock—suggests you’re holding onto aged inventory. This ties up cash flow and leads to potential markdowns. Look at your sales data and recent purchases to figure out where the bottleneck is. Are you buying too much of a slow-seller? Or is your stock just not moving? Either way, this is where you step in to correct the course before aged stock becomes a bigger issue."

 

 

Look ahead at how much stock is available to support future sales over the planning period.

 

Ken says:

"You need to think ahead. How will your current days of stock impact sales, closing stock, and markdowns over the next few months? This analysis ensures you have enough inventory to meet demand but not so much that you’re stuck with overstock. Cross-check your stock coverage with your budgeted days of cover for each category. This step helps you avoid reactive decisions later, keeping you on track with your sales and inventory goals."

 

 

First margin percentage is the difference between the selling price and the cost price, expressed as a percentage of the selling price.

 

Ken says:

"Margins are the foundation of your profitability. The first margin percentage measures how much profit you’re making on a product right out of the gate. If there’s significant variation in margins within a category—say, more than 5%—you need to dig deeper. Maybe some SKUs are mispriced, or perhaps they belong in a different category altogether. Reviewing first margins ensures you’re not losing money before the product even hits the floor."

 

 

Committed orders refer to products already ordered from suppliers. ATS indicates how much of your open-to-buy budget is still available for spending.

 

Ken says:

"Your committed orders are your future. These should align with your open-to-buy budget and reflect what’s needed to hit your sales targets. As a rule of thumb, 95% of your open-to-buy for the first month should already be committed. For the second and third months, it’s 85% and 75%, respectively. Why? Because having the right inventory arriving at the right time—especially in the first 10 days of a trading month—is critical to hitting your planned sales numbers. Miss this, and you risk losing sales momentum."

 

 

Ensure your planned ending stock (closing stock) aligns with what you started the planning period with (opening stock).

 

Ken says:

"Inventory planning is all about balance. At the end of your planning period, your closing stock should make sense in the context of your opening stock. Let’s say you’re planning for $150,000 in closing stock at $100 per unit—that’s 1,500 units. Now, visualize those units on your floor. Does it match what you’ve historically needed? By thinking in terms of physical stock, not just numbers, you ensure your plan is grounded in reality and set up to succeed."

 

 

Calculate the physical number of products available at the end of a period based on their selling prices.

Units on Hand = Closing Stock Value​ / Average Selling Price

 

Ken says:

"This step is about turning dollar values into something tangible: units. When you divide your closing stock by the average selling price, you get the actual number of items on hand. This helps you picture what’s in your store or warehouse. If you notice that the floor looks empty or overstuffed, your sales data may be misleading. Units on hand give you a real-world check on whether your inventory matches your presentation goals."

 

 

Aged stock is inventory that hasn’t sold within the expected timeframe.

 

Ken says:

"Aged stock is like dead weight—it slows you down and eats into your profit margins. Your RMS or POS system can tell you which items have been sitting too long. But don’t just jump to markdowns. Sometimes, better merchandising, improved in-store displays, or even training your staff to highlight key product features can boost sales. Remember, customers can’t buy what they can’t see. If aged stock lingers in reserves or isn’t properly showcased, you’re leaving money on the table."

 

 

"Remember, all these steps are interconnected. Each KPI—sell-through rate, markdown percentage, stock levels—tells a part of the story. The more you align these metrics with your sales goals and customer demand, the more successful your MFP process will be. Most importantly, always think about the customer. How does your inventory look to them? How does it meet their needs? When you plan with the customer in mind, the numbers will follow."