Expanding Stock & Space and Parkinson’s Law

There is a corollary to Parkinson’s Law…

It is, ‘the stock expands to fill the space available’.

There is a danger if you have access to funds and plenty of space to fill them with stock. This is fine if there is no other suitable investment for your cash and you are sure it will not be subjected to a change in fashion.

If you are borrowing the money then it is different. You are paying interest and you are putting the business more at risk. There are always unexpected changes in fashion and stock is often hard to turn into its real value in cash.

Two things are considered:

Firstly, Comparisons and reduction:

Look at the ratios of sales to stock for your industry. This may surprise you. A number of the credit rating sources publish comparisons and there are reports accessible in the British Library and some County Libraries. Your bank may give you the information.

Once you have established that perhaps you can establish targets for the business and sections of the business.

After that, the Pareto principle applies. Often 90% of the stock is in 10% of the items. So only 10% of the items need to concern you in your quest for reduction.

Secondly, Remove the space:

Find something useful to do with the space occupied by this stock. Let it out to a complementary business.  This will generate benefits for both of you.  Close it off and do not heat it if not or rent it out if possible.

If you manage this you may well be able to empty the loft.

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