Speculative Buying

Speculative Buying

As a buyer, anticipating a price increase can lead to big profits. The problem is that the suppliers usually will not let you buy more of product at one time when there is a price increase coming. Consequently, you need to plan and take a risk. 

There are a few important questions to consider. When do you anticipate the price to go up? How much extra would you like to have sitting in the house when that occurs? How many weeks do you have left to “sneak in” the extra buys?

Using the K3S Hold Outs feature, you can pre-enter your quantities which will allow K3S to build the inventory automatically based on your prediction and anticipated need. Similarly, there is the automated add days feature which works well with products such as pharmaceuticals. The Hold-out feature technique works best with purchasing cigarettes when using Daily Replenishment.

Hold-Out Quantities 

The Hold-out Quantity feature is used to save a specific amount of inventory for a product due to a promotion, holiday, or other special circumstance. The hold-out quantity is backed out from a product's inventory level so that the system will still suggest buying the product as it normally would. The Hold Out feature allows users to buy an extra amount of product for future use and not have it affect the current replenishment of the product.

Suppose there is a special event coming that will most likely cause more of a particular product to be sold. The buyer needs to add some extra stock to inventory to cover the event. However, they don’t want the buying for this to affect their regular inventory replenishment. So the buyer would create a Hold Out quantity. Set up a begin date, when the Hold Out will start to subtract inventory from the product's balance, and an end date when the Hold Out will expire.

Instructional Video: Hold-Outs

How to use Hold Outs 

Automated Add Days Feature 

The Automated Add Days feature is also effective for buyers who do speculative buying. While the Hold-Out Feature deals with building your order point in units, this feature focuses on adding extra days. Since suppliers can sometimes limit how much you can buy, this feature allows you to add extra days to the order point slowly so that the suppliers will not catch on that you are building up inventory. To them, it looks as though your sales are increasing. Months later, the price goes up on the product. The difference in what you paid and the new price is the profit and the reason for speculative buying.

Instructional Video: Automated Add Days Feature

Automated Add Days Steps