My first Large inventory mistake

I will never forget my first major inventory mistake. It happened in 2006. I had been working for LivingDirect, an internet appliance retailer. I thought for sure I’d get fired.

LivingDirect sold icemakers, air conditioners, refrigerators, and similar appliances.

I thought for sure I’d get fired.

I had been sourcing appliances for about a year and a half. Profits were good. I had made no substantial errors. When you purchase something for $200 and sell it for $500, life is really good.

We had been expanding our product line to wine refrigerators, and we found a factory that made some slick versions. The maker used thermoelectric coolingsystem, which had advantages like low energy use, low noise, without a bulky compressor.

However, the biggest plus was the luxury appearance with blue LED temperature displays. Back in 2006, this was exceptional. We figured we could make good margins .

My big mistake

I ordered a couple of samples. We tested them. They handed the quality and appearance tests with flying colours. The temperature screens were in Celsius, but that was because the samples came from a production which has been destined for Europe.

Or so we presumed.

I purchased two containers at $50,000, to market in the 2006 Christmas season. Our inspector checked the performance of the LED displays. But he didn’t take a photo of a screen or notice the temperature range.

I approved the review results, and the refrigerators came in Austin. Excited, we put a unit in our showroom, unplugged. About a week after, I got a call from one of our customer support reps.

Customer Service Rep:“Hey Peter, a client says her wine cooler only extends up to 24 degrees.”

Me: “Silly customer. That is well below freezing. It’s physically impossible for the thermoelectric cooling system to have that low.”

Customer Service Rep:“I dun. She is pretty insistent.”

Me:“We have got a unit at the showroom. Proceed plug it in and check the screen.”

Customer Service Rep:“Hey Peter, this one does not go over 24, either.”

Me: “Oh crap.”

My heart sank. I jumped up and checked the device at the showroom. Sure enough, the temperature display ranged from 10 to 24 degrees.

That is freezing if in Fahrenheit. Or, ideal for storing wine if in Celsius.

But Americans do not use Celsius.

I closed the door to my office and assessed all of the purchase orders and correspondence with the mill. I had given the temperature range to the wine fridge, but I hadn’t given the screen appear in Fahrenheit. That is when I understood it was all my fault and I would be fired.

After all, the cost of the containers was $50,000 — more than I made in a year!

The recovery

It took me around an hour to calm down and enter problem-solving mode. I requested warehouse employees to spot check the screen on a couple more units and affirm that the problem affected both containers. It did.

I stumbled into the CEO’s office and told him about the error. I said I had been working on a solution, and took full responsibility for the mistake.

The CEO was silent, which unnerved me. However, the damage was done. There was nothing to do but proceed.

I convened our advertising team, the CEO, along with the president. We brainstormed. Two hours later, we had a strategy.

We published a Celsius-to-Fahrenheit conversion table. (The creative manager made it look nice.) Then we changed the promotional and marketing text. We called the wine fridge”Euro-style,” and marketed it with the tag line,”Why store your French wine at an Fahrenheit wine cooler?”

“Why store your French wine at a Fahrenheit wine cooler?”

We sold them. Every. Last. One.

Not a single client complained. I didn’t get fired. Rather, I was complimented for believing quickly and solving a huge problem (of my own making.)

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I reordered the wine refrigerators once we ran low. However, this time I given a screen in Fahrenheit! We eliminated the”Euro-style” marketing security once we sold the last one using a Celsius display.

Lessons

Establish all details on purchase orders. Some companies even name individual elements in the products. I have never done that. But if you are not specific, mill staff will interpret the sequence as they know it.

Your inspectors must get explicit directions about what to test. Our inspectors tested the LED screens and took photographs of the components. But I didn’t instruct them to shoot pictures of the screen while it was on.

And do not panic when problems happen. Operate in reality. Consider how to recover.

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