The situation in China is making many of the vendors in our industry worry about whether they will have stock on hand to fill orders this fall.  In order to best serve their customers, some are asking that orders be signed as being non-cancelable.  Others are encouraging retailers to sign on to a planned buying program. 

Is it ethical to cancel an order?  I think it is OK to cancel an order, or part of an order, within a few days of placing it.   After all, even car dealerships usually have an “out” clause to account for buyer’s remorse.  And sometimes a line that looks great at the gift show doesn’t seem like such a good fit when you get back to the store.  An individual item occasionally needs to be cancelled from an order later on, which is certainly something that vendors understand.

But there are stores that are in the practice of placing large orders just in case they need them, and canceling them close to the ship date — to the detriment of the vendors, who even when supply chains are functioning smoothly plan their inventory levels based on orders.  Canceling an entire order late in the game has always seemed to me to be an action that should only be taken when unforeseeable circumstances would make it impossible for you to pay for the goods.

And what is a planned buying program?  In order to help a vendor plan their stock levels, the buyer is encouraged to place several orders throughout the year, spacing out the ship dates.  Often a discount and extended dating is offered on these orders, which cannot be canceled. Some vendors also offer special terms on any reorders during the remainder of the year.

The advantage to the vendor in terms of inventory management is obvious.  It is the retailer who takes the risk in trying to predict what will sell throughout the year, rather than waiting to see what consumers find attractive.  There is a danger of becoming over-inventoried in some categories, and running short of goods that are in demand. (Of course if a vendor has merchandise on hand, you can always add on to the planned buy.)

The incentives being offered by the vendor have to be enticing enough to overcome these obstacles — and the merchandise has to be goods that you feel confident will sell.  But for some of the core lines, placing a planned order for 2011 may be your best bet for having the right stock on hand — and will also contribute to your suppliers’ success in this challenging year.

Happy Retailing,

Carol “Orange” Schroeder