This is one of those fun mini business problems that encapsulates all of the uncertainty of running a business. You could play it right and have a huge advantage over the competition, or play it wrong and waste a ton of time & money.
One of our bestselling products is being discontinued and replaced by a similar, yet seemingly better, model (I don’t think I’m technically supposed to disclose what product it is yet, so I won’t…even though it’s leaked all over the internet…). The new model is due in within a few months, but we don’t have a set date. Once production starts on the new model (it probably has already), the old model won’t be made any more. The only available stock will be what’s currently on hand with distributors. So we’re in the position of trying to figure out the best way to transition ourselves to the new model without losing out on any ongoing desire/need for the old model.
The way I see it, there are a few options:
- Stop buying the old model and start taking pre-orders on the new one as soon as the knowledge is made public.
- Based on historical data, buy enough of the old model to take us up to the approximate release date of the new model.
- Stock up on the old model to ensure we always have it in stock up to the release of the new one.
Each one has it’s own unique sets of pros and cons. One of the biggest fears is having an over stock of the old model once the new model comes out. We don’t want to have to sit on it or sell it for a loss. Then again, that stock could come in handy if the new model is late or has unexpected issues. We ultimately settled on the second option, but as soon as we’re able to we will also take pre-orders on the new model. Pre-orders are huge because they give us the cash up front to do our initial buy-in. They also ensure that we don’t over-buy or under-buy the first time. Either mistake could swing the situation a few thousand dollars against us.
Ideally we sell out of the current model just as the new one is becoming available, and we have enough pre-orders for the new one to guage the popularity. It’ll also be interesting to see how our competitors handle the situation, which could have just as much impact on us as our decision.