【日本】How to Survive in the Jewelry Business That Makes Presidents from Other Industries Flinch

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Editor’s Note

This exchange highlights a fundamental principle of inventory management: using turnover rate as a clear, effective metric to align stock levels with sales targets. By focusing on this simple ratio, businesses can streamline operations and directly tie inventory investment to revenue goals.

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Manage Inventory Simply with “Turnover Rate”

Tanaka: What metric or yardstick do you use to measure inventory management?

Mochizuki: Regarding inventory, I manage it simply based on the turnover rate. I pay attention to target sales and appropriate inventory levels. For example, if you hold 100 million yen worth of inventory, turning it over three times generates 300 million yen in sales. In that simple way, I determine the appropriate inventory turnover rate and the level of inventory to hold based on the target sales.

Tanaka: It’s good that the policy of “This is how we do it!” is clear. Simpler management metrics tend to work better. Are there any particular efforts to make this function effectively?

“Systematization is very important, I think. Regardless of whether I am there or not, operations need to run properly. Just as I asked to ‘make me president immediately’ and somehow managed to serve as president, I believe the position makes the person. So, I give them the position, that is, the responsibility. Certainly, there are cases where people break under the pressure, but if that happens, we all think and act together. We just need to incorporate such accidents into our plans.”

Tanaka: So, employees also have the right to fail, and the president shouldn’t take that away.

Mochizuki: Yes. Things rarely go exactly as planned (laughs).

Yasuda: I understand that the inventory turnover rate increased through direct sales like e-commerce, but has the B2B side not changed much?

Mochizuki: The sales team’s awareness has changed to look at inventory, so the inventory turnover rate has also increased in B2B. Previously, inventory was just piling up. Also, as I mentioned earlier, we’ve become strict about not purchasing or manufacturing until inventory decreases, so naturally, the turnover rate goes up.

Yasuda: You mentioned not only selling your own original products but also purchasing and selling other companies’ products. What is the aim there?

“Handling other companies’ products has its own merits. There’s the pure quality of the goods, and there’s also the inventory risk of making everything in-house, so it has the effect of risk diversification.”

Yasuda: How do you plan to balance B2B and B2C going forward?

“That’s a troubling issue. If we only think about generating sales, we could achieve sales targets with B2B alone. However, leaning too heavily on B2B wholesale carries a significant risk of unstable cash flow, especially since collections can take up to five months. Therefore, we are currently drawing up a story to aim for total sales of 5 billion yen by strengthening tourism business, e-commerce, and overseas operations.”

Yasuda: By the way, what is the loss rate for jewelry products, meaning products that are disposed of due to obsolescence?

“Since trends like design change easily, I basically decide what percentage of profit to allocate for disposal. Ultimately, I make the final decision based on my judgment, like ‘This might be hard to sell now’ or ‘Maybe it’s better to turn this into bullion now.’ Originally, in the past, we made things freely, so there were considerable losses. But in recent years, employees have become serious about development, so we no longer create products that lead to major losses.”

Tanaka: In the case of jewelry, even if inventory stagnates and becomes unsellable, you can melt it down into bullion and remake it, so there’s no real ‘loss’ in the sense of throwing it away, right?

“That’s right. However, the first step is to sell properly through creative efforts like sales and campaigns. It’s about having customers buy it rather than turning it into bullion. Melting a ring into bullion or handing stones over to a jeweler to be taken back is the last resort.”
Inventory Management is Everything in the Jewelry Industry
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⏰ Published on: July 17, 2014