A Better Path to Inventorying

Gaining control over store inventory is a necessary step to boosting your bottom line.

By Ed Collupy

When store operators talk about inventory and cash management I always hear them talk about it in terms of accountability, control and operational improvement. How they get there, even with similar objectives, isn’t always the same. Many put technology to use, prioritizing what’s important to them and later widening the circle to learn more about their system to make further improvements.

CIRCLING THE SUPPLY CHAIN
Sam Nino, operator of Cabazon Fuel Centers in Southern California, described his inventory management process to me as a circle of activities that need to work together. That’s exactly how I describe the procurement-to-pay process.

Each step in the inventory management supply chain has its own processes and opportunity to put technology to work—let’s move around the circle and look at a few of them.

Vendor Management. Centrally managing vendors and the items that are authorized for each store is a key component and putting to use the Price Book functionality of your back-office system is a step that can help to ensure availability of product for the store personnel to place an order. There are case studies throughout the industry where retailers have stopped unauthorized inventory by disallowing open item purchases, resulting in immediate inventory control and vendors’ unauthorized items are immediately returned.

Ordering. A colleague of mine says “the prize” that comes about from taking progressive steps in inventory management is Computer Assisted Ordering (CAO). But before you get there most back-office solutions support different types of orders:
• The ability to walk the c-store and order against the authorized Price Book.
• The ability to copy or re-use a prior order.
• View a theoretical on-hand during the order process as well as the last few weeks of sales history.

At a recent gathering of industry back-office solution users, they learned more about implementing some form of automated ordering capability.

For those already on this journey there was advice to take it in steps—ensuring first that new inventory processes have been mastered in terms of execution and timeliness. CAO offers the most return on investment for any inventory management technology implementation that a c-store might be pondering.

Receiving. With the use of technology/processes comes a great opportunity to introduce and automate policies that are critical to managing vendors delivering product. Earlier identification of cost discrepancies is an opportunity in the receiving process that can’t be minimized. When a vendor delivers, in most back-office systems, the store staff will have immediate visibility of a cost from the central Price Book being different from the vendor’s invoice. Nino noted vendor controls like these “gives you accountability.”

Adjustments & Counts. There are many types of modifications that need to be made to maintain an accurate store level inventory: returns/credits, transfers and waste. Entry of adjustments into your system is critical to maintain an accurate perpetual inventory.

Having the capability to report on adjustments helps identify causes of margin erosion and true shrinkage allowing for action planning.

Inventory counts are completed based on your inventory management method—full c-store, partial count, category and/or item level filters. Your back-office system should help track sales during the count process. Counts also allow you to see the result in shrinkage and overages as a performance measure and guide.

Invoices. A true time saver at store level and an overall business process improvement that Donna Perkins, Price Book manager at E-Z Stop Foodmarts, spoke about when she led the recent Conexxus webinar “How Much Can You Save with Electronic Data” is importing an electronic invoice from wholesalers and direct delivery vendors.

This system-based process allows for the tracking of transactions from ordering to receiving to returns and audits. Identification of cost and quantity discrepancies before the vendor leaves the c-store allows these exceptions to be identified and resolved before they update your financial system and reduce overpayment.

Perkins reported that with just one vendor they have saved over $23,000/year and knows that this will grow as they continue importing new vendor invoices.

A HANDFUL OF USES
Using a hand-held terminal during the inventory management process is a key technology that many grocery wholesalers and back-office solutions offer to improve inventory accuracy. A solution that is integrated with the Price Book will enable further efficiencies.

“Time is everything,” said Nino, who has been able to delegate the receiving process to cashiers because using the hand-held is “simple and easy to do.” His hand-held uses a docking station to upload data but he knows that wireless devices and real-time updates are available.

The hand-held is best used to complete the inventory management circle:
• Display calculated on-hands when ordering.
• Receiving against the order once the items are delivered.
• Matching the order and receiving to the e-invoice.
• Facilitate faster and more accurate counts.

A hand-held device also removes duplication of effort, in terms of matching and counting manually against the order and/or paper or e-invoice and then requiring entry into another system. The introduction of substitution products or unauthorized products prior to arriving at the point of sale (POS) is prevented.

Brandy Clark of Clark’s Pump N Shop refers to the proverb “time is money” when she points to the inventory management processes she uses along with what’s close at hand, her smart phone or tablet, wherever and whenever she needs information.
Nino sees the day when he and his employees will use a tablet in the ordering process that will “keep operations as streamlined as possible.”

EVERY PENNY COUNTS
Smart operators make it a point to follow Ben Franklin’s “a penny saved is a penny earned” advice when it comes to business. Technology-based cash management practices are able to quickly identify actionable steps to bring more than pennies back to the bottom line of your store operation.

One back-office solution provider consultant recently told me that working with his customer and the system brought to light and resolved a long-standing problem.

Their previous method of reconciling money orders left a hole allowing the store manager to manipulate sales and receipts figures to make a day seem in balance, when in fact it was not. Analyzing back-office and auto-imported POS data that auto-calculates the over-shorts accordingly made it quick and easy to see the discrepancies.

Clark utilizes the c-store analytics module of her back-office solution and reports that cashier performance has improved at her 62 stores. She said, “Using a cashier heat map enables monitoring of incidents by cashier by store allowing us to address training or shrink issues.”

Her back-office system collects transaction data from the POS and with its heat map capabilities report using “different colors to quickly show us when a store/cashier’s average has shot up. It’s a quick and easy way to spot a problem.”

Inventory and cash controls within a closed-loop system are necessary in successful operations. With strong processes supported by technology, managers can close the gaps in the supply chain cycle and let the pennies add up quickly to significant dollar savings.

Ed Collupy, executive consultant at W. Capra Consulting Group can be reached at ecollupy@wcapra.com. Visit www.capraplus.com for more retail technology and business insights. Collupy has IT leadership and business team experience providing strategic, operational, and project leadership to retailers, emerging businesses and technology companies.

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Comments

  1. For those of us who work within both the grocery and c-store worlds, its baffling that DEX has not been implemented more within c-stores. If it is properly integrated with the backend system, the payback should be measured in weeks.

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