Does this look like how your purchasing is done?

If you are still using this method, is time to change or time will change your business!

Are you still monitoring your stock level and when it reaches reorder level, you order the quantity to the shelf level? If this is the way you control your stocks and manage your inventory, is time for your business to change. Otherwise, time will surely change your business - to the worse. Smart purchasers and inventory managers use advanced analysis and merchandising system to help them have total control over their inventory.

Diagram 1 Traditional Replenishing of Stocks - when stock quantity reaches reorder level, purchasers will order back to the shelf level

This method of reordering is good only for items which sells at a steady trend - meaning a consistent quantity of stocks sell at a stipulated duration. For example, you may have a malt drink at your convenience store selling at 8-10 packs per week, consistently at this level every week. It is perfectly alright for you to use the traditional method.

Challenge 1: Differing Sales Trend
However, this is not the case for many businesses these days. With SKUs (Stock Keeping Units) over 3,000 in your inventory and almost all with different sales trend, traditional replenishing method simply does not work. There are items which could sell in an increasing trend, meaning it sells 8-10 in the first week, 15-20 in the second week and then 30-60 in the third. With such sales trend, if you still reorder using the traditional method, most likely customers walk in your store with an "Out of Stock" sign simply because the replenishing level does not support the uptrend in sales. On the other hand, if you reorder using this method for items with downtrend in sales, you will find your warehouse stocked with excess of these items.

Challenge 2: Loss of Opportunities
Customers walking in with an "Out of Stock" sign simply walk away to another store to purchase - you lost customers. On the other hand, when overstock happens, your cash flow is locked and logistics (warehousing, store keeping) cost increase. Either way, you incur losses.

Challenge 3: Focusing on ALL instead of CORE
With this traditional reorder method, it forces you to monitor ALL your stocks to ensure stock availability. Unless you have a sophisticated sales analysis which tells you which are your best selling items, you will have to control every single item in your store. Smart business owners analyse and focus on core products which bring in the most profits for their businesses.
Allow XeerSoft to show how 2 simple technologies could assist analysis and reordering.

ABC Analysis

Diagram 2 ABC Analysis analyses your core products which bring in the most profits to your business

ABC Analysis helps to analyse core products for your business. Using the Pareto 80/20 rules, it says that 80% of sales comes from only 20% of your stock. Do you know which 20% of you stocks is really contributing to 80% of your sales? With ABC Analysis, system tags A items which contributes 80% of sales, allowing you to further configure percentages for B and C categories of items. This way, you know A items contribute to 80% of your sales.

In a case study, a retail client actually manipulate this record to ensure he knows exactly his A items every week. He then ensure stocks is always enough for A items. He also strategies his business by doing promotions on B and C items, partnering with suppliers of A items for better pricing as well as negotiating with suppliers for extra discounts so margin will be higher.

Auto Reordering

Diagram 3 A good reorder system will take consider sales trend of each item before suggesting a reorder level

Auto Reordering identifies sales trend for each item to then suggest a reorder level for your inventory. For items in a decreasing sales trend, the system will suggest a lower reorder quantity. Likewise, for items with uptrend and increasing sales in nature, auto reordering suggests a higher reorder quantity. With less focus on reordering methods and lesser attention in the purchasing department, business owners can focus on sales and core business functions.

Is It Time to Change?
To get started, analyse your business if there is a need for such technologies. Signs of needing such a technology includes:

• Inventory and stocks are often in a mess
• Items are often out of stocks with no visibility, especially when having multiple stores
• Having at least 3,000 item codes (SKUs) especially with difficulties in managing multiple codes for the same products
• Having to hire more than 5 purchasers just to maintain stock levels and each one works their butts off
• Not knowing inventory levels at any point of time when needed

If you face 2 of the above signs, is time to change - for the better. Talk to XeerSoft if you need to have us take a look at your current inventory system. Fix a no-obligation presentation appointment with our solution consultants today by calling 03-9284 8286 or email sales@xeersoft.com.