Current intelligence on stores' operational performance is usually inadequate; based on exposing what happened yesterday as guidance for what might be applied tomorrow. This is the paradigm for problem absorption, and it is one we must break by enabling a more accurate forward view of emerging problems that can be avoided if addressed early, and with the right corrective action.
With perishables' products accounting for >50% of total store revenues, and where retail margin losses arising from shrink, or markdowns to beat shrinks, account for some 8% of total perishables' sales, even before adding the costs of disposal in shrink, these losses represent >4% of total store sales. As perishables' inventory is a "sunk cost", any recovery of losses flows 100% to operating profit. Reverse just 25% of existing losses will lift operating profit by 1% of store sales. At a time where a 2.5% operating profit is reflective of the sector; such a recovery increases operating profit by as much as 40%.
Of course, perishables' products generally represent <20% of the total products in the store, so any solution for optimizing stores' performance must also address non-perishables and general merchandise products as well.
Achieving optimal return-on-inventory is possible across all products requires accurate store inventory management (SIM) and the store's application of this accuracy, along with an accompanying advance in accuracy of store-derived demand forecasting, will enable store-based ordering off the DC/supplier sources; effectively transitioning supply chain execution into effective demand chain.
Make the stores the weapon for eliminating under and over stocks in store inventory, while assuring products are always available on the shop floor so long as they exist in total store inventory. Add to this the elimination of end-of-promotion overstock markdowns, maximized GMROII across all non-perishables' products, reduced personnel costs through improved store logistics processes, and profit lift from within existing costs is assured.
We provide the stores with the best practice processes engaged in optimizing inventory performance; processes that deliver the outcomes cited above:
- Without requiring changes to existing IT systems
- By exploiting the existing information assets to deliver real-time, actionable insights
- To enable corrections before problem impacts occur
- While providing best practice task guidance to the stores' management and personnel
- To ensure all inventory management processes are correctly executed
- While analyzing and exposing accurate forward demand forecast planning
- Create store based ordering on the DC/supplier to shift supply to demand chain