Stock Control

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Stock Control

Culling items

POS SOFTWARE
Reducing the variety of items on a shelf is a common way for retailers to a large number of items, that do not sell, that confuse shoppers, complicate the stocking of shelves and eliminate unprofitable items.  The technical term for it is assortment reduction, and most retailers have been doing it for years, for example, figures show in the packaged food and grocery lines peaked in 2014.
 
This is an easy way to cull items that do not sell in your shop. It should take you about 10 minutes to do.
 
Let us say you had a shelf like this with goods on it, so let us start.
 
 

 

Step one

I suggest that you do it by department  

Go to the Main Menu / Stock Systems / Supply Report

The first step is to check the Over Supply Report.

Put 100% in the box.

Select the option to show all

Select option Returns

Now click Show Report.

These are all the products you have received and never sold in the period chosen. I would suggest these are the first ones to cull.

Step two

Now if you need more room, select the Magazine Supply Report. Although the report was designed for magazines, it will work with any item.

Now I suggest you do this step by a supplier. 

Now select a supplier here and period and then click Get Data.

Now on the reports, you will see a listing of the items sold by numbers. Note the bottom selling items.

Actually it is surprising how much can be culled with little effect on sales.

See how you go and let me know how it went.

The idea here being is to be very surgical in your approach rather than blunt.

 

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Find your actual margins

POS SOFTWARE

Often a supplier will tell you the gross margin on their products. Do not believe it? Do you think you should check?

After all, this is a key indicator  in your shop

One big problem here is that in the real world often, this margin they give varies. The other problem is that this margin depends on you getting their price.  Maybe in your area, you cannot get this price. Perhaps because you have too much stock you, you need to discount to get rid of some of it? I am sure you can add many reasons why the theoretical margin is not what you get, and it is easy to find out what is the actual margin you are getting.

 

Go to the menu

 

Now in sales select  the "Discounted Item Sales Summary."

Pick a period, I suggest the last 12 months and now check, I would recommend as a first attempt by the department

Now you will get a detailed report of where you are discounting both by quantity and price.

Knowing which products lines are your most profitable in your shop can lead you to actionable advice.

 

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Evaluating a stock item

POS SOFTWARE

What happens is that when you go to your point of sale software and check your selling report to see how things are selling. You will find items that are selling well but are making little profit. The question often raised here, is even accepting that the item is not making much, is it drawing people into your shop who buy other products?

Well, we can help you somewhat. The reason I say somewhat will be explained here.  

Go to Register reports.

 

 

Now select "Top N Stock Sales for a Given Period"

 

 

Now put in say a year of sales and ask for the top 100 by quantity. 

Outcomes a report with the top sellers for that year. 

Top sale item by qty

I have not got the heading here, but I will explain. Look at the envelope 

45 is the stock ranking. It is the 45th best selling item in the shop. The 300 is the quantity sold. The next roll is profit, which is $77.45. In comparison, the item on top of it at 44 made the store $1159 profit. Now for many retailers would say to themselves is $77.45 profit enough to justify having this item? Is it enough to even pay the rent, much less the labour and other charges?

Now another issue that most retailers will ask here is, as it does sells well does it bring people into my shop who buy other products? That is very hard to measure, but we can give you an idea.

Go to reports > Sales register > Stock Sales companion sales by period 

Now in options put in say last financial year and put in the product ENVELOPE TUDOR....

Stock companion report

 

Now out pops up a report which will give you a listing of all the items that were sold with this item.

Then at the end will be a total.

Stock companion total

The last number is the profit of $265.01, which is the total profit of all the items sold with this item. 

Now the question is how much of that profit of $265.01 would you have made anyway with or without that profit. That is something you have to decide. 

An analyst like me, as a first-level approximation in the absence of any other information, would probably say

A third would have brought something else in the shop to replace the envelope 

A third would have left and gone elsewhere

A third would not have brought the envelope but everything else.

So I would say the loss involved in dropping the product is 

2/3 x (the actual product $77.45) + 1/3 x ( companion sale of $265.01) = a loss of about $140.

If you can do a better estimate let me know.

 

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Gross Margin Return on investment

POS SOFTWARE

This is said to be the most important KPI in stock control.

What it measures is how much did you actually make on an item? It is a difficult question to know by gut feel particularly when you have thousands of items that you handle. 

 

This is what the chart looks like in theory.

 

In practice, it is more complex because this chart assumes that you are conscious of what category an item is in. Too often a Low Margin/Low volume item should not be in the shop and is an accident. Also, it is very hard to assess which item is better a High Margin/Low volume item or a Low Margin/High volume item. Also as stock comes and goes, prices and margins change all the time it is very hard to determine by gut feel what is working and what is not.

This is what Gross Margin Return (GMROI) is designed to help you determine. What it does is measure your actual stock items and gives you a financial return figure on your stock? Generally, it is measured in a department or by supplier although I have seen it used for every item in the shop. What it does is tell you where you should look in your shop to get the best return on your orders.

Here is how it is calculated manually which will give you a feel of what it does.

Step #1: Gross Margin in Dollars= Sales x Margin%

So say you sold $1000 last year of an item, your margin was 30%, so your profit is $300.

Step #2: Average stock holding = ((Stock at start of the year) + (Stock at the end of the year))/2

You started the year with $1600 of stock and ended the year with $100 so your Average stock holding = (1600+100)/2 = $850.

Step #3: GMROI = (Gross Margin in Dollars )/(Average stock holding)

GMROI = ($300)/($850) = 0.35

What it tells you is that for every dollar you have invested in stock, you are getting a dollar back to pay all your expenses and buy new stock.

What it tells you is that for every dollar, you invested in that item, you made 35 cents. Of course, no one can maintain a business at that level; I just made a simple example to explain the concept.

If you notice, the calculation itself is almost manually impossible to do for each item. Here are some immediate problem points, items often do not have a steady margin; the 30% is often an ideal that a supplier provides and my stock holding obviously, here varied a lot during the year. Say, for example, my Margin was closer to 25%, so I made $250 and my average stock holding over the year was $100,

My GMROI = ($250)/($100) = 2.5, so I made for every dollar on that item $2.5 


The computer can overcome these problems with GMROI 

Go to register reports

 

 

Select GMROI marked in green

 

 

Now select the date you require. I suggest looking at last year, mainly as it is now the time we are looking back. 


I selected in this shop confectionery.


Out pops a report that looks like this among other items.

 

Now in green, the On-Hand figure is zero; the stock ran out, that would be definitely one to look at what happened there and the one marked in red; it has a negative result; this is almost certainly due to data errors which I will discuss in another post.


As these two items show, to get any use from GMROI you need to export the data into excel or OpenOffice (OpenOffice is free and well worth getting if you do not have excel) where you can edit and remove if necessary bad data.

So on the top left-hand side, click export (where the green arrow is), and click excel where it's marked in purple.

 

 

Now you have a list to review and edit. That is why it must in my view be in excel otherwise you cannot really do GMROI.

High turnover, high GM% and low stock holding are perfect while low turnover, low GM% and high stock holding are terrible.

However high number does not necessarily indicate that all is good, it often means you are under ordering and do not have enough stock, although sometimes it means that the item does really well only very few people come into your shop to get it. So you are not going to sell much more if you bring in more stock. Maybe look at add on sales for that item instead. Low numbers tend to indicate that you are over-ordering.

Only you know the retail dynamics of your shop and it can help and a detailed system of stock control like ours can keep the customer satisfied and you in business.

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Now take a minute to do a check on your stock levels

POS SOFTWARE

It is currently the last chance you have to check your stock levels 

However, running out of stock now can have a dramatic impact on your business.

We have a unique report which is super fast to run and gives you an immediate snapshot of your stock levels.

In Cash register report, call up the GMROI (see the selection highlighted) in your point of sale software in the reports here.

You can select the list of options you want, and I suggest you go over these options later when you have time.

I recommend doing this by departments or supplier, whatever makes more sense for you. 

Now you get a report like this.

As you can see the items are all listed.

Let’s look at it in detail:

What we are looking for is items with low stock on hand figures, decent sales, and reasonable ROI% figures, ROI% is the return on investment, it is one of the best ways to determine how valuable your stock items are to your business. It is calculated by the (unit sold) x (Profit)/ (Average stock cost) and you need about 3.2 in industry, but as you can see here, there are many items above and below it.

Now it is up to you

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Under-ordering stock is sometimes better

POS SOFTWARE

Retail stock control

It does not matter how many products you sell, our Point of Sale Software can keep you informed of your stock levels to help you make sure that you do not run out of the relevant stock on an item. 

While not having enough stock of a core product will be damaging for a retail business. There a pharmacy near me, I came to pick up medicine, he asked me to go back because he did not have stock, so I came back. I went a second time, and the same thing happened, I never came back again as I found the other pharmacist near me always has stock. 

For core products, the worst case is that you are overstocked a little if you order too much. 

But this is not true often of non-core products mainly if they are temporary. For example, Frozen II  products are now selling well. I doubt that in six months they will be selling that well. There is a genuine danger, that a retailer that over orders will be stuck with that product that will need to be heavily discounted to get rid of it. 

So for products like this, if you’re going to order, I’d say order less than you think you need. The worst thing that can happen is that if a potential customer comes, explain that it is a great product, highly in demand and people just snapped it up. Then tell them that you can order it in.  It will probably be cheaper then too. At least next time, they will think that they have to get to you earlier.

 

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A quick way to check if you have the right stock for today

POS SOFTWARE

The method we suggest is mirror marketing which is a proven method to make a check on your existing stock lines for the coming day, a week etc.

Here is a step by step method for doing it.


Go to Register Reports marked in green.
 

Now select in stock, "Stock Sold During Period(a) Not Sold in Period(b)"



What the report tells us what was sold in a previous period (a) last year but has not been sold now, so we examine the past year's figures and compare it to what we have currently.

Now, this is a bit confusing but bear with me. What we want to do is compare the week coming in last year with this week which we have figures.

So today is the 19/11/19


So we put in (a) the dates 19/11/18 to 25/11/18 <- note the year. This is last year when we have figures.

 

Now we put in the dates for the coming week starting with 19/11/19 to the 25/11/19 which is what we need to estimate.

In then put in the dates for (a) as of 12/11/19 to 18/11/19 <-last week.

You will also see a lot of different options here, which can help with ordering and giving specific department information. We will talk about these later.

Now what you investigate in the report where you get what was sold last year, but you are not selling now in your current period. The odds are you are out of stock.

 

Primarily with the holiday trends are already starting to appear, you need actual history to make decisions as it is not the same as last week.
 

This is a compelling report for stock control, and it is worth having a look at it in detail.

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Automating your replenishment processes

POS SOFTWARE

Most of your suppliers have large numbers of items on catalogue. I would say a typical small client of ours would be selling actively over a year selling over 43,000 lines. That is a lot of work if you order once a week to handle it. Just do a calculation on how much it costs you now to order stock?

Those that do not computerise it, tend to do much of the ordering on gut feel and memory.

However, getting it right is critical to retail business success as what we need to do is get the shopper what they want and when they want it. This is particularly difficult if you deal with products with high decay, eg popular magazines, fresh food, etc. because then we have the problem of availability vs waste.

This is why if possible here we recommend that you consider as the computer can relatively quite cheaply do the ordering that you consider smaller orders and buy frequently. This has the added advantage of keeping your stocks levels tight and your cash requirements down.

This is something where, if you are not already doing it where our software can save you much time and money and in the process, optimise your stock levels. What our software does is looking at your sales history discovers learning algorithms which automates replenishment. Technically its a form of demand processing. 

What it does is looking at your history of sales, create an ideal stock quantity that it thinks you require. 

If you order frequently, the amount of stock you need until the next reorder is less. It then compares this figure to what the actual stock on hand figure you have, it then adds some safety stock, then takes into account the ordering requirement of each supplier and then prints or issues a stock order with almost no work.

This reduces your holding costs, as you are not holding that much in stock.

It also

  • Lower ordering costs - as you are buying only what you need.
  • Improved selling rates - as you are ordering only what you need.
  • Decreased stock out occurrences - as the computer is checking continuously
  • Overstock wastes - this is often caused by people overestimating what they require.
  • Improved stock accuracy - you have a continuous check on your stock.
  • Higher customer satisfaction - you have the stock you require.

You will save a lot of time and almost certainly your shop will do a better job of it.

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Start looking at Christmas ordering

POS SOFTWARE

Managing stock orders is trouble even in the best of times. Christmas season makes its harder.

So let us now use your Point of Sales Software to see what worked well and what did not last year. You 

This is a step by step method for doing this.

Go to register reports and select the top stock report as marked with the red arrow here

 

You get this screen

 

 

Now I suggest you work by the department as it makes it easier to think about similar products.

Now, look at the red arrows as these items need to be changed to the coming Christmas, the dates for 2018. and you also need to put in say 100 items. After 100, it is rarely worth worrying about.

Then I got this report

 

Now you need to examine this list to see what did sell. You may find many items that did not sell, you may want to examine these too.

What I find useful is doing exactly the same analysis for the year before in this case 2017. It will give you an extra comparison.

 

 

 

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Narrow your focus

POS SOFTWARE

Every item on your shelf takes up room. Generally, a good seller takes just as much place as a poor seller. It also takes just as much time and effort in looking after it and possibly even more time in dusting, and it earns less.

Here is a picture of a pen rack

I can guarantee you that only a few pen types here are making most of the sales. When I reported on the pen sales on one brand in a shop over three years, I found that they had sold over 450 different types of pens and something like 80% of the profit was in the top 10% of pens. 

 

Towards the end of this list, sales were like one sale in three years, and there were pages of these items. Consider how much profit they are making on these slower-moving items.

What is also particularly interesting is that the most profitable pen was not mainly a high seller. Looking at this list, it is clear the most popular one is a black pen. I bet people came into the store, with one thought about the pen, I need a simple black pen. It is quite possible the range did not sell much of these pens but the convenience. 

The reality is that we cannot be all things to all people. Maybe fewer products would be better than more. Perhaps some of your space could be used instead of having many mediocre items and replacing them with a new category of things that are outstanding sellers. Could that shelf space be devoted to quicker-moving, more marketable items? 

Want to investigate your stock, here is a step by step method for doing this.

Go to register reports and select the top stock report as marked with the red arrow here.

 

You get this screen

 

In this case, here I used the category of Artline pens, I put in 99 million in to make sure I get everything, and as I like to get a long term view, I selected three years.

Then I got the above report

Once you get this right, if you want to increase your stock range in this category, well you can expand your business later.

 

 

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