Working Your Point-of-Sale System

Doug Smith

Garden center retailers today face challenges such as aggressive competition, increasingly complex needs and costs associated with managing inventory, and a lack of time caused by inefficient, manual methods that exist in spite of having back office and point-of-sale (POS) technology in place.

Let’s face it―garden center retailers often spend more time putting out daily “fires” than on polishing their inventory mix. And many are still relying on gut instinct or time-consuming manual practices to manage their inventory instead of real-time business management data.

In our work with retailers, we’ve seen it proven that, on average, those not relying on business data often have 65% of their inventory value invested in the bottom 15% of sales. That’s right—65% of their inventory is invested in the slowest 15% of inventory for sale. A common rule of thumb is that for every $500,000 in inventory, it’s recommended that retailers can take 10% of the inventory value out (at least $50,000) without losing customers or profitability. Carrying $50,000 worth of unprofitable inventory is costing you more than you think. Actual carrying costs are far greater than the value of shelf space and the cost of the item.

For instance, let’s take a retailer with a 2,500-sq. ft. location, selling $2.5 million a year, which has approximately $100,000 worth of excess inventory. Not only does this tie up $100,000 that could be spent on other more profitable investments, it’s actually costing them another $54,000 to house this unprofitable inventory due to insurance and financing unneeded inventory and labor costs and lost sales. Not focusing on refining inventory has much larger negative implications to your business.

Treasured Retail Space
As retail space becomes progressively more valuable and merchandising strategies become more sophisticated, retailers can save thousands of dollars a year by minimizing inventory dead stock and unprofitable items, increasing the accuracy of their inventory counts from a streamlined receiving process to cycle counting and beyond, and by using real-time business data to make smarter purchasing decisions.

There’s only so much space in a retail location and it must be used strategically. Fortunately, there’s innovative business management software to help every step of the inventory management process. By utilizing back office and POS reports, you can start taking steps in the right direction to begin reducing hidden inventory costs and making sure the right items end up on the shelves—ultimately leading to business growth. Here are a few tips to help you get started today.

Use Technology to Streamline Business Processes

1.    Leverage your business management system for calculated and weighted order points to reduce seasonal spikes, stock outs and overstock, and trim inventory costs.

2.    Use mobile devices, like smartphones, at buying markets to instantly access your inventory and determine the quantities you have in inventory and what you need to purchase. This prevents you from overbuying and eventually having to put your overstock on clearance.

3.    Set safety stock high for popular items in the system. Regularly review quantities-on-hand for popular items to ensure you won’t be at risk for stock-outs of your most popular items. Lower the safety stock level for less popular items that also have longer vendor order cycles.

4.    Utilize an Inventory Valuation Report to extend the value of each inventory item at cost and retail price. It also includes item level information for year-to-date sales and cost of sales, as well as store totals for year-to-date sales, cost of sales and gross profit. Run the report monthly to monitor the following:

Dollar amount invested in inventory
Annualized sales, cost and gross profit dollars
Year-to-date sales dollars
Inventory turns
Gross margin return on investment (GMROI)
Sales to Inventory ratio to verify that the total sales on the report equal the total sales on the Department Report (Note: If you deleted any SKUs, these reports may not match)

By putting a plan into action, your business can generate more profit. Inventory is typically the largest asset for a retailer and the greatest asset for making your inventory productive is to understand how to align business processes and technology to keep your inventory healthy, refreshed and revived. GP

Doug Smith is the Director of Product Management and Marketing at Epicor Software Corporation, which is based in Austin, Texas, www.epicor.com/eagle. Doug can be reached at DougSmith@Epicor.com.