Product is your lifeline. What you earn on the bottom-line is a direct reflection of your company’s product management efficiency. Unfortunately, most owners are very poor product managers. But any company wanting to survive the next decade will need to become incredibly smart at this vital business process. From what you order, to how much of each product you keep on hand, to how you handle and manage product from your door to your customer’s hand, to physical count and reconciliation, efficient product management will dictate your bottom-line success in this decade.
The first trick is having the right stuff that maximizes per customer gross profit. Smart owners have done their demographic homework, have target customers on a store-by-store basis, and have each store merchandised correctly for their target market.
Next, considering that every $100,000 in store goods inventory costs you at least $10,000, you’re first goal should be to operate each store with exactly what’s needed plus a small cushion. Smart product managers keep no more than 1.5 times the supplier’s delivery frequency of any product on hand.
Automation eliminates potential for human errors. In smart store management systems, inventory ordering targets are computer controlled, orders are triggered and prepared automatically, sent via computer directly to vendors, and confirmed by the vendor to your computer. Price changes are immediately captured. When product arrives, each shipment is scanned in and verified automatically against the order with only exceptions causing a report to generate. The invoice is received electronically and automatically matched. Payment occurs on fully verified invoices automatically via funds transfer. With no order changes, the entire process is seamless and highly efficient. Store personnel must still stock shelves correctly, but the majority of human error has been eliminated via automation.
For this system to work at peak efficiency, customer sales are also scanned which means that inventory is constantly updated on a real-time basis. Another key to efficiency lies in centralization of vendor purchasing negotiations – your specials and discounts. Your product-by-product sales data becomes a valuable bargaining chip to be utilized by a staff member skilled in vendor negotiation. With an automated system, time-limited specials are no longer a nightmare – providing vendor price accuracy is sound.
Can you continue to use a manual store system and stay profitable? The answer lies in your competition. A fully automated competitor without great friendly customer service and clean facilities won’t give you a run for your money if you have impeccable service and a great location. If you add impeccable service, great location and spotless facilities to your automated competitor, they can and will likely under-price you and erode your market share.
In summary, make product management efficiency your focus. It deserves your complete attention.
