There are many benefits to including electronic business as part of your business: reduce overhead, improve planning, and enable a competitive edge.
Improve the accuracy of demand forecasts and production plans
Automated statistical forecasting systems create a far more calculated and accurate demand forecasting:
- Past sales data, forecasts, and future orders are all on one system. As a result, more accurate forecasts can be made based on the totality of this information.
- Forecasting systems can reach the desktop of every line manager, bringing chain-wide input (if appropriate) into the process through interactive Web-based applications. Thus forecasts can be further adjusted, taking every aspect into account.
- Automation facilitates fast projections and scenario planning. You can forecast inventory needs in thousands of categories in a matter of minutes, or do what-if planning related to special promotions, spike orders, or strikes for each product.
Reduce inventory requirements by shrinking planning horizons
Forecasting tools work in tandem with the central database, inventory control, and sales systems. This means purchasing is tied more closely to actual customer demand. The result is an opportunity to reduce inventories and adopt a just-in-time relationship with suppliers.
Reduce inventory-control costs
It is essential that you always know what merchandise you have on hand and on order, and how many of each item you have received and sold. Electronic inventory control makes this information available much more quickly, as it automatically updates your database as products sell or move from one location (a warehouse or another store, for example) to another. These systems also provide a variety of instantaneous data analysis that once took many hours of sifting and calculating.
Once online, every aspect regarding store performance is at your fingertips. Select and view products by cost, price, margin, first or last date sold, date received, or UPC codes. In minutes you can create new categories with hundreds of subcategories of style, size, or color.
An electronic inventory control system is now a basic tool for retail management. Without this information, you cannot plan and execute a retail strategy.
Improve customer satisfaction through quicker and more accurate responses to requests
If you don't have the product on display, customers expect you to be able to tell them if you have it in stock or on order. They don't want to wait while you wander through the back storeroom or phone your warehouse.
With an electronic inventory control system, it takes only a few keystrokes to answer a customer inquiry. Select items by any criteria: manufacturer, style, size, color, price range, date last received, or date last sold.
You can then call up the inventories of different stores, if you have multiple locations, viewing the same information for other outlets. In moments, you can discover how many of each item exists in any store.
Reduce costs and improve profitability with electronic inventory control
Electronic inventory control can eliminate over-ordering and under-buying by referring to each store's sales history to calculate the optimum stock levels for each item. You tell the system how many days of supply you prefer (which you can modify, for example, according to season) and the system will look at past sales patterns to determine when you need to re-order.
An inventory control system also performs "Open To Buy" calculations that tell you how much to spend on particular store categories for maximum return. The system takes past sales cycles, such as seasonal variations, into account. You may also query the system to determine what the order should be if sales rise or fall.
This information tells you:
- how much you should invest in inventory from month to month
- how much inventory you need to order to keep up with expected sales without going overboard and tying up excess capital
- how to keep merchandise flowing into the store throughout the season, maintaining customer interest
- which items are 'hot' and which are not, and the respective manufacturers (also useful for buyers heading into negotiations.)
- rank best-selling stores and individual sales staff.
Improve control over shrinkage through immediate verification during physical inventory.
Internal theft and pricing errors can eats up about 4 per cent of retail inventory. Using a portable terminal, taking inventories goes much quicker than manual counts and offers much greater accuracy. The system immediately flags discrepancies with the recorded inventory levels and verifies pricing, making it easier to detect pricing errors and missing merchandise on the spot.
Save time and improve profitability through automated pricing controls Your inventory control system can suggest pricing and markdowns within your pre-set parameters, and/or it can track your margins based on the prices you enter. You are always aware of gross margins.
- You enter the purchase price into the system when you issue a purchase order.
- You then enter a retail price and the system will record your margin, or you enter the desired margin and the system will insert the price.
- You can set margin levels for entire classes of goods if you wish.
Even with special pricing offers, you never lose track of margin. Establish different pricing for different stores in other geographic regions, for instance, and for preferred customers such as employees or major buyers. You can also pre-set markdowns for end-of-season or other sales. The system continues to track gross margin, including the effects of markdowns and preferred pricing.
Reduce unsold inventory through online auctions
Much of online business will take place in an auction format. The reason: price-sensitive customers get the best possible deal, but sellers also create a market for goods that might otherwise sit in a warehouse. Sellers may also be able to approach unsuccessful bidders as potential new customers.
Auctions are actually a form of dynamic pricing, since the selling price depends on market conditions at the time of the sale. Consider the implications, however, before putting goods onto an auction site:
- To what extent could lower-than-expected auction prices tarnish the image of the brand you have built?
- Are you willing to accept lower margins that an auction may bring?
- Can you continue to differentiate your product from the competition in an auction format?
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.