Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide
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Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide

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Retail Best Practices Series: Strategies on getting an accurate count; hiring the right people to become your inventory accuracy ambassadors; creating a team environment by setting key policies; ...

Retail Best Practices Series: Strategies on getting an accurate count; hiring the right people to become your inventory accuracy ambassadors; creating a team environment by setting key policies; implementing routine monitoring activities; and taking control.

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Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Document Transcript

  • An Epicor White Paper Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Retail Best Practices Series
  • Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Table of Contents Getting an Accurate Count the Traditional Way...or the New Way............................................................................1 Hiring the Right People to Become Your Inventory Accuracy Ambassadors............................................................3 Creating a Team Environment by Setting Key Policies.............................4 Keeping a Finger on the Pulse of Your Business by Implementing Routine Monitoring Activities...........................................5 Taking Control...by Using Controls..........................................................6
  • Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Epicor works with many retailers who are facing fierce competition from big boxes, higher customer service expectations, and the increasingly rapid pace of doing business. You’re likely facing similar challenges… As important as it is to out-price and outsmart the competition while providing exceptional customer service, focusing on those challenges without an eye on inventory is a common and unintentional oversight. We have observed that most retailers are not fully aware of the impact inaccurate inventory numbers can have on a business. It seems so harmless, but it’s not. Inaccurate quantities-on-hand (QOH) data is costing you more than you think. It can mean you have dollars locked up in excessive, unprofitable inventory. It can also mean that you might be providing inaccurate answers to customer stock inquiries, which, in turn, could be forcing customers to shop elsewhere. A lost $20 sale today from a mistake in the inventory numbers could result in much more than a $20 loss. Simply consider the long-term: lost future sales from that customer, lost marketing costs, and even negative reviews which could cost you other potential customers and further limit your sales. You could be out of thousands of dollars simply by not having accurate inventory numbers to rely on. You know the story. A customer has called asking if an item is in stock. Your data indicates that yes, you do. However, when the customer arrives, the item is nowhere to be found. You offer to special order the item, but the customer is upset and no longer wants to do business with you. The customer goes to another retailer for the item, and you’ve just lost sales today and in the future. It is estimated that if you increase your customer retention by 5%, it could mean a boost of 25% to 100% on your bottom line. One way to increase customer retention is to have the accurate inventory data you AND your customers can rely on. Every retail business management system worth considering is designed to keep track of inventory. But the best systems help you tackle the most important elements of inventory control: keeping cash flow and dollars in your business while also keeping your customers very, very happy. Epicor has been providing software solutions for over 40 years to retailers looking to better track their QOH, provide exceptional customer service, and improve margins. Use the tips on the following pages to help you get started on accurate QOH today. Read strategies on: 1. Getting an Accurate Count the Traditional Way…or the New Way 2. Hiring the Right People to Become Your Inventory Accuracy Ambassadors 3. Creating a Team Environment by Setting Key Policies 4. Keeping a Finger on the Pulse of Your Business by Implementing Routine Monitoring Activities 5. Taking Control…by Using Controls Let’s get started. iii
  • Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Getting an Accurate Count the Traditional Way…or the New Way At the heart of every retail business is its inventory. It is, after all, your largest asset, and your largest capital investment.  Here’s our first lesson on QOH. You really must take a physical inventory. We know, we know, you’d rather stick your finger in an electrical socket, or go swimming with sharks AND piranhas. But it must be done in one way or another. !  you do not have an accurate count, you cannot accurately determine If what to order. You also cannot generate an accurate Financial Statement for your business. Simply put, it’s the essential starting point. The first step in getting your quantity-on-hand up to date is to see what you currently have. Whether you close down and call an all-hands-on-deck on the prettiest weekend of the year (Murphy’s law says this will inevitably happen) or decide to cycle count or invest in managed inventory accuracy services (which give a targeted monthly count sheet of “special” SKUs to monitor), it has to be done. Here are the three methods of counting and more about how to do each: Count Method How it’s Done What is Counted Level of Labor Required Physical Year-End Cycle Counting One time a year Continuous–each item is counted 3x/year All items once All items 3x High Medium Managed Inventory Accuracy Services Monthly Special items Low 1. Physical Year-End You are probably most familiar with this type of counting. Usually you have a mandatory work weekend, you shut down the store at year-end, and you count all the items in the store, then load and reconcile the counts against the system’s numbers. In short, this method is a pain in the neck. It requires a lot—and we mean a LOT—of labor hours to work through the store all at once, it can take weeks to reconcile the counts, and it usually means you’re losing dollars as you shut down for the weekend. 2. Cycle Counting Instead of waiting to count at the end of the year, this method involves continuous physical inventory done in cycles according to physical location, category, or other attributes. The advantages include being able to stay open for business during counts, more accurate counts, and counting hours spread throughout the year instead of in one fell swoop. 1
  • Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Epicor® Eagle® Does That! The Eagle Mobile RF scanner is designed to help you with physical inventory counts, printing bin labels, receiving and more. Epicor is also working on The challenge with cycle counting is being able to stay on top of the counting requirements, and this is best resolved by making a plan and calendar so that each location is counted at least three times a year. 3. Managed Inventory Accuracy Services The third method involves counting monthly the inventory that is most important in your business. The concept here is that it isn’t necessary to count all your items; instead you count the moving inventory. Identifying the “important” SKUs takes time, so the best way to resolve this is to hire a company offering this service. The company will put together customized count sheets, and you count those recommended SKUs only. This method requires a lot less labor hours and yields accurate results. Whether you choose method one, two, or three depends on your business, of course, along with the technology you have available to commit to an accurate inventory count. Now that you have counted, let’s keep that number up-to-date. developing partnerships with companies offering managed inventory accuracy services so that you don’t have to spend so much time counting… instead you can spend your time planning how to grow your business and help more customers! 2
  • Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Hiring the Right People to Become Your Inventory Accuracy Ambassadors  second lesson for an accurate QOH is to get the right people. The Perhaps this is an oversimplification, but sometimes, things really are that simple. With your best, most organized people assigned to promote inventory accuracy; you’re on your way! Back to Basics Quiz Q: Where should you put your best people? A:  might be that your very best thinkers and doers are also the best you have It at working the POS. You may not want to take your best floor clerk away from your customers, even for two hours a day. It’s also important to consider who will be the best fit to take the lead in receiving—a key role in inventory. In all likelihood, however, you know which people to put where, and everyone will benefit, including your customers. Here are some tips for finding your best people for inventory accuracy. When hiring, remember to: 33Ask yourself, can they do the job? Do they fit with the culture of your business? think it 33Ask them what they aptitudemeans to be successful, which can reveal a level of drive, ambition, and Epicor Eagle Does That! focus. Inventory 33Determine their level ofto a range of SKUaccuracy requires the discipline and ability to pay attention level details Training on Demand is a Ideal employees work with pride 33Promote ownership.were their own business or store and treat their area of responsibility as if it subscription-based online training program to help newcomers get familiar with the Eagle system and their roles within your company. If you do have turnover in your inventory ambassadors, this is a good recruitment environment 24/7. employees 33Encourage aimportant to make it worthwhileYourthem to staycan leave at any time, so it’s for 33When you hire seasonal employees, look for ones that might want to transition to full-time hires 33Consider schedule flexibility, education, and experience attitude. The most successful people are 33Look for a positiveto meet or exceed their assigned goals enthusiastic and work passionately People! Put your most organized ones on keeping track of inventory. place to train the new hires. 3
  • Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Creating a Team Environment by Setting Key Policies Keeping inventory working well is like keeping order on the highways and byways. Things work better when everyone follows a basic set of rules.  third lesson in QOH accuracy is that you’ll need to set some clear The policies and encourage everyone in your workplace to follow them. When everyone follows these policies, it will create a team effect and help you maintain accurate inventory data, which can lead to better customer service. The specifics will vary depending on your business’ size, market, inventory breadth, and other factors. But some things are nearly universal—such as the following: item be stocked and/or sold has a unique SKU. Some exceptions may 33Every basedtoon your particular business model. EVERY effort must be made to exist, limit these exceptions to the base minimum. 33Except where completely impractical, every item has a barcode. 33Barcodes affixed to stock—or stock locations— must be accurate. Always. policy must be clear and consistent, 33Yourshould on returns, refunds and exchangesprocedures, and other pertinent and address defective items, validation issues. You need to post this policy for all customers and employees. All employees must be well versed in the policy. These are just examples, but...see where we’re going here? ! Epicor Eagle Does That! Training on Demand allows you to post your policies on the central training portal so that  Here’s a policy for setting policies: If an activity, event, stakeholder or other factor of any kind affects items or the way they’re counted, received, sold, or returned, rules may be in order. Back to Basics Don’t be afraid to set rules nor to stress the value and importance of following those rules to every employee. Maintaining an accurate inventory is every employee’s responsibility. Anyone who touches product any place during the business cycle has the ability to affect the accuracy of an inventory. employees can access those important elements at any time. Finally, know that there will be more rules to come—most of them specific to certain situations or activities. You’ll get to those, when you need to. For now, just set up the basics, and follow them. And know that they’re very, very important. 4
  • Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Eagle Does That! In the Epicor Eagle system, the Inventory Transaction Register or ITR is an invaluable tool for tracking and understanding Keeping a Finger on the Pulse of Your Business by Implementing Routine Monitoring Activities Monitoring information important for inventory mastery means using your system to access all the transactions that affect inventory. Think purchasing, receiving, POS, transfers, returns, write-offs. changes to QOH. NOTE:  Here is the fourth lesson of QOH accuracy: monitor the numbers even if you’re on the go! If you’re like most retailers, you’re not in front of a computer all day. You’re on the floor, or visiting important customer sites, or your other store locations, or checking out the competition. ITR is part of the System Audit & Reporting Tools package (SART). SART includes multiple viewers and archives to !  Monitoring shouldn’t—really, must not—stop just because you’re away from your desk. What’s selling today? And what isn’t? Where do you have extra quantities of a hot item? Which stores, departments or inventory classes are lagging and leading? track changes made to Customers, Vendors, SKUs, Did You Know? Quantities, etc. You can use a mobile app (Eagle Mobile Manager is one of them) to get access to business performance data, where and when you need it. Having this kind of visibility at a glance gives you the power to respond quickly to issues and opportunities. Eagle Performance Manager (and the mobile app Mobile Manager) is a great tool for tracking—and then analyzing—these items at a glance, saving you the effort of sorting through multiple reports and viewers. Here are a few things to keep your eye on every day: are 33Low inventory: which itemsyour at risk of stockIfouts?QOH is less than your Review quantities-on-hand for popular items. your order point, you are at risk of running out. inventory: where do you tied up? 33Excess quantities-on-hand vs. orderhave capital needlesslyyour QOH is Review points in your system. If greater than the order point, then you are likely sitting on excess product and dollars, particularly if the items are slow-moving or dead items. by department or location, by 33Inventory value valuation report nightly in orderandbestvendor how much Run an inventory to monitor cash you have tied up in inventory. bottom-dwellers) 33TopallSellers (andpopularity. Run a report ranking your items in terms of their It’s about the popularity and profitability at least weekly. !  items are not selling, come up with a plan to reduce or If eliminate them. the 33Remerchandisealong.store, so that your customers can “discover” items that have been there all 33Create promotions to attract buyers to non-selling items. items to appropriate outlets and the tax 33Donate non-selling shelters, and other organizations takewelcomebreak. castoffs. Churches, schools, will your 33Utilize online marketplaces to expand your customer base. 5
  • Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide Eagle Does That! Leverage the Reorder Point Calculation Report (ROP) in Eagle to calculate reorder points, or, if you want a more accurate and sophisticated way to calculate reorder points, try Eagle Inventory Planner. Epicor Eagle provides a wealth of inventory control points and tools, found in both the core system and in inventory-focused solutions including: • Eagle Inventory Planner • Eagle Mobile Inventory Taking Control...by Using Controls  Our final lesson of QOH management: gain greater control over your inventory by mastering the procedures and tools that help keep QOH accurate and customer service in tip-top shape. Here are some widely used examples of QOH tools and techniques that you must master in order to keep your QOH in check: using 33Tools for setting andprovidereorder points ERP systems will often inventory management software that includes reorder point calculation reports. More advanced technology will offer forecasting models to best match supply with demand. systematic cycle counting or 33Tools forcycle counting, use RF scanners tomanaged inventory accuracy If you’re check QOH variances and better track inventory shrinkage. Some companies are also providing services which supply customized monthly count sheets for more targeted inventory tracking. 33Tools for creating and using forecasting models to predict demand and drive replenishment Accurately predicting product demand is difficult. Sophisticated forecasting models allow you to make the best possible demand predictions based on past sales history. stock 33Tools for balancingof time across multiple stores/locations across stores Reduce the amount it takes you to balance inventory levels by utilizing Stock Transfer Balancing software. This allows you to make product movement decisions. You set your system to auto-generate transfers to reduce the amount of time it takes to manage a multi-store inventory. • Eagle Pricing Planner Call us today for more information •  agle Performance E Already an Eagle customer? Contact us at 800.538.8597. New to Epicor? Please call 888.463.4700. Manager 6
  • About Epicor Epicor Software Corporation is a global leader delivering business software solutions to the manufacturing, distribution, retail, and service industries. With more than 40 years of experience, Epicor has more than 20,000 customers in over 150 countries. Epicor solutions enable companies to drive increased efficiency and improve profitability. With a history of innovation, industry expertise, and passion for excellence, Epicor inspires customers to build lasting competitive advantage. Epicor provides the single point of accountability that local, regional, and global businesses demand. For more information, visit www.epicor.com. Contact us for more information on Epicor Products and Services  +1.888.463.4700  Worldwide Headquarters San Francisco Bay Area 4120 Dublin Boulevard, Suite 300 Dublin, CA 94568 USA Toll Free: +1.888.448.2636 Direct: +1.925.361.9900 Fax: +1.925.361.9999 Latin America and Caribbean Blvd. Antonio L. Rodriguez #1882 Int. 104 Plaza Central, Col. Santa Maria Monterrey, Nuevo Leon, CP 64650 Mexico Phone: +52.81.1551.7100 Fax: +52.81.1551.7117  eagle@epicor.com  Europe, Middle East and Africa No. 1 The Arena Downshire Way Bracknell, Berkshire RG12 1PU United Kingdom Phone: +44.1344.468468 Fax: +44.1344.468010  www.epicor.com/eagle Asia 238A Thomson Road #23-06 Novena Square Tower A Singapore 307684 Singapore Phone: +65.6333.8121 Fax: +65.6333.8131 Australia and New Zealand Level 34 101 Miller Street North Sydney NSW 2060 Australia Phone: +61.2.9927.6200 Fax: +61.2.9927.6298 This document is for informational purposes only and is subject to change without notice. This document and its contents, including the viewpoints, dates and functional content expressed herein are believed to be accurate as of its date of publication, October 2013. However, Epicor Software Corporation makes no guarantee, representations or warranties with regard to the enclosed information and specifically disclaims any applicable implied warranties, such as for fitness for a particular purpose, merchantability, satisfactory quality, and reasonable skill and care. As each user of Epicor software is likely to be unique in their requirements in the use of such software and their business processes, users of this document are always advised to discuss the content of this document with their Epicor account manager. All information contained herein is subject to change without notice and changes to this document since printing and other important information about the software product are made or published in release notes, and you are urged to obtain the current release notes for the software product. We welcome user comments and reserve the right to revise this publication and/or make improvements or changes to the products or programs described in this publication at any time, without notice. The usage of any Epicor Software shall be pursuant to an Epicor end user license agreement and the performance of any consulting services by Epicor personnel shall be pursuant to the standard services terms and conditions of Epicor Software Corporation. Epicor, Business Inspired, the Epicor logo and Eagle are trademarks or registered trademarks of Epicor Software Corporation or its affiliated companies registered in the United States and certain other countries. All other trademarks mentioned are the property of their respective owners. Copyright © 2013 Epicor Software Corporation. All rights reserved.