Do you sell goods? Do you have competitors, suppliers, warehouses and stores? If yes, then this series of articles can give you some valuable tips on how to increase your sales and business efficiency by leveraging automation technologies and handing over the most time-consuming и data-intensive processes to well-tailored algorithms.
You don't have to get bogged down in a routine, you don't have to keep track of every transaction, you don't have to manually balance the balance - there are smart programs for all of this. What is left for you? With the help of an ERP system, you can free up resources and time for planning the future development of your company. You will be able to observe your business from a bird's eye view and navigate its way more confidently, making targeted adjustments to its progress and shape.
All cases and approaches described in this series of articles have been applied in the real business of a retail trade company that sells mobile devices across its network of shops and warehouses. Yet nothing prevents them from being adopted in other sectors as well — say, in the wholesale distribution business.
Step #1: Getting Rid of Stock-Outs and Over-Stocks From Your Warehouse
Businesses with large inventories frequently face the problem of shortages and excess stock due to lack of accurate inventory data, causing the cash flow of the business to become chaotic. This situation can be resolved with the visibility and the right mechanisms that a warehouse automation system provides.
“Our customer came to an understanding that their business needed more automation in the area of inventory management. When a chain of stores has a central warehouse, it takes time and physical resources to monitor which goods are missing and see how sales are going at each place,” — says Alexey Nesterenko from FB Group company that deployed a business automation system for the retail company mentioned above, using one of 1C ERP solutions as a basis.
Categorization Is the Key
At the start of the project, all stores and warehouses are sorted into categories based on sales analysis. The same is done with goods, which should be divided into several logical groups. For example, items in the Newest category must be permanently on sale for some time, there should not be shortages of stocks. When a product is no longer new, it either goes to another category if it sells well, or it is to be withdrawn from sales. This is the life cycle of any product.
Other product categories may be, for example, Best Sellers, Assortment, Promotion and so on, depending on the particular business. The ERP system implements algorithms and analytical reports that allow you to see, based on daily calculations, which products sell well, in which stores and regions.
For example, you can see that a certain product sold very well while it was in stock. But as soon as it ceased to be in stock (wasn’t shipped on time or wasn’t purchased from the supplier), sales in this store immediately dropped. At this point you have a lost profit. An automation system can show you your lost profit for a particular store or for the entire network almost immediately. Or more specifically — tonight.
Busy Nights at Warehouse — Replenishment and Rotation of Goods
While stores are most active during the day time, night is the most active time for a warehouse.
By the evening, when all sales are closed, the “hot season” begins at the central warehouse. A single database allows you to analyze today's sales and inventory balances across all stores.
According to the preset algorithm, the system automatically compares the current state of stock with what should be at the beginning of a new day. And if necessary, it creates an internal order to replenish a store or warehouse to the optimal level. Thus, if there are goods available in the central warehouse, stores are always automatically replenished every evening. And it works non-stop.
There are also cases when, say, the store #1 has been overstocked with an item that is reported to be selling well at the store #10. For situations like this, you can set up the system to return the excess goods from the store #1 to the central warehouse and then automatically send it to the store #10 or wherever it is in short supply.
Smart Sale Algorithms
Proper product categorization allows you also to automate sales and not just get rid of products but do it with maximum benefit. If you want to sell out a product, you can simply put a crazy discount on it. Usually, it’s some kind of high-margin product. Or you can implement an algorithm in the system that will lower the price gradually. As an example, every week you can give a discount of 10%. Practice shows that this mechanism works perfectly. Because, you see, it’s not a good idea to wait for 5 weeks to buy a product with a 50% discount, as it can simply be bought out earlier.
Automated Tender System for Suppliers
Let's move on to the next quite typical situation: the company needs to purchase goods at competitive prices. The necessary goods can be bought from several manufacturers, sometimes you can buy them at promotional prices and with discounts.
|“Our team has developed a tender system for purchases, where suppliers can automatically send out their price lists, via API or through an Excel file with a predefined form, — explains Alexey. — The company sends a request for certain goods, and suppliers enter the available quantity and send the Excel back.”|
That is, in fact, the system announces a tender: it sends requests, receives price information back, automatically downloads all incoming Excel files from emails or downloads the latest prices from websites, and then it determines that now, for example, a company needs to buy 100 iPhones at the best price. At the same time, the best price is defined not only by current price lists but by the terms of the contracts as well — taking into account all back bonuses, guaranteed discounts at the end of the year and so on. And the system can calculate that, say, 50 items can be bought from one particular supplier at the best price and the remaining 50 can be gained from others.
Product manager simply clicks the Create Tender button, defining the goods and the quantity to be purchased, then he gives the command Announce Tender, Collect Results and Send Orders to Suppliers. They need to keep an eye on the system, of course. Sometimes the algorithm doesn't not work as intended because of some unexpected exception to the predefined rules. Sometimes they have to adjust the rules to take into account, for example, sharp spikes in sales. But this is all that needs to be done manually.
As a result, product managers are now mostly engaged in direct work with suppliers — focusing on price negotiations, new assortment, matrix development, while the inventory management works automatically.
|“All those mechanisms related to inventory, rotation of goods, purchase orders — we just modified and automated them. The customer already had a good understanding of inventory management, and we did a level-up upgrade, — sums up Alexey. — Ultimately, the categorization of goods and stores allowed the system to determine how to replenish the stock, what to buy and what to sell automatically.”|
Process automation described in this story was based on the low-code 1C:Enterprise platform, that allows building business solutions fast and with minimum development effort. Learn more here.