Managing Your Inventory Assets
Small chains, as well as independent pharmacists, are tackling the challenge of maintaining high service levels while lowering inventory investment costs. One method is a new technology that makes it possible for individual stores to forecast sales and place automatic replenishment orders based on their prior selling histories. This system is called E3ProfitTrack, a modified version of Marietta, Ga.-based E3's Store Level inventory asset management software. Retailers that have been using the system, which was beta-tested last year, are reporting dramatic improvements in service levels, as well as significant savings from a more efficient allocation of dollars that would otherwise have been tied up in inventory safety stock and inventory carrying costs.
Bill Earnest, chief operating officer of Kopp Drug, an eight-store chain in Altoona, Pa., was one of the early adapters of E3ProfitTrack. He said his out-of-stock percentage on "never-out" SKUs (fast-turning items that retailers never want to be out of) dropped from 18 percent to 2.4 percent over a two-month period. At the same time, he said, his service levels went from 68 percent to 96 percent, while his inventory turns on front-of-store items soared from 5.5 percent to 12 percent. Most significant was the value of his inventory at cost, which fell 7 percent in the two-month period, freeing up $ 10,000 for other business purposes. Manager of services for E3ProfitTrack, said that based on projections, E3ProfitTrack can bring an additional $ 80,000 in profits to an average pharmacy. Instead of someone physically walking the store to order product, the E3ProfitTrack system creates replenishment orders based on the store and item order level parameters established by the retailer. In effect, it takes the haphazardness out of the ordering process. Like E3SLIM, E3ProfitTrack follows the movement of approximately 20,000 SKUs through each individual store. Typically, it tracks sales for between 6,000 and 8,000 front-end SKUs, as well as about 12,000 prescription items for pharmacy. Using a new technology, each day's replenishment orders are placed on E3's web page. With a password, the retailer logs on, reviews the orders and either accepts them as they are or makes whatever modifications are necessary. Once accepted, the retailer transmits the orders to suppliers in whatever format the retailer is currently using: Internet, EDI, fax or U.S. mail. The system is easy to implement, can be learned in a matter of hours and can be relied upon to do basic replenishment effectively within a matter of weeks. Problems, such as a developing out-of-stock situation or an over-stock, are kicked out of the automatic replenishment system by exception reports. This makes it easier for the retailer to recognize whenever particular products are either too low or too heavily inventoried. E3ProfitTrack is particularly effective for seasonal products and for new products where sales histories are non-existent. Retailers pay a monthly fee to access and use the replenishment and forecasting system from E3. All that is needed to run E3ProfitTrack is a PC, a modem, an Internet service provider and a point-of-sale system that supports a standard interface from E3. For example, Freedom Data Systems has created a software interface that links E3ProfitTrack to the POS data Freedom manages for its retail customers. Recently, E3 reached an agreement with QS/1, a pharmacy POS solution provider, to interface the pharmacy POS data of retailers using E3ProfltTrack. E3 is still in the process of forming new partnerships with POS solution providers. |