By Marilyn Odesser-Torpey, Associate Editor
With stores located in highly competitive marketplaces, Kyle Lawrence, president of Kimball, Mich.-based By-Lo Oil Co., found himself constantly adjusting fuel pricing for the company’s Speedy Q Markets.
“Basically, I was spending most of my time doing pricing, especially for five of the stores that are in the most competitive areas,” Lawrence said. “Sometimes I would have to move prices three times a day. It was time consuming and some changes could take hours before they were confirmed.”
And it was not only Lawrence’s time that was being consumed with tracking and changing prices. Before price changes could be implemented, they first had to be approved by district managers.
“Too much of the operations team’s time and attention were being focused on pricing changes instead of working with the stores,” Lawrence said. “Our store staff was feeling that they weren’t getting the support they needed; they were not feeling their time with their supervisors was valued.”
Tracking fuel prices is just one duty where technology is enabling retailers to better manage inventory via iPads and iPhones as well as Wi-Fi-enabled, handheld devices that alert managers to when SKUs are unavailable or remind them of their last order times.
FUEL PRICE MANAGEMENT
In 2012, the company tested a cloud-based fuel price management software solution from PriceAdvantage, a division of Colorado Springs, Colo.-based Skyline Products, in five of its Speedy Q stores. The software gathers and provides instant access to real-time volumes, margins and replacement costs; analyzes competitive pricing data; automatically communicates price changes to the point of sale (POS) and issues confirmations of the changes.
Lawrence explained that the software “allows you to set your strategy.”
“It tells us if we want more volume, we should go to one price; if we want more margin, we should go to a different price. It visually illustrates the trade-off of choosing volume versus margin,” Lawrence said. “It shows us all of our options and is worthwhile even if it just confirms that what we’re already doing is right.”
In addition, PriceAdvantage will send a suggestion if a competitor in the marketplace is charging as little as a penny less price for fuel.
“That’s something I wouldn’t know unless I spent the time to read all of my pricing emails,” he said.
As soon as Lawrence decides to move a price, he can just push a button and the change is transmitted directly to the POS. At the same time, an alert is sent to the district manager.
At one of the stores, the POS is hooked up to the price sign so it changes the numbers automatically. PriceAdvantage’s mobile platform also allows Lawrence to change prices from anywhere he can get a Wi-Fi connection.
“I’m hardly ever at my desk, so it is important that I have the ability to change the prices on the go,” Lawrence said.
In fact, automating the collection and analysis processes of the fuel pricing data has freed him and his team to work on other areas of the business. It also significantly reduces the incidence of manual human error, which can result in lost revenues. PriceAdvantage is now in place in all 18 of the Speedy Q Market locations.
ON THEIR OWN
J & H Family Stores, which supplies fuel and lubricants to 100 retail sites, including its 40 company-operated stores in western Michigan, has been using PriceAdvantage since last January. The company recently introduced the software into its 40th store.
“With PriceAdvantage, we are not pushed into a cookie-cutter approach to fuel pricing. My team can incorporate detailed business rules for each location, which supports our overall pricing strategy. The tool then provides additional pricing data, which we use to validate our strategy,” said Craig Hoppen, president of J & H Oil.
If enough is good, is more even better? Not when it comes to inventory, said Lesley Saitta, CEO and managing partner of Impact 21 Group, a global consulting company for the petroleum/convenience, c-store, retail and refining industries.
Retailers are being squeezed by lower fuel margins, rising credit card fees and increased labor costs, so every dollar counts, especially when monitoring inventory.
Keeping shelves fully stocked and avoiding excess inventory that can tie up dollars and reduce margins is a balancing act that every convenience store retailer must face every day. Saitta explained that maintaining optimal levels of inventory of all items is difficult for businesses like c-stores that carry a wide variety of items and often operate in more than one market area.
“Inventory is the largest investment inside the store, but it has also been a black hole for dollars,” Saitta said. “Most average retailers have 14-16 days of inventory on hand for cigarettes and are getting deliveries at least once or twice, some even three times a week, and they’re carrying items they don’t need. In addition, categories like other tobacco products (OTP), which is growing rapidly, can still have excesses in some items.”
Not having enough of an item to avoid out of stocks is a sure way to disappoint and possibly alienate customers. Having too much of an item in stock results in unproductive inventory with higher carrying costs and slowed cash flow.
Saitta noted that supply chain schedules that work for fast moving items don’t work as well for slow movers; ones that work well for slow movers aren’t effective on fast movers. To track inventory accurately, it must be done on an item rather than category level, but doing that manually can prove to be costly in terms of labor required to count and enter numbers in a ledger.
There’s also always the factor of human error.
“If someone is not scanning correctly, it’s garbage in, garbage out,” Saitta said.
Saitta explained that by automating the inventory control process, stores can increase sales by 1-2%. “In our business that’s huge,” she said. At the same time, it can reduce inventory carrying costs by 6-7%.
Many back-office providers do a good job of assisting retailers with scanning in items—differentiating Cherry Pop Tarts from just plain Pop Tarts, for example—with handheld devices. But item-level inventory management requires more than just scanning every item in and out.
“You need to know what is sold as well as what has come in and make sure you are managing waste and shrink at item level,” Saitta said. “You need to be managing on-hand inventory levels for each item on a perpetual basis.”
Automated item level inventory control tools like 4R Systems, a partner of Impact 21 Group, set inventory levels using a proprietary economic framework that maximizes gross margin dollars by directly measuring the cost of holding inventory and the frequency of purchasing each item.
“We take the retailer’s data and come up with analytics to determine optimal inventory re-order points for every item in the store,” Saitta said.
Saitta’s company has also worked with smaller chains, using an inventory management solution that provides visibility to a retailer’s weekly inventory by item and store.
“One 50-store chain saved $1 million by simply using this information to better train store managers, resulting in a reduction of cigarette inventory from 29 days on hand to less than 19,” Saitta said.