Whether for one store or 1,000, good inventory management can keep customers happy and retailers profitable. Many convenience stores are using technical advances to take the guesswork out of buying to keep the turns coming.
By D. Gail Fleenor, Contributing Editor
The days of counting product and filling out inventory forms by hand are a thing of the past for most convenience store chains. Managed inventory software creates orders based on sales data history so shelves offer what customers want. There are a variety of systems available to help retailers stay on top of inventory.
“It’s all about turns,” said Mark Eckhoff, director of store operations for Bloomington, Ill.-based Freedom Oil Co. The family-owned chain uses McLane’s Customer Managed Inventory (CMI) system to ensure the chain’s stores are carrying the correct inventory, preventing out-of-stocks and getting the most dollars possible out of space available. Freedom Oil owns and operates 33 stores in Illinois and another three in Florida.
“We set our system to keep 14 days of product on hand but this number can be set to whatever number of days you want,” Eckhoff said. “Managers are still able to look at orders before the next truck to make any needed changes.”
Slow moving items, which may be necessary to offer, can be set by number of product rather than by days. When the slow mover sells down to a magic number, more product is ordered. This way, the item doesn’t have to be cut and stores do not have to store stock that is ordered too soon.
The system is also flexible enough to allow an item that does not sell well at one store to be cut but continue to be supplied to other stores where it sells.
Freedom Oil is in an interesting situation with its 36 c-stores that could easily lead to out-of-stocks and other inventory problems. Three of its locations are in Florida. Eckhoff said these stores upload sales data and receive orders the same as its Illinois stores. The system has helped with this long-distance ordering, he noted.
ORDERING IN OKLAHOMA
“Having the correct amount of inventory and the correct amount on order is helped considerably by our ordering system,” said Ron Lukenbaugh, director of sales and merchandising for Hammer Williams Co. The Enid, Okla.-headquartered chain owns and operates 27 stores under the Jiffy Trip and Jack’s retail banners. The chain uses Professional Datasolutions Inc. (PDI) inventory management, which is accompanied by handheld devices.
“Using sales data to calculate orders is much better than a par level the individual stores set on their own,” Lukenbaugh said.
Lukenbaugh said his company’s PDI/Retail software uses calculations based on order day, delivery day, on-hand quantities, prior sales and future sales to arrive at suggested orders that are sent to the distributor.
“Our stores can modify the orders with additional merchandise or reductions, if needed,” he said.
PDI uses flexible business rules to suggest product reorders, its Website said. The system also uses store scan data to determine customer favorites, under-selling items and other trends. The system also depends on information from smart handhelds.
BASED ON PROFIT
With CMI, Freedom Oil no longer requires managers to use smart handheld devices to order items, freeing them to handle additional customer service duties. However, managers on site can still use the smart handheld to order an item a customer wants.
“There’s no need to check and see what’s authorized or not authorized because that has been built in,” Eckhoff said. If the customer has the package of an item he or she wants, management can even use an iPhone like a smart handheld to scan the item for an order.
The PDI/Retail system is performing well for Hammer Williams, according to Lukenbaugh.
“Having the correct amount of inventory is helped considerably by the ordering system,” Lukenbaugh said. “This method reduces the amount of time needed to prepare weekly or bi-weekly orders, from the stores’ perspective.”
Several years ago, Freedom Oil used McLane Co.’s previous inventory management application to test the technology on a category, which is extremely important to the chain—cigarettes. The goal was to reduce inventory but still make money. The test was successful.
Recently, Freedom stores tried McLane’s CMI system, to evaluate the same category since cigarettes and other tobacco products (OTP) make up almost 93% of sales at the chain.
After using the inventory management system for eight weeks, Freedom Oil reduced its cigarette inventory by 3,666 cartons and OTP by about 700 rolls, translating to $700,000 of cut inventory at its stores.
“Our cigarette sales are up 5%, cigars are up 18%, and OTP is up 3-4%,” Eckhoff said.
After starting with the tobacco category, everything that Freedom Oil stores purchase from McLane was loaded into the CMI system including candy, groceries and cooler items.
All sales data is automatically uploaded daily, including Saturday and Sunday. Orders are generated based directly on sales unless management requests a change. New basic order levels are set each week through the SKU items sold.
Some inventory management systems allow managers to check the history of a particular product to see its ups and downs in one store or in all stores. History for all products at all stores can also be generated for research and planning. Each use means a more efficient store operation.
“When we look through our stores now, sales are up in all departments and there are fewer outdated items and out of stocks, which was an issue for us,” Eckhoff said. “Now, we don’t have waste or throwaways.” The inventory system automatically requests what has been sold, which handles out of stocks. “This is a better way of managing our business.”