Twitter icon
Facebook icon
LinkedIn icon
Pinterest icon

How Can Retail ERP Software Address Threats to Your Profitability?

Declining profits and ERP

You have a product to sell and a market with demand, but profitability maximized by a retail ERP solution is the key to growing your business.

A retail ERP solution can address three of the biggest threats to a retailer’s profitability. Here’s how: 

  1. Outdated technology: It’s no secret that retail is a fast-evolving industry. In this environment, if you find your company losing sales to a competitor, take a look at the technology they’re using to serve customers. Your competitor may have a well-developed loyalty program that continues to drive customers back to the store or well-timed promotional events that drive sales.

    Likely, a retail ERP solution is behind these programs and other facets of the company’s operations. Retail ERP software delivers analytics that help retailers make strategic decisions about things like product placement; improving a product’s visibility can lead to an increase in sales and, ultimately, year over year growth. A retail ERP solution is a key technology investment that will facilitate growth by helping you maximize profits.
     

  2. Inefficient inventory management: Inefficiencies in your inventory management could unnecessarily lead to increasing costs due to an excess of inventory or lost sales due to out-of-stock conditions. This occurs when retailers do not have the data visibility that a retail ERP solution can provide.

    For example, after the retailer initially inputs vendor and inventory information as well as projected demand, the retail ERP software can give automatic recommendations of how much product to order while considering price breaks, lead time and safety stock. Price may not be the most important criteria when determining the economic order quantity; carrying costs should be considered and a retail ERP system can hold the key to the information you need to make such decisions.

    Another inventory management issue retailers sometimes encounter is predictable out-of-stock conditions for high-selling items. The retailer assumes that the product can be replenished in a week, forgetting that the vendor usually takes three weeks to replenish the product. Retail ERP software allows you to include vendor lead times into the calculation so that order planning considers the amount of time it will take on average to receive the product from the time it is ordered. To mitigate inconsistencies in vendor performance, a level of “safety stock” could be specified.

    Businesses must keep in mind that the retail ERP system doesn’t make up information; it needs to be given some starting information and then updated with actual vendor performance data from operations. But from that point on, the retail ERP software can provide analytics, vendor reporting and calculations to help make strategic decisions.

    For example, imagine that a high-selling product at your store is nearly out of stock. You remember that the vendor usually takes two weeks to replenish the product, but the vendor reporting conducted through your retail ERP software says that specific vendor can take as long as five weeks to deliver. Being able to track that information and obtain analytical reporting enables you to make decisions to improve your supply chain. In this case, your retail ERP software has given you valuable, analytical information which may lead you to the decision to look for a better vendor.
     

  3. Undefined product mix: Let’s say your central system reports that your stores had an average of $10,000 a day in sales; your natural conclusion is that each store has the same mix of products. But if you dive deeper into the retail ERP software data, you can see that a certain percentage of sales at one store location came from a specific group of items; each store’s sales were composed of a different product mix. The data may prompt you to change the product allocation at each store; while each store is part of the same chain, each location will have a different product mix tailored to its location and customer buying habits.

    You can set up your retail ERP system to have a specific store location carry more of a certain product. So when you are transferring inventory from a central warehouse, the retail ERP system can make an inventory recommendation based on the allocation percentages that you set up. The solution to defining your ideal product mix is data collection and data visibility. When you see the data and have access it, you can use it to make strategic decisions to maximize profitability.

Profitability is important to keeping your business growing. With a retail ERP solution, you can quickly respond and adapt to the changing retail landscape.

Blog Tags: