Retail Inventory Management Software

Why am I happy that people don’t consider last Monday night’s college basketball game the greatest final ever?  Luckily for me Gordon Hayward’s shot glanced off the rim and backboard allowing Duke to capture our fourth national title.  Hats off to a great Butler team and a phenomenal tournament.

Now onto the topic of inventory. If you ask most CFOs, they would point to the balance sheet and tell you the dollar amount of inventory on the books.  It seems like it should be an asset; it is something your company spent time and money to create.  Heck, we make a living selling millions of dollars of software and services so companies can better manage and track their inventory with warehouse inventory management systems. 

So why is inventory not an asset?  Why does Dell dictate their suppliers locate their warehouses literally across the street from their facilities?  Why has the concept of consigned inventory become popular in the retail world?  Why do many companies such as Amazon and Target not ever inventory the item but allow the manufacturer/distributor to drop ship directly to the end customer?  All of the above practices allow the company with power in the supply chain to delay or completely remove the necessity to take actual ownership of the physical product.  Inventory has become the proverbial hot potato.  No one wants to take ownership of the inventory and if they are forced to, they want to own it for as little time as possible.  If inventory is an asset, then why does no one want to own it?

In almost every industry, the day the brand new product comes off the manufacturing line is when it is most valuable.  Every week, day, minute afterwards the inventory is at risk of losing value:whether it is actual expiration dates/best before dates for food products, technology obsolescence as everyone is pushing for the next generation product, or the latest edition update to a college text book.  This is why FIFO (first in first out) is such a popular pick algorithm as it rids the business of the asset that is declining the fastest and keeps the product with the longest runway on the shelf.

Another reason inventory is not an asset is the working capital it ties up.  Every piece of inventory your company has in its possession is money that could potentially be used elsewhere in the business.  The company loses the “optionality” to find the best return those dollars could generate.  While it is quite possible putting that money into inventory of a hot product is absolutely the right decision, once the decision is made you cannot get that dollar back and put it into R&D or hiring a new person.  This makes it absolutely essential that your company watch closely your investment in inventory.

It is surprising that many companies have not reduced the amount of inventory they keep in their supply chains.  In a recent post by Dan Gilmore at Supply Chain Digest, he details by industry how many companies have not appreciably reduced their inventory since 2004.  In a day and age when investment of every dollar matters, maybe people need to take a closer look on how to optimize their inventory levels throughout their extended supply chain. Supply chain management software solutions can help. Au revoir, Go Duke!

Related Posts:
Where is Your Inventory? Even Today Some Companies Still Don’t Know

All of the Inventory I Want to Ship Is Sitting In My Yard!

When Metrics Turn Evil

I recently received a direct mail marketing piece from a HighJump Software competitor. The mailer included a press release announcing that this company had “enhanced direct store delivery integration” and a one page datasheet which described a direct store delivery value chain as manufacturing + regional warehouse + mobile resources + retail shelf.

HighJump Software is the North American market leader for direct store delivery software solutions. If our primary competitor in the warehouse management systems market had encroached on our market position I needed to know. Perhaps they had acquired a route accounting solutions provider or acquired a provider of mobility solutions for mobile selling and delivery at the retail location. I consulted a trusted industry analyst who confirmed my suspicions… this was marketing hype and this company’s approach to direct store delivery still had significant “holes.”

Anyone familiar with the value chain of direct store delivery companies knows there are some specific complexities that must be addressed in order to have “comprehensive coverage across the extended supply chain.” Here are some things companies should consider when search for direct store delivery software solutions:

Certified Route Accounting Systems

Route Account Systems are unique software systems to manage the complexities of route-based sales and delivery. They typically manage the entire order-to-cash cycle and are geared toward the world where sales, inventory, and business metrics are all tied to a “route.” Although traditional ERP systems can be used for route accounting systems, they typically require customization to deal with complex pricing/promotion, cash settlement, truck inventory, and supplier e-commerce integration. To further understand the complexities in the beverage value chain read It is Hard for Anheuser-Busch to be Procter and Gamble.

Mobile Sales and Delivery Applications

Success or failure in a direct store delivery business is determined at the store shelf. Direct store delivery companies have large workforces of mobile sales and delivery professionals who need to be equipped with mobility technology for them to effectively accomplish their objectives. HighJump Software provides a comprehensive suite of mobility products which support industry best practices for order capture, goal-based selling, delivery tracking and cash settlement. For more details on these solutions read about our latest mobility suite product release HighJump Software Enhances Mobility Solutions With New Release of Mobile Route Sales and Delivery Software Suite.

Load Optimization

Optimized loading of side bay beverage trucks can be complex. While there are numerous packages for creating optimized load plans of traditional van trailers or flatbed trailers, optimizing for side bay beverage trucks is another animal. Additionally, this business problem becomes even more complex when you have a “peddle” environment (driver selling off truck without pre-sold orders) and driver preferences must be taken into account at the load and pallet level.

I think the moral of the story is “don’t believe the hype.” Direct store delivery software solutions are specialized for the unique needs of this industry. Direct store delivery software solutions deal with complexities of supplier integration, cash settlement and truck inventory. A WMS, TMS and retail workforce solution will not meet the needs of most food and beverage distributors in their direct store delivery operations.

Today HighJump announced that our latest route accounting system (RAS) has received certification with Anheuser-Busch InBev for use by their wholesalers. The result of this certification is that HighJump RouteCenter receives the highest level of compliance, Level 1 ISV – Strategic Partner. The news release: HighJump Software Named Strategic Partner by Anheuser-Busch InBev.

The role of route accounting systems in Anhueser-Busch InBev’s value chain is critical. In order to fully understand the importance of this software, it is important to contrast the value chain of the large four beverage suppliers from a traditional CPG value chain. Let’s explore the differences …

Traditional CPG Value Chain

The traditional CPG value chain is largely vertical. A vertical value chain is one where each component of the chain including source, make, deliver and sell is controlled by the same company – in this case the brand owner. This allows retailers and brand owners to collaborate about every aspect of the product including quality, new product introduction, price, promotions, and electronic commerce. With today’s sophisticated supply chain software it is possible for most CPG companies and retailers to know exactly what was sold (and at what price) at every retail location every day.

Additionally, most traditional CPG companies have the following inventory flow: manufacturing/production -> regional distribution center -> retailer’s distribution center -> retailer. In this scenario the retailer is primarily responsible for managing the inventory that is shipped from the manufacturer to the retail distribution center (ordering) and the flow from retail distribution center to store (although there are certainly evolving collaboration techniques to share this responsibility across the manufacture and retailer).

Big Beverage Value Chain

The value chain of the big 4 US beverage suppliers (AB InBev, MillerCoors, PepsiCo and Coca-Cola) are more fragmented than the traditional CPG companies. In the case of the beer suppliers, they manage the manufacturing/production process and then resell their beer to independent wholesalers/distributors that distribute and sell to the retail location. In the case of the large soft drink suppliers, they do not even manage the production process but leave make, deliver, and sell to independent bottlers.

Additionally, in most situations beer and soft drink products are delivered directly to the retail location and by-pass retail distribution. This approach benefits the retailer because they are not forced to handle and transport beverage products which are significantly heavier than most food products. The beverage companies benefit from the ability to merchandise themselves and manage promotions at a local level.

Why Retailer Collaboration is More Challenging in the Beverage Value Chain

Retailer collaboration through e-commerce initiatives is more complex in the beverage value chain. This is because unlike the traditional CPG chain which has full visibility to transactions with the retailer, the big 4 beverage suppliers are reliant on their independent distributors who transact with retailers. AB InBev needs to have the same level of visibility over their independent wholesalers as Proctor and Gamble has over its distribution centers….no easy task.

How the Route Accounting System Helps

The route accounting system is the core back office system for independent beverage distributors (think ERP for beverage distributors). Best-of-breed route accounting systems have certified integration back to the large beverage supplier organizations. Through this integration, the large beverage suppliers are able to have transaction visibility throughout their distributed value chain. This collaboration allows product, pricing, and promotional information to flow from the supplier to the independent distributor. It also allows sales transactions to flow from the independent distributor back to the supplier so that the supplier can provide this information to the large (and demanding) retailers. Therefore, it is really the route accounting systems which allow the large beverage supplier organization to provide retailers the e-commerce supply chain collaboration they demand.