TACIT AND OVERT

In most cases the largest if not the only one asset of a trading company is its trading stock, which typically causes most problems while stock recording.
Such things as banal thefts or usual stock worries like misgrading or shortage are not worth while mentioning for their being easily settled by introducing regular stock-taking system, which is rather labour-intensive but simple.
Shortly speaking quantitative accounting doesn’t cause any serious problems whereas value accounting does especially when you deal with goods with fluctuating demand.

How actual it the price of 100 RUR an item of good was bought for and put to stock once its market price now is 50 RUR or due to being seasonal it´s of no demand at all?
It goes without saying that in such situation the goods’ book value is one thing and it’s the price it can be sold at is another. As a result the situation is twice as worse for
- firstly management accounts are inaccurate for they show nonexistent assets and P&L data is much more optimistic than it is for the expenditures don’t show losses due to goods’ market value loss;
- secondly, the stock-list is getting more and more shelfwarmers — the goods with no chances to be sold due to its known non market value. The pro ratio portion of the worthy stock depreciates and takes up the space for nothing.

Let’s imagine the assortment lists thousands of absolutely heterogeneous item names. More than realistic. Thus due to lack of proper control the problem may grow bigger.

In fact on average 20-30% of shelfwarmers in the stock is a pretty good result. Usual figures for such irrelevant business formats as "Kiosks Empires" are much worse.

Schematically the proper control is rather simple-the assortment is divided into directions headed by the responsible officer whose money motivation is based on his direction KPI e.g gross margin and stock turn. With spread spatial structure the vertical of assortment responsibility replicates on the territory levels.
The stockturn component of motivation or such like gives an impetus to the ones in charge to keep a close eye on the stock and prices being current and to avoid shelfwarmers appearance.

However life is one thing and schemes are another. Even highly professional and well motivated responsible product-managers, are human beings and human factor can cause unconstructive fit of temper.
For there’s a huge difference between buying, selling and dealing in big money with your phone ringing off the hook and trifling hours sorting out the remains, marking down, thinking out special offers to get rid of the shelfwarmers and doing other unambitious and uninspiring things which alongside this neither turn a profit nor increase the salary at least directly ann worse it seems they do decrease both.

Fortunately, Ultima ERP copes with such uninspiring and unambitious but extremely necessary for the business tasks hands down.

Firstly let’s give a definition to "a shelfwarmer", say a number of days in stock without sales and/or the estimated time of the item’s presence in stock exceeds Х days and/or number of the item’s page views doesn’t reach У a week. The set of criteria can be arbitrary complex for it’s adopted to each specific business or class of goods or a specific single item if desired.

Afterwards our "antishelfwarming" robot can work both in warning (generating shelfwarmers dynamic repots, escalating the problem on reaching the target critical indexes, prioritized listing of "shelfwarmers" in sales catalogues, extra points for loyalty program members, and active mode.
In the latter it provides regular marking down of shelfwarmers by well-defined business rules till these bargain sales allow to exclude the particular item from this unworthy category.

That’s the way Ultima ERP prevents a tiny problem from growing into a big one possibly harmless for the whole business profitability.

A discerning reader may ask whether it’s worth while wasting time describing a rather uncomplicated functional?
It is for despite the functional being very simple we belive one of our competitive advantages is considering the client’s problems from the business side not programming.

Low margin and high stock turn are typical for developed highly competitive markets thus in the situation being as it is assortment handling optimization resulting in significant shelfwarmers percentage reduction and minimizing contingent losses are likely to lead to multiple profit mark up.

Even if this result have been reached comparatively easily its absolute value isn’t any lower.

Ultima ERP. Real effectiveness for real businesses.
Eager to share our experience.