know your numbers! the quantity-on-hand (qoh) quick guide

An Epicor White Paper

Know Your Numbers!The Quantity-on-Hand (QOH) Quick GuideRetail Best Practices Series

Table of Contents

Getting an Accurate Count the Traditional

Way...or the New Way ...........................................................................1

Hiring the Right People to Become Your

Inventory Accuracy Ambassadors ...........................................................3

Creating a Team Environment by Setting Key Policies ............................4

Keeping a Finger on the Pulse of Your Business by

Implementing Routine Monitoring Activities ..........................................5

Taking Control...by Using Controls .........................................................6

Know Your Numbers! The Quantity-on-Hand (QOH) Quick Guide

iii

Epicor works with many retailers who are facing fierce competition from big boxes, higher customer service expectations, and the increasingly rapid pace of doing business. You’re likely facing similar challenges…

As important as it is to out-price and outsmart the competition while providing exceptional customer service, focusing on those challenges without an eye on inventory is a common and unintentional oversight. We have observed that most retailers are not fully aware of the impact inaccurate inventory numbers can have on a business.

It seems so harmless, but it’s not. Inaccurate quantities-on-hand (QOH) data is costing you more than you think. It can mean you have dollars locked up in excessive, unprofitable inventory. It can also mean that you might be providing inaccurate answers to customer stock inquiries, which, in turn, could be forcing customers to shop elsewhere.

A lost $20 sale today from a mistake in the inventory numbers could result in much more than a $20 loss. Simply consider the long-term: lost future sales from that customer, lost marketing costs, and even negative reviews which could cost you other potential customers and further limit your sales. You could be out of thousands of dollars simply by not having accurate inventory numbers to rely on.

You know the story. A customer has called asking if an item is in stock. Your data indicates that yes, you do. However, when the customer arrives, the item is nowhere to be found. You offer to special order the item, but the customer is upset and no longer wants to do business with you. The customer goes to another retailer for the item, and you’ve just lost sales today and in the future.

It is estimated that if you increase your customer retention by 5%, it could mean a boost of 25% to 100% on your bottom line. One way to increase customer retention is to have the accurate inventory data you AND your customers can rely on.

Every retail business management system worth considering is designed to keep track of inventory. But the best systems help you tackle the most important elements of inventory control: keeping cash flow and dollars in your business while also keeping your customers very, very happy.

Epicor has been providing software solutions for over 40 years to retailers looking to better track their QOH, provide exceptional customer service, and improve margins.

Use the tips on the following pages to help you get started on accurate QOH today.

Read strategies on:

1. Getting an Accurate Count the Traditional Way…or the New Way

2. Hiring the Right People to Become Your Inventory Accuracy Ambassadors

3. Creating a Team Environment by Setting Key Policies

4. Keeping a Finger on the Pulse of Your Business by Implementing Routine Monitoring Activities

5. Taking Control…by Using Controls

Let’s get started.


1

Getting an Accurate Count the Traditional Way…or the New WayAt the heart of every retail business is its inventory. It is, after all, your largest asset, and your largest capital investment.

Here’s our first lesson on QOH. You really must take a physical inventory. We know, we know, you’d rather stick your finger in an electrical socket, or go swimming with sharks AND piranhas. But it must be done in one way or another.

! If you do not have an accurate count, you cannot accurately determine

what to order. You also cannot generate an accurate Financial Statement for your business. Simply put, it’s the essential starting point.

The first step in getting your quantity-on-hand up to date is to see what you currently have. Whether you close down and call an all-hands-on-deck on the prettiest weekend of the year (Murphy’s law says this will inevitably happen) or decide to cycle count or invest in managed inventory accuracy services (which give a targeted monthly count sheet of “special” SKUs to monitor), it has to be done.

Here are the three methods of counting and more about how to do each:

Count Method How it’s Done What is CountedLevel of Labor

Required Physical Year-End One time a year All items once HighCycle Counting Continuous–each

item is counted 3x/year

All items 3x Medium

Managed Inventory Accuracy Services

Monthly Special items Low

1. Physical Year-End

You are probably most familiar with this type of counting. Usually you have a mandatory work weekend, you shut down the store at year-end, and you count all the items in the store, then load and reconcile the counts against the system’s numbers.

In short, this method is a pain in the neck.

It requires a lot—and we mean a LOT—of labor hours to work through the store all at once, it can take weeks to reconcile the counts, and it usually means you’re losing dollars as you shut down for the weekend.

2. Cycle Counting

Instead of waiting to count at the end of the year, this method involves continuous physical inventory done in cycles according to physical location, category, or other attributes. The advantages include being able to stay open for business during counts, more accurate counts, and counting hours spread throughout the year instead of in one fell swoop.


2

The challenge with cycle counting is being able to stay on top of the counting requirements, and this is best resolved by making a plan and calendar so that each location is counted at least three times a year.

3. Managed Inventory Accuracy Services

The third method involves counting monthly the inventory that is most important in your business. The concept here is that it isn’t necessary to count all your items; instead you count the moving inventory. Identifying the “important” SKUs takes time, so the best way to resolve this is to hire a company offering this service. The company will put together customized count sheets, and you count those recommended SKUs only. This method requires a lot less labor hours and yields accurate results.

Whether you choose method one, two, or three depends on your business, of course, along with the technology you have available to commit to an accurate inventory count.

Now that you have counted, let’s keep that number up-to-date.


Epicor® Eagle® Does

That!

The Eagle Mobile RF

scanner is designed to help

you with physical inventory

counts, printing bin labels,

receiving and more.

Epicor is also working on

developing partnerships

with companies offering

managed inventory

accuracy services so that

you don’t have to spend

so much time counting…

instead you can spend your

time planning how to grow

your business and help

more customers!

3

Epicor Eagle Does That!

Training on Demand is a

subscription-based online

training program to help

newcomers get familiar with

the Eagle system and their roles

within your company. If you do

have turnover in your inventory

ambassadors, this is a good

place to train the new hires.


Hiring the Right People to Become Your Inventory Accuracy Ambassadors

The second lesson for an accurate QOH is to get the right people. Perhaps this is an oversimplification, but sometimes, things really are that simple. With your best, most organized people assigned to promote inventory accuracy; you’re on your way!

Back to Basics Quiz

Q: Where should you put your best people?

A: It might be that your very best thinkers and doers are also the best you have at working the POS. You may not want to take your best floor clerk away from your customers, even for two hours a day. It’s also important to consider who will be the best fit to take the lead in receiving—a key role in inventory.

In all likelihood, however, you know which people to put where, and everyone will benefit, including your customers.

Here are some tips for finding your best people for inventory accuracy. When hiring, remember to:

3 Ask yourself, can they do the job? Do they fit with the culture of your business?

3 Ask them what they think it means to be successful, which can reveal a level of drive, ambition, and aptitude

3 Determine their level of focus. Inventory accuracy requires the discipline and ability to pay attention to a range of SKU level details

3 Promote ownership. Ideal employees work with pride and treat their area of responsibility as if it were their own business or store

3 Encourage a recruitment environment 24/7. Your employees can leave at any time, so it’s important to make it worthwhile for them to stay

3 When you hire seasonal employees, look for ones that might want to transition to full-time hires

3 Consider schedule flexibility, education, and experience

3 Look for a positive attitude. The most successful people are enthusiastic and work passionately to meet or exceed their assigned goals

People! Put your most organized ones on keeping track of inventory.

4

Epicor Eagle Does That!

Training on Demand allows you

to post your policies on the

central training portal so that

employees can access those

important elements at any

time.


Creating a Team Environment by Setting Key Policies Keeping inventory working well is like keeping order on the highways and byways. Things work better when everyone follows a basic set of rules.

The third lesson in QOH accuracy is that you’ll need to set some clear policies and encourage everyone in your workplace to follow them. When everyone follows these policies, it will create a team effect and help you maintain accurate inventory data, which can lead to better customer service.

The specifics will vary depending on your business’ size, market, inventory breadth, and other factors. But some things are nearly universal—such as the following:

3 Every item to be stocked and/or sold has a unique SKU. Some exceptions may exist, based on your particular business model. EVERY effort must be made to limit these exceptions to the base minimum.

3 Except where completely impractical, every item has a barcode.

3 Barcodes affixed to stock—or stock locations— must be accurate. Always.

3 Your policy on returns, refunds and exchanges must be clear and consistent, and should address defective items, validation procedures, and other pertinent issues. You need to post this policy for all customers and employees. All employees must be well versed in the policy.

These are just examples, but...see where we’re going here?

! Here’s a policy for setting policies: If an activity, event, stakeholder or

other factor of any kind affects items or the way they’re counted, received, sold, or returned, rules may be in order.

Back to Basics

Don’t be afraid to set rules nor to stress the value and importance of following those rules to every employee. Maintaining an accurate inventory is every employee’s responsibility. Anyone who touches product any place during the business cycle has the ability to affect the accuracy of an inventory.

Finally, know that there will be more rules to come—most of them specific to certain situations or activities. You’ll get to those, when you need to.

For now, just set up the basics, and follow them. And know that they’re very, very important.

5


Keeping a Finger on the Pulse of Your Business by Implementing Routine Monitoring ActivitiesMonitoring information important for inventory mastery means using your system to access all the transactions that affect inventory. Think purchasing, receiving, POS, transfers, returns, write-offs.

Here is the fourth lesson of QOH accuracy: monitor the numbers even if you’re on the go! If you’re like most retailers, you’re not in front of a computer all day. You’re on the floor, or visiting important customer sites, or your other store locations, or checking out the competition.

! Monitoring shouldn’t—really, must not—stop just because you’re away

from your desk. What’s selling today? And what isn’t? Where do you have extra quantities of a hot item? Which stores, departments or inventory classes are lagging and leading?

Did You Know?

You can use a mobile app (Eagle Mobile Manager is one of them) to get access to business performance data, where and when you need it. Having this kind of visibility at a glance gives you the power to respond quickly to issues and opportunities.

Here are a few things to keep your eye on every day:

3 Low inventory: which items are at risk of stock outs? Review quantities-on-hand for your popular items. If your QOH is less than your order point, you are at risk of running out.

3 Excess inventory: where do you have capital needlessly tied up? Review quantities-on-hand vs. order points in your system. If your QOH is greater than the order point, then you are likely sitting on excess product and dollars, particularly if the items are slow-moving or dead items.

3 Inventory value by department or location, and by vendor Run an inventory valuation report nightly in order to best monitor how much cash you have tied up in inventory.

3 Top Sellers (and bottom-dwellers) It’s all about the popularity. Run a report ranking your items in terms of their popularity and profitability at least weekly.

! If items are not selling, come up with a plan to reduce or

eliminate them.

3 Remerchandise the store, so that your customers can “discover” items that have been there all along.

3 Create promotions to attract buyers to non-selling items.

3 Donate non-selling items to appropriate outlets and take the tax break. Churches, schools, shelters, and other organizations will welcome your castoffs.

3 Utilize online marketplaces to expand your customer base.

Eagle Does That!In the Epicor Eagle system,

the Inventory Transaction

Register or ITR is an

invaluable tool for tracking

and understanding

changes to QOH. NOTE:

ITR is part of the System

Audit & Reporting

Tools package (SART).

SART includes multiple

viewers and archives to

track changes made to

Customers, Vendors, SKUs,

Quantities, etc.

Eagle Performance

Manager (and the

mobile app Mobile

Manager) is a great tool

for tracking—and then

analyzing—these items at

a glance, saving you the

effort of sorting through

multiple reports and

viewers.

6


Eagle Does That!Leverage the Reorder

Point Calculation Report

(ROP) in Eagle to calculate

reorder points, or, if you

want a more accurate

and sophisticated way to

calculate reorder points, try

Eagle Inventory Planner.

Epicor Eagle provides a

wealth of inventory control

points and tools, found in

both the core system and in

inventory-focused solutions

including:

• Eagle Inventory Planner

• Eagle Mobile Inventory

• Eagle Pricing Planner

• Eagle Performance

Manager

Taking Control...by Using Controls Our final lesson of QOH management: gain greater control over your

inventory by mastering the procedures and tools that help keep QOH accurate and customer service in tip-top shape.

Here are some widely used examples of QOH tools and techniques that you must master in order to keep your QOH in check:

3 Tools for setting and using reorder points ERP systems will often provide inventory management software that includes reorder point calculation reports. More advanced technology will offer forecasting models to best match supply with demand.

3 Tools for systematic cycle counting or managed inventory accuracy If you’re cycle counting, use RF scanners to check QOH variances and better track inventory shrinkage. Some companies are also providing services which supply customized monthly count sheets for more targeted inventory tracking.

3 Tools for creating and using forecasting models to predict demand and drive replenishment Accurately predicting product demand is difficult. Sophisticated forecasting models allow you to make the best possible demand predictions based on past sales history.

3 Tools for balancing stock across multiple stores/locations Reduce the amount of time it takes you to balance inventory levels across stores by utilizing Stock Transfer Balancing software. This allows you to make product movement decisions. You set your system to auto-generate transfers to reduce the amount of time it takes to manage a multi-store inventory.

Call us today for more information Already an Eagle customer? Contact us at 800.538.8597. New to Epicor? Please call 888.463.4700.

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About EpicorEpicor Software Corporation is a global leader delivering business software solutions to the manufacturing, distribution, retail, and service industries. With more than 40 years of experience, Epicor has more than 20,000 customers in over 150 countries. Epicor solutions enable companies to drive increased efficiency and improve profitability. With a history of innovation, industry expertise, and passion for excellence, Epicor inspires customers to build lasting competitive advantage. Epicor provides the single point of accountability that local, regional, and global businesses demand. For more information, visit www.epicor.com.

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This document is for informational purposes only and is subject to change without notice. This document and its contents, including the viewpoints, dates and functional content expressed herein are believed to be accurate as of its date of publication, October 2013. However, Epicor Software Corporation makes no guarantee, representations or warranties with regard to the enclosed information and specifically disclaims any applicable implied warranties, such as for fitness for a particular purpose, merchantability, satisfactory quality, and reasonable skill and care. As each user of Epicor software is likely to be unique in their requirements in the use of such software and their business processes, users of this document are always advised to discuss the content of this document with their Epicor account manager. All information contained herein is subject to change without notice and changes to this document since printing and other important information about the software product are made or published in release notes, and you are urged to obtain the current release notes for the software product. We welcome user comments and reserve the right to revise this publication and/or make improvements or changes to the products or programs described in this publication at any time, without notice. The usage of any Epicor Software shall be pursuant to an Epicor end user license agreement and the performance of any consulting services by Epicor personnel shall be pursuant to the standard services terms and conditions of Epicor Software Corporation. Epicor, Business Inspired, the Epicor logo and Eagle are trademarks or registered trademarks of Epicor Software Corporation or its affiliated companies registered in the United States and certain other countries. All other trademarks mentioned are the property of their respective owners. Copyright © 2013 Epicor Software Corporation. All rights reserved.

know your numbers! the quantity-on-hand (qoh) quick guide

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