Joe's Journal

Well, sports fans, we’re on the home stretch of our five part series entitled “5-Steps to Successful Inventory Management.” Today we discuss the fourth step: Auditing Receipt of Invoices.  Of all the five steps (order process, communication, receiving inventory items, audit invoices, and reports), auditing invoices and vendor deals is the last chance in the cycle to be certain your vendors’ invoices are accurate.

The following are 5 tips to consider when auditing invoices and vendor adjustments:

• Verify cost and retail extensions. When deliveries are made store personnel should have either a pre-printed invoice or, if checking by hand-held scanner, an invoice should be printed using the store’s pricebook cost. Instant verification while the delivery driver is still in the store will set the tone for your relations with the vendor in that you have a real time system in place to verify invoiced items. Remember in your 20s (or perhaps last week), when you were too busy boozing and schmoozing to check your bar tab at the end of the night…only to discover the next morning that all of those cocktails your friends kept pushing your way (and theirs!) were actually going on your tab?  Don’t be that guy. Check your receipts…before your friends and, in this case, your vendors leave the building.

• Verify cost and selling price. Whose cost and selling price is right? Yours or your vendor’s?  Make this all about you.  After all, it is your store.

• Rebates, Buy Downs, Allowances…Oh My! Rebates, Buy Downs, Allowances, Mark ups, Mark Downs…they all affect the inventory value. Don’t forget to account for any items affected. Cigarette rebates in our industry are critical to your bottom line, so be sure you have a policy in place to track your rebates.

• Stick to the plan. Most importantly, be sure to have a policy and procedure in place to account for any cost and selling price changes which will affect your inventory valuation. OK, so you find an error on an invoice…now what?  Be sure your store personnel know what the next steps are.  In Washington this pre-season, All Pro tackle, Albert Haynesworth, came into training camp out of shape and assumed, as in the past, no one would be checking up on him.  But with a new coach who is excellent at establishing and enforcing the rules, Haynesworth learned the hard way what it was like to play with the scrubs last weekend in an exhibition game.  He was not amused.  Likewise, when you set the rules and encourage your employees to follow through, your vendors will know you intend to be the head coach of your store. They must play by your rules or get out of the game.

• Post the items to inventory with all adjustments and corrections. You have worked hard to build a solid foundation with the previous four steps, so go ahead and post your items secure in the knowledge that you have an extremely accurate inventory valuation in place.

Next week, we will wrap up our 5-Steps to Successful Inventory Management series as we discuss reporting and the information you need to know in order to achieve success.

Over the past three weeks, we have been discussing the 5 Steps to Successful Inventory Management (order process, communication, receiving inventory items, audit invoices, and reports). Weeks 1 and 2 highlighted the importance of streamlining your ordering process in addition to listing tips on how to effectively communicate your policies to vendors and employees. Today we will discuss Step #3 — best practices for receiving inventory items.

As a general rule, we are taught that it is always better to give than receive. Whoever said this (which, after a quick Google search, could be anyone from Jesus to Elton John’s boyfriend) clearly never had much experience in working retail. The goal for the items in your store should be like Tiger Woods in Vegas — get in, get out, leave the money on the table. While receiving items from vendors may seem fairly routine, common pit falls do abound. The following scenarios are what clients have told us is critical to their success (and is easily remembered by using the acronym GREAT):

1. GET What You Pay For. Did you get all the items you ordered? Do your store employees know what to do if an order is not fulfilled? Is there a substitute item? If it is a popular selling item, when will you receive the missing item? How is the home office notified? Remember…communication is key!
2. RELEASE Cupid’s Chokehold. Ah…the sweetheart deals. If you do not have a policy in place, then you leave the potential for a vendor to get too cozy with your store personnel. Before you know it, your store becomes a dumping ground for every new product to hit the market. These types of stores are easy to identify — product is stacked from floor to ceiling, inventory turn reports reveal numbers that would lead you to believe product delivery should be every 90 days instead of 7 days, and your inventory keeps growing while your cash keeps shrinking.
3. EYE the receipt. It is imperative that you verify your receipt process.  Most grocers provide an electronic invoice.  Hand-held scanners can be used to check vendors in and weed out any unauthorized items and invalid pricing immediately.  If the costs are not correct, you should have a policy in place for notification to the vendor and to the home office.
4. That’s AMORE. Don’t let a vendor show your store personnel all the love. Showing your store personnel that you care and that they are a valued member of your organization, gives them assurance and confidence in their job…at least until their daily prayer of “Lord, let me prove that winning the lottery won’t spoil me” gets answered.
5. TRIM the Fat. Did you get items you didn’t order? How do you handle unauthorized items coming into your store? Your store personnel know to contact you, right?

Each of these five elements is critical and should be checked and re-checked to be certain the processes you have in place are followed religiously by all parties. Be sure to join us next week as we discuss the thrilling topic of audit invoices. Have a GREAT day!

Last week, we kicked off our 5-step series regarding How to Successfully Manage Your Inventory by discussing some best practices to use during the ordering process. Today, we move on to the topic of communication.  Of all the five steps (order process, communication, receiving inventory items, audit invoices, and reports), communication is the most important. It is this process that could have your organization as synergized as a fine-tuned concerto or as dysfunctional as a baby mama waiting for the paternity test on the Jerry Springer show.

It is imperative that every employee in your organization understand their role and responsibility. In addition to your employees, the vendors you allow into your store should understand the same. Assuming you have one person (and a backup person) assigned from your organization to place orders, following are examples of what should be effectively communicated within your company:

• New products. The store supervisors, managers, and vendors all need to be notified of newly authorized products.   Not only should you let your store personnel know a new product is going to be delivered to their store, the also should know where that product will be placed for maximum selling exposure.   If you have a “Back-to-School” promotion of a new brand of energy drink you want the product placement prominently displayed.
• Price Changes. Communicate new price and cost changes. While price changes are done automatically within most systems for scanning purposes, it is always a sound practice to verbally review with store personnel to be sure display signs and shelf labels have been changed. We see exception reports with retail prices lower than costs every week. Don’t be that person.
• Discontinued Items. Is it time to mark down seasonal items or do you have items on your shelf that just aren’t moving?  What about that can of chocolate covered worms? After 4 years, it’s bound to become a collector’s item, right? Wrong! Let your store employees know when it is time to free up space for hotter selling items.
• Vendor relations. R-E-S-P-E-C-T. Do your vendors respect you or do they steamroll over you like Chris Brown on a bender? Vendors need to know YOUR policy for being able to do business in your store. If your policy is that no vendor is allowed to place a product, change prices at the time of delivery, or change quantity ordered, the vendor needs to know. If a product cost has been agreed upon, the vendor needs to know that is what you are paying and not a penny more. If you order 30 cases of Corona 12 pack bottles, then your store will ONLY accept 30 cases.  Why?  Because it is your store, not the supplier’s annex warehouse.  Vendor communication is absolutely critical.  Much like a toddler, vendors appreciate boundaries and will respect you for establishing the ground rules for doing business in your stores. Your stores are not their stores.  If you do not communicate the rules of doing business with your suppliers, you are placing your business jeopardy.  Vendors really do want you to be successful, so actively communicate with them to place product where it will sell and work with them to find the top selling and high grossing items.

As Saul Alinsky put it, “Without effective communication you cannot lead…you end up taking a walk on your own.” Everyone works best when they are all on the same page. Implementing the steps above puts your organization one step closer to perfect harmony…and that, friends, is a sweet, sweet sound. Ka-ching.

This summer has been quite a busy time for us here at CMI! In addition to all of the work we have been doing to expand our online and in-house educational offerings, we are thrilled to announce that we have been invited by the Pacific Oil Conference (POC) to lead a seminar entitled “Inventory Management: Retailer Best Practices” on September 21, 2010 as part of their Retail Track seminar sessions.

The Retail Track seminar sessions are new for POC and include workshops presenting information regarding Security & Theft Protection, Credit Card Interchange industry updates, Petroleum Profit Margins, and Retail Inventory Management. Attendees will walk away with a wealth of information to help them maximize the bottom line. We were honored by the invitation to facilitate such a program…especially in its inaugural year.   

As we prepared for the panel discussion, we solicited best practices from a group of our convenience store clients, petroleum distributors, grocers, and DSD suppliers.

Through our discussions, 5 key elements rose above all others in how to best manage inventory:

1. Ordering Process – how and what to order
2. Communication between home office, store, and vendor
3. Establishing receipt of inventory procedures – did you get the items you ordered?
4. Audit Invoices for accuracy – whose cost is right, yours or the vendors?
5. Analysis of reports – are you drowning in paperwork?

Over the next several weeks leading up to the POC convention, we will discuss these 5 Keys to Inventory Control for those of you unable to attend the POC. If you are attending POC, but have already signed up for the Golf Tournament or the Bowling Tournament, have no fear. Swing by booth #528 for your very own autographed copy of the presentation.

See you at POC!

If you had asked Darlene, our favorite local c-store manager, a few years ago “What does it mean to “go green”?” her reply would have included the words “leprechauns”, “selling those green beers for all that green money”, and “some Saint named Patrick”.  In today’s environmentally conscious world, however, “going green” has become not only both the responsible and trendy choice, but an economically savvy one at that. Nowadays, going green can actually save you green!

While companies like CMI can save you the cost of paper (and for the planet – the cost of a tree), the big industry buzz is how energy efficiency (from energy efficient refrigeration and HVAC to energy efficient light bulbs) can save you significant long term dollars. In fact, according to EnergyStar.gov, 38% of energy use in grocery & convenience stores can be attributed to refrigeration.  The report goes on to list some practical, no-cost tips on how to save on your refrigeration energy use. Examples would be:

• Check temperature settings - If settings are lower than necessary, chances are you are wasting energy. The most common recommended settings are between -14 degrees and -8 degrees Fahrenheit for freezers and between 35 degrees and 38 degrees Fahrenheit for refrigerators.
• Clean cooling coils – Dirt accumulation impairs proper heat transfer and lowers the efficiency and capacity of refrigerators.
• Check door seals - Tight seals and properly closing doors prevent warm air from entering the unit, which reduces cooling energy and prevents frost buildup. Use this rule of thumb: If you can easily slide a dollar bill into the seal, have the seal adjusted.
• Keep doors shut - Repeated fluctuations in temperature will damage food quality and will cost money.
• Maintain equipment - Perform any scheduled maintenance on the units and keep evaporator coils clean and free of ice build-up.

Simple steps like these are easy ways to get your stores thinking (and saving) green.

Yes, by some, the green movement may be seen as threat as more energy efficiency cars may, in theory, decrease the volumes of gasoline sold at the pump. However, in the long run, our industry will adjust as we have proven to be nimble enough to take on any challenge.  Convenience stores will still be the place to go to fuel your vehicle…be it with gasoline, diesel,  E-85 fuel, electric, biodiesel, green beer or whatever else the future holds for powering our modes of transportation.

One thing, however, will never change.  Darlene, our Irish lass wannabe, will still wear green on St. Patrick’s Day and peddle her green beers.  Her customers will still shop in her store…if only to see that friendly smile and hear her latest words of wisdom. Rumor has it, today she will be blessing customers with this old Irish prayer as they stop in for their pre-package corned beef sandwiches:

May the wind be always at your back.
May the sun shine warm upon your face,
The rains fall soft upon your fields.
And until we meet again,
May God hold you in the palm of his hand.”

Have a great Patty’s Day!