Here’s How You Can Grow Your Gross Margin by 3 Points

Shrink, spoilage, overstocks, and out-of-stock scenarios are all problems that push pennies off the table. These inventory problems eat into your gross margin… but it doesn’t have to be that way.

Imagine having so much confidence in your item data that you could allow your products to order themselves.

Enter perpetual inventory.

Once thought to be a pipedream… but no longer. More and more retailers are achieving perpetual inventory. During the NGA Show 2019, two CATAPULT® power-users shared how, utilizing ECRS tools, they were able to to optimize their operations and propel their profits. Marczyk Fine Foods has achieved perpetual inventory and LaBonne’s Market continues to strive toward the same goal.

What is Perpetual Inventory?

“Perpetual Inventory is simply a way to track your inventory on a continuous basis so you know what you have on hand and on order at all times. This is done by using the Point of Sale system, the back office, in our case powered by ECRS, to manage the flow of inventory throughout your store and your ordering process.”
– Rob Labonne, LaBonne’s Market

To achieve Perpetual Inventory means to get your inventory tracking down to an exact science so products flow in and out of your stores with precision. When you’re able to track every item on a continuous basis, guesswork is removed. 20th century retailers could only dream of such a thing, but 21st century technologies like CATAPULT make it possible.

Why Does Perpetual Inventory matter to retailers like me?

“Perpetual inventory can provide real-time visibility on total inventory investment, it can also provide efficient analysis of your product mix. It can streamline ordering and auto-reordering. It has a better use of EDI or electronic data interchange, and its main focus is particularly for barcoded items. That’s where this is really going to succeed at. That’s what our company adopted, we focused on the grocery category, primarily in dairy, beverages, and dry goods. It helped reduce out-of-stocks and improved our gross margin.”
– Rob Jones, Marczyk Fine Foods

Perpetual Inventory means more money in your pocket. It means you’ll know what you have on order and what you have on hand at all times.

When you have a perpetual inventory system up and running you will have:

What results can I expect?

“2017 was the last time we actually did a physical inventory for barcoded items in the grocery category. Since then, we have used all of the CATAPULT reporting to rely on our inventory numbers because we always achieve inventory accuracy within the margin of error.”
– Rob Jones, Marczyk Fine Foods

After reaching full perpetual inventory, Marczyk Fine Foods reported the following achievements:

• Their total SKU counts reduced by 17%
• They achieved 99.8% Scan Rates
• Their average inventory value on hand reduced by 11%, improving cash flow
• One of their gross margin dollar metrics increased by 19%
• Sales increased by 12% because of efficient product mix
• They did not need to conduct a physical inventory for the year
• Blended Gross Margin % increased by 3 points

Conclusion

“Ultimately, there’s no silver bullet. You can’t just turn the feature on. The technology is there and it works, but the key to succeeding with this is adopting the 8 Steps to Automation. The act of going through the process, that process is what makes you really take a look at your inventory, and consider all of your options. You can negotiate better agreements with your vendors, and really get a strong handle on your data.”

Reaching perpetual inventory takes time, effort, and commitment. But when you have the right technology stack for the job (like ECRS’ CATAPULT), technology is the easy part. The more difficult task will be the human aspect, changing your store’s employee culture to adapt to perpetual inventory protocols. Luckily, ECRS can help retailers with that task too.