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05 - Business Operations Management, P&L Control & More

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  #1  
Old 02-26-2005, 03:06 PM
aslack aslack is offline
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Default Why stock control is important for small businesses

For a small business, stock/inventory control is a crucially important aspect of business and it does play a very important role in the daily operations of your company. Supplies can have problems and other 3rd party problems can result in unavailable stock.

Holding too much stock can result in unavailable funds for other areas of your business and extra storage costs, however having too little stock can result in loss of sales. You should also monitor slow moving stock as holding a lot of this will be a drain on resources, the is a very large balancing act, luckily there is software to help you with this (highlighted below).

Costs of holding stock

When holding stock you need to be aware of the carrying costs which include: storage (holding the stock), insurance (incase of theft/damage), costs on funds tied up (interest or lack of investment opportunities) and the costs of damaged that often accrue in the workplace.

Your task through your stock control systems is to minimise stock holding costs but at the same time making sure you do not lose money by losing valuable sales.

Analysing the stock turnover rate

There are easy to use systems that will help you with your stock control management, one of the most important is analysing your stock turnover rate and thus making good management decisions when coming to order stock. A simple formula is highlighted below:

Number of items sold ÷ Average stock level = Rate of stock turnover

An example could be, 3,000 footballs in a year, and your average stock is 300 footballs at one time, then your purchase rate and stock turnover is about 10 times per year and can work out that you carry about 5 weeks supply (52 weeks / 10 times).

You should know from your own research and business model if this is too much or too little, if you’re unsure you should experiment with ordering less and them more to see how effectively your business copes with these changers.

Also be aware that if stock is being sold slowly or if you have large amounts sitting around this is poor use of stock control and money is being wasted.

Different Ordering Methods

There are two common ordering methods which are worth reading about, Just-In-Time (or known as JIT) which means leaving your ordering to the last moment to reduce handling costs and storage issues, and bulk buying which requires more space but often results in a lower purchase price.

Advantages and Disadvantages with a Just-In-Time solution based over a bulk buying solution:

Advantages:

1. Reduces outgoing cash flow and spreads the costs over the year
2. Lowers the cost of storage and insurance
3. Easier to work out your future requirements (if its not here, we need some)
4. Reduces risk of stock not being sold/price decreasing

Disadvantages:

1. Buying in smaller amounts will result in higher prices than bulk buying
2. Smaller stock could result times of no stock, resulting in customers going else ware
3. Other jobs will be effected as you have to manage the deliveries
4. Delivery costs increase as you require more frequent deliveries
5. Accounting work increases due to more deliveries and paperwork

Stock Control Systems

Available stock control systems include the following:

• Online System (New)
• Software Purchase
• Custom Built Solution
• Paper Based Solution

Online System (New)

A new online system has been developed with allows small businesses to login and manage there stock levels, this is perfect for business with more than one location or for people always on the move, you can monitor and react from information delivered to your computer from any ware in the world. A system like http://www.stock-control.com (the leader in online stock control systems) has many obvious benefits:

1. Cost effective (no software to purchase/upgrade)
2. No new hardware needed
3. Available from multiple locations
4. Easy to use system/set-up system
5. Free support available (unlike all other systems)
6. Time saving (no need to produce your own reports or fill in endless paperwork)
7. Up/Down sizeable for when your business grows or shrinks
8. Easy to train other members of staff
9. 30 day free trials available

The online system does have many more benefits over other systems, but I have highlighted a few of the most important ones.

Software Purchase

There are a number of off-the-shelf systems including OrderWise, StockHome and StockIT.

These systems can be very pricey ranging from $10,000, they are often very difficult to set-up and maintain, and can often require a fulltime member of staff to keep on top of the software (not very effective for a small business). Once you have purchased the software the level of support is often very low and therefore takes a long time to get problems fixed.

These systems are normally developed for single locations sites and are hard to use in more than one location, they are also developed for larger business in mind and therefore are not best suited for the smaller sole-trader.

Custom Built Solution

These are very expensive and are only used by big blue chip companies, if you are a small shop/store owner or work from home this would not a feasible option.

Paper Based Solution

The most common form of stock control method is the simple pen and paper, why should small businesses move away from this?

This method can be very time consuming in producing reports/forecasts which the above software will do within seconds, the management of stock is vastly reduced, the information can be lost or damaged, this is both hard and time consuming to upgrade to one of the other solutions, allowing other staff to take over this responsibility is very difficult.

Conclusions

After reviewing all the above we suggest if you’re currently using a paper-based solution you should seriously consider upgrading to one of the software packages highlighted above. This would definitely save your business both time and money.

We suggest if you are a small business you should defiantly trial the online software available from companies like stock-control.com (http://www.stock-control.com) and if you are serious about saving your company money do some more research into better ways to manage your stock.
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  #2  
Old 02-26-2005, 05:13 PM
MaxusPaldane MaxusPaldane is offline
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Quote:
Originally Posted by aslack
Custom Built Solution

These are very expensive and are only used by big blue chip companies, if you are a small shop/store owner or work from home this would not a feasible option.

That is, unless someone designed their entire business around bringing 'blue chip' solutions down to the small business sector.

I couldn't resist...
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  #3  
Old 02-27-2005, 08:55 AM
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pete pete is offline
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10 turns is virtually impossible in real life. In most industries, either retail or wholesale, 4 turns annually is considered a realistic goal to maintain a good return on investment.

Gross profit also needs to be considered, since with a higher gross, you have fewer turns and still maintain a good ROI.

For many retailers, an Open To Buy program will help them maximize turns by product category. An OTB program will tell them that in Ladders they have too much invested and must sell down what they have before ordering more. At that point the owner may decide to cut prices to move out the dead inventory and get back in a balanced state in the Ladder dpartment.

While turns is a good, quick measure of how someone is managing their inventory, it is not the total answer to inventory management.

Ideally, you want the delivery truck backing up at the back door the instant you sell your last item out the front door. However, supplier minimums, shipping delays and other causes keep this from being a reality. A dock workers strike anywhere in the world can blow any plans. In this day it's wise to have a little cushion.

JIT works great for manufacturing, where a bottle or can manufacturer puts in a plant a mile from the brewery and shuttles stuff to them hourly. Or a bearing manufacurer puts in a warehouse down the road from a vehicle assembly plant. But for most wholesalers and retailers having a source two blocks away who can deliver hourly is impossible.
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  #4  
Old 02-27-2005, 11:02 AM
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OldJack OldJack is offline
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10 turns is low for some mfg businesses. I just did a financial report for a gasket mfg with 10.3 turns when they normally have about 12-14. Turns is only really comparable within ones own industry. A lot of folks think the answer to success is increase sales, but the only real measure of management is the bottom line profit.
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  #5  
Old 02-28-2005, 06:35 PM
Bodee Bodee is offline
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What one businesses turns are compared to another is irrelevent unless they are of simmilar size and in the same industry. What you want to focus on is trends in your business and in the industry. If your turns are slowing down and the indusrties is speeding up your competitors are moving cash much faster than you.

Regardless, every twink you make in inventory management that improves your turns, increases cash flow.

Inventory management is a part of a company's value chain and can be a competitive advantage, look at Dell. I bet they have more than 10 turns a year.
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  #6  
Old 04-06-2005, 05:33 AM
highcontrol highcontrol is offline
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Default Stock Control for Small Businesses

Inventory Management Systems and Stock Control software in general is a very highly saturated market, with hundreds of software houses producing sophisticated systems for all types of industry.

This is how the small software house can be a key niche player in the market, by specialising and targeting certain industries, rather than try to be a swiss army knife program.

A solid functional system is the basis of good stock control, with a simply laid out, well designed interface, which eases the learning curve for new users. Then one must look at the target user, to add further precision in the marketplace.

Split the target end user into groups of user level and computer competence, and design for that level of computer literacy. It is reasonable to assume that most people working in the stock warehouse or sales office of a retail or wholesale distribution business are fairly IT literate, and know their way around a keyboard and mouse, but even then, one should design and cater for the lowest level of competency.

Information Technology should be ubiquitous, much as the mobile cellphone is becoming, and so this simple phrase should be the motto running in the heads of all software engineers. Make it easy to use, so that every one can use it.

So the HighControl Stock Control Business Management software was designed with low IT literacy in mind, although many functions are for the more experienced computer user, the daily tasks of stock purchase, entry, sales, despatching and invoicing are made to be simple to use, and with lowered times of competency by design.

Reason? We saw that many office users, salespeople, warehouse staff and other operational job roles, did not require or have to use IT equipment, any more than a cursory check of email and the web. So their user experience was limited to email programs, browsers and, usually, games. So when introducing a new Stock Control system, it had to be logical and easy to learn & use.

Also, by targeting a specific industry niche, the IT wholesale distributor, it benefitted our target customer by recognising and meeting those needs of that particular industry, so new customers could find all they need straight out of the box, and take control of their inventory problems.

Although we have changed our off-the-shelf package, it is still aimed at the retail or wholsale distributor, taking sales over the phone, email or web, with the occasional walk in customer. The system is set up in such a way that the goods out/despatch is central to operation, so, unlike an EPOS system, it is based on the gereration of a Sales Order, or a Pro-Forma invoice, rather than scan out operation at a till like a supermarket, though we also have scan out capability for faster sales order generation.

For more information on Stock Control and Business Management software, visit http://www.higherminds.co.uk

J
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  #7  
Old 04-22-2005, 04:06 AM
highcontrol highcontrol is offline
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Default Stock Control and the Cost of doing things wrong

Over the years of creating stock control solutions for clients, we found that too many small businesses were not using adequate inventory management tools, either keeping a tally of all their stock in their heads or using inefficient paper based systems, leaving a mess of paper trails everywhere, confounding the inventory control process.

Inevitably, we found that these potential clients were desperately looking for a business tool to manage their inventory, preferably before they reached the critical point where inventory management was taking over the valuable time that could be spent working on building the business.

More and more small business owners approached us for a solution, but were not prepared to pay for the premium products we, or any of our competitors, offered because of the bottom line cost.

Even the argument that improper stock control leads to higher costs (the cost of doing things wrong!), would not persuade them to purchase, much to their own detriment.

Some of our potential clients were in the situation where their Inventory had taken over their storage and office space, with no knowledge of where an individual stock item might be, other than a general location where it should be, but things would move, disappear, reappear or be completely lost.

Mislaid stock is mislaid capital, and keeping your bottom line healthy means knowing where all your cashflow and capital is. Stock costing thousands is capital tied into the business, but these business owners could not see the potential of cost savings through stock management software costing hundreds of pounds.

A few hundred pounds purchasing the correct tools is thousands of pounds saved when your inadequate inventory management is sucking up your capital.

There are stock control programs out on the net for mere tens of dollars like this one www.stock-control-programs.com or just search on www.download.com or www.tucows.com for stock control programs, and more than likely there'll be one to fit your business.

If you want to save costs, just make sure it fits the 80/20 rule to compare each product against another - if it does 80% of what you require for 20% of the cost of the next best product, then your initial ROI is much greater.

When your business expands and grows, then you can re-evaluate the business tools you have, re-evaluate your budget and compare your potential software tools at a later date, for its a simple fact that most small businesses trying to gain momentum require every dollar that it can muster.

Jason
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