Taking stock keeps the bottom line in shape

Stocktaking is a typical Catch 22 exercise: costly to do and costly if you don’t do it. And if the input information is inaccurate, decision makers can’t produce the right answers.

When you’ve got 26 shops nationally and the starting cost for a stocktake is $50,000 plus the loss of potential sales with an error-prone pen and paper system, like JB Hi-Fi’s Geoff Craig you dream of a better solution.

Craig is national IT manager of the Melbourne-based home entertainment products retailer which operates warehouse-look and bargain-type stores on a discount philosophy in stand-alone sites and shopping centre locations.

To keep its inventory up to date, JB Hi-Fi does stocktakes at the same time on the same day in all its sites, which under a manual system meant closing its doors for as much as a day.

The manual system was prone to errors, with staff sometimes writing down the wrong product codes or losing count of the number of products. This resulted in stocktake results that were not accurate, costing JB Hi-Fi money in terms of decisions made based on inaccurate results.

“Doing stocktakes manually was a nightmare,” Craig said.

“Trying to keep track of more than 150,000 individual product codes using pens and paper was extremely difficult. After spending days collecting the information at the stores we then had to spend a week at head office collating it, before we had a clear picture of our true stock levels. It was a very inefficient and ineffective way of working.

“We needed to find a technology solution that would save time and labour and, as a result, money,” said Craig. “It was essential that we be able to complete the stocktakes quicker so the stores — which now employ about 1300 people — had less downtime. It was also very important that we be able to get those results back to head office immediately so that they could make business decisions in real time.”

The retailer looked at a number of alternatives including a device that was attached to a cable, but the cable’s maximum length was 15 metres, which was nowhere near enough to cover the large floor spaces in the stores. “Then we reviewed a number of Radio Frequency scanners, but none of them were suited to our needs because this type of solution would require twice the amount of staff compared to a scanner using batch mode. We needed a cordless solution that could be flexible, work anywhere in the store and we needed the handheld devices to be really tough to cope with shop floor conditions.

JB Hi-Fi then worked with existing business partner Warp Systems to find the perfect solution. Warp Systems (through a value-added reseller) and Symbol Technologies came up with a solution based on Symbol’s pistol-grip-style P460 memory barcode scanners, which are also used at the point of sale (POS). “It was a solution we didn’t even know we were looking for,” Craig said of the P460.

“This is a tight-arse operation and we work to keep prices down. We’ll add eight stores in 2004 and probably another eight the year after — that’s a lot of staff to tie up in stocktaking — so the $600,000 outlay on these devices paid for itself in a couple of years.”

Product information is retained for batch processing at a central kiosk within each store where it is collated before being automatically sent to head office, reducing the amount of time it takes to get this information through.

As the devices are also used as POS scanners within the stores it saves the retailer money on implementing an entirely different POS system, and removes the need for complex integration between POS data and stocktake data.

The implementation was completed two months after deciding to adopt a technology solution with the first of the devices going in about three years ago. “The people at Warp Systems and at Symbol were fantastic, and they really helped drive this project through to completion,” said Craig. “We had to integrate some third party software to round out the solution. Warp had one of its in-house software developers tweak one of the existing stock take programs, and this was then uploaded to the P460.

“Reducing the labour costs and downtime associated with stocktakes was really important to us,” said Craig. “By ensuring the stores are closed for around a quarter of the time they were closed previously, we are minimising the risk to the business of missing out on potential sales.”

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