Manager Training Manual

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Merchandising
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Inventory Maintenance

 

Recovery
~Pull down top stock
   -Check all boxes for what is inside.
   -Refill shelves to reasonable capacity – slide bin tags if necessary.
   -Place leftover stock on top shelves.
   -Update counts.
~Pull out back room stock.
   -Check stock room for additional stock.
   -Refill shelves to reasonable capacity – slide bin tags if necessary.
   -Place leftover stock either on top shelves or stock room.
   -Update counts.
~Face and front.
   -Pull items to front of shelves or pegs.
   -Items should be in proper location, replenished, and fronted.
~Clean and dust.
~Remove empty pegs and bins.
~Remove boxes on floors.
~Check end caps.
~Bin tags.
   -All items should have bin tags.
   -No hand written bin tags allowed.
   -Bin tags should be placed on plastic backing and on the left side of bins/shelf spaces of items.
~Bin Tag Colors.
   -Yellow – Standard Color Tag.
   -Green – Never Out Listing.
   -Red – Do Not Reorder Z Flag Or Close-Out Y Flag.
   -Blue – Impulse.
~Signage Colors.
   -Yellow – Regular Signage In Aisles – Never Outs.
   -Pink – Main Aisle, End Caps, Displays, Sidewalk.
   -Lime – Circular/Flyer Sales, Additional Signs Needed.
   -Red – Z Flag And Y Flag Close-Outs.
   -Orange – In Store Specials.
~Counts.
   -The best way to always have items in stock is to have accurate inventory counts.
   -Update incorrect counts as often as possible.
   -Short card – insist all staff to use it.
   -Frequent zero, negative, and cycle counts.
~Close outs.
   -Let your manager know when you have items that need to be reduced in price.
   -Overstock.
   -Z Flag Items.
   -Permission To Z Flag.

Inventory Count Accuracy
Maintaining count accuracy is ensuring that your in-store computer system always has the correct quantity on hand for every item. Having correct counts is critical to your system’s ability to generate an order. The system uses yours sales history and the weeks’ supply value you select to determine each item’s reorder point. It is compares that reorder point to the quantity on hand and the quantity on order to determine if you need to reorder more. Following the procedures to keep your quantity on hand and quantity on order figures correct is necessary for the computer to suggest an accurate order.

The actions of every person in your store, even customers, can affect the accuracy of your on-hand quantities. All associates must be fully trained on your store procedures including cycle counting, receiving, point-of-sale, back-office, and customer service.

For example, items being returned to the store are a frequent cause of incorrect counts. If the item is in sellable condition, it must be handled as a regular return. If it is not sellable, it must be handled as a defective return or defective exchange. A defective exchange is when a customer wants an identical item to replace the defective item. A defective return is when the customer wants to return the defective item, but not replace it with the same item.

Return Scenarios
Refund Reason
               Effect on QOH             Effect on Sales $

Return                            Increase                        Decrease

Defective Return             None                            Decrease

Defective Exchange        Decrease                       None

Cycle Counts
Cycle counting is a method of performing an inventory audit by checking product quantity on a continuous schedule. It is important to count every item in your store at least twice a year. To accomplish this, the store is divided into four-foot sections, with each section defined by a unique location code. These locations are then combined into a number of groups, and the items in each group are counted each. Cycle counts are performed weekly with two sections being reviewed each time.

The key purpose of cycle counting is to identify items with an incorrect quantity on hand in the computer, so this issue can be researched, identified, and eliminated. Some of the other reasons cycle counting is important:
~Improves accuracy of quantity on hand.
~Necessary to generate accurate computer assisted orders.
~Minimizes lost sales.
~Improves customer service.
~Improves accuracy of management reporting and inventory valuation.
~Allows timely detection and correction of errors.
~Identifies high-shrinkage items.
~Replacement of items in proper location codes.
~Reduces year-end inventory write-offs.
~Reduces the need for a physical inventory count of all products at one time. 

Before cycle counts can be performed, recovery of the week’s selected sections must be completed. Those assigned to perform the cycle counts for the week, obtain the assigned sections from the intranet. Once the listing is retrieved, the cycle counts are performed. The sections are either manually counted and logged onto a cycle count sheet or counted with the RF unit. Regardless of how the cycle counts are performed, manually or electronically, the counts must be verified by another person to ensure accurate counts. If there are shortages in quantities of the items, an attempt must be made to find the missing items. Usually these items are misplaced in different sections or placed in the claims box where the special orders and rainchecks are stored. If the items are not found, the necessary revisions are made. Once this is completed, the counts are logged into the Eagle Browser in PIP. If the counts were counted with the RF unit, then the counts are already recorded and sent to PIP. (The sections must be logged in individually. They cannot coincide with each other.) The reports containing the updated counts are printed through RPI. After this, the counts are posted on the intranet and a copy of each report is stored in the cycle counts binder.

Accessing Cycle Count Sections
~Log on to the MVL intranet site.
~Click on the Operations tab.
~Click on the Cycle Count Program link under Useful Links.
~Click on the Calendar link.
~Select store.

Posting Cycle Count Results On Intranet 

~Log on to the MVL intranet site.
~Click on the Operations tab.
~Click on the Cycle Count Program link under Useful Links.
~Click on the Cycle Count Results link.
~Find store and click on the down arrow of link.
~Click Edit Item.
~Enter in results.

Negative Counts
An automatically generated list is checked weekly for items in the store that have a negative quantity on hand (QOH). The count can be done throughout the week, but should be completed before the RSO (Suggest Order) date. Negative counts should not be done on freight and receiving days. The report can be accessed at anytime on the Eagle Browser under the title of RIS.

Before negative counts can be done, recovery must be performed. This includes checking to make sure none of the items are in receiving or in the claims box where the special orders and rainchecks are stored. If items are found, their counts are recorded. After this is completed, the negative counts are performed. The items with negative quantities on hand are located and counted. The quantities of the items are changed to their correct counts (instructions below). A report of changes is printed and stored into the negative and zero counts binder.

Changing Counts & Running Report
~Log on to the Eagle Browser.
~Type in PIP in the Launch field.
~Click on QPIP F3.
~Enter in the SKU number and the correct quantity on hand. Click OK. Repeat this for all of the SKUs.
~Close Program.
~Enter in RPI in the Launch field in the Eagle Brower. Select print settings and then print the report (spool and print).

Zero Counts
The counts are done to ensure that items with quantity on hand (QOH) of zero are recorded as zero so they can be reordered. The counts can be done throughout the week but not on freight and receiving days.

Before zero counts can be done, store recovery must be performed. This is done to ensure that the inventory counts in the database are accurate so that the correct amount will be ordered. If the counts are off, then the store will have a surplus/ shortage of supply of the respective items.

After recovery is completed, zero count sheets are used to record the SKUs and section numbers of the items with a supply count of zero. These SKUs are entered into the Eagle Browser in the PIP page. Once this is done, the reports are printed through the RPI page. Recounts are done after this as a confirmation measure to verify accurate inventory counts. Recounts employ the reports produced from RPI.

Recording Zeros
RF Unit
~Scan the SKU from the bin tags of the zero items.
   -If the SKU does not scan, manually enter the SKU.
~Enter 0 into the Count field. Press FCN and then 3.
Manual Count
~
Make a record of all the SKUs that are zero.
~In the Eagle Browser, type in PIP in the Launch field.
~Click on QPIP F3.
~Enter in the SKU number and the correct quantity on hand. Click OK. Repeat this for all of the SKUs.
~Enter in RPI in the Launch field in the Eagle Brower. Select print settings and then print the report (spool and print).

Staple Items
Items that the store should always have in stock. These are items that should always be available to customers.

Promotional Items
Items that are being promoted or put on sale. These items usually are staple, seasonal, and/ or new items. They are promoted through store events and advertisements as listed in the sales plans and promotional schedules.

In/out items are items bought specifically for the purpose of quick sales through promotions. These items are temporarily in stock and usually are not repurchased unless the sales are immense and the demands are high.

Reviewing Promotion Items List By Promotional Codes
~Log on to the Eagle Hawaii Network.
~Enter MIP in the Launch dialog box.
~Enter the promo code into the Type dialog box or scroll down in this box to view a list of the promo codes.
~This page displays lists of current and upcoming items that are being or will be promoted or on sale. To view past promotion items:
   -Click on the Miscellaneous icon.
   -Click on the View Promo History button.
   -Click on the Lookup icon. This allows you to choose your desired lookup setting.
   -Pick your desired setting and then either enter the SKU number in the SKU dialog box or the promotional code in the Promo Name dialog box.

ACE Hardware Sale Plan Preparation & Execution

Accessing Advertising Schedule (ACE Hardware)
~Log on to the MVL intranet site.
~Click on the Advertising tab.
~Click on the Store Documents link.

Ben Franklin Crafts Sale Plan

Accessing Promotional Schedule (Ben Franklin Crafts)
~Log on to the MVL intranet site.
~Click on the Merchandising tab.
~Click on the Merch Documents link.
~Click on the Promotional (Sales Plan) folder.
~Click on the Craft folder.

Seasonal Items
Items that are only sold in their particular season. In this context, season is taken to mean a particular time of the year such as Christmas, Summer, etc. Thus, Christmas items would not be sold during the Summer season.

Accessing Seasonal Items Schedules
~Log on to the MVL intranet site.
~Click on the Merchandising tab.
~Click on the Merch Documents link.
~Click on the Seasonal Items folder.
~Select desired store and document.

New Items
Items that are new to the stores merchandise list. These items are usually promoted through print ads and store displays. 

Accessing New Items List
~Log on to the MVL intranet site.
~Click on the Merchandising tab.
~Click on the Merch Documents link.
~Click on the New Items folder.
~Select desired store and document.

New Items Procedure

Adding Items To Stock
~Before requesting a product, make sure you have space for the item.
~Research the product.
~Print out the item with a picture and description.
~Write the reasons for wanting to bring in the new item.
~Put all requests into the inventory coordinator’s box.
~The inventory coordinator will review the request weekly.
~The inventory coordinator or the manager will write the approval/denial.
   -If approval, arrival time for new items logged.
~Original paperwork will be returned to supervisor’s box indicating the status of the request.
~All other new items that have not followed this procedure will be Z Flagged.
Locations For New Items
~On Thursday or Friday, the inventory coordinator receives the ERP (day varies by store).
~The inventory coordinator will assign a temporary location code in IMU and post the new item list with the date of arrival.
~The supervisor will then create a home on the shelf or peg and put the new bin tag up with the correct location.
~The standard time for completing this is six days.
New Items Arrival
~New items will arrive ten days after the Tuesday or Wednesday of their ordering (day varies by store).
~A home must be made and the location code must be updated.
~Sales associates must be instructed of the arrival date of the new items and their respective homes so they can be properly stocked.
Items From Merchandising
~The inventory coordinator will let you know when new merchandise is being ordered from Hilo office’s merchandising department.
~Repeat procedures from Location For New Items and New Item Arrival.

Discontinued Items
Items that are discontinued from selling for the following reasons:
~Manufacturer suspended or terminated production of item.
~Poor sales history for item in stores.

Accessing Discontinued Items List (ACE Hardware)
~Log on to MVL intranet site.
~Click on Operations Documents located on the left side of the page.
~Click on the ACE Cancelled Items excel sheet.

Accessing Discontinued Items List (Ben Franklin Crafts)
~Log on to MVL intranet site.
~Click on the Merchandising tab located near the top of the page.
~Click on the Merch Documents bullet located on the left side of the page under the category titled Merchandising.
~Click on the folder labeled Hot Sheets.
~Click on the desired folder and the desired month.

Adding SKUs To Inventory
Merchandising emails over a new SKU request form to the stores. The stores make their respective requests and then email the forms back to merchandising. Merchandising makes the changes in the inventory database.

Clip Strips
Clip strips are small merchandise display units that promote impulse sales. Data shows a 25% unit sales increase for items that are clip stripped. Examples of items that have been successfully merchandised on a clip strip include utility knives, safety goggles, desktop scissors and batteries. It is best to locate clip strip items near products they are associated with. For example, placing utility lighters near fire logs or permanent markers near food storage containers.

Damaged & Pilferage Items
~A damaged item is an item damaged through receiving or through the store.
~A damaged item through receiving is an item that is received defective. This item is reported and a claim is processed to the vendor. The defective item is then destroyed and the store is compensated with credit by the vendor. If the item is only slightly defective, it may be bought at a reduced price and sold at a reduced price.
~Damaged items through the store are the items that are damaged while being in the store. These items are reported in the store damaged items binder and the losses are taken off the funds in the store budget.
~Pilferage items are the items that are stolen. The losses from these items are reported and taken out of the shrinkage category.

Deadstock Clearance Program
The purpose of this program is to identify and dispose deadstock items that have not sold for the past 12 months and have not been received for the past 90 days. Deadstock items negatively impact our cash flow and our ability to bring in new items that can generate sales and gross margin dollars. It affects our ability to manage shelf space and long-term customer perceptions on our in-store merchandising.

Item Ranking
Ranking is the process of grouping items into categories for analysis and reporting. The Eagle Browser offers a number of ranking categories, such as units sold, dollars sold, gross profit dollars, gross profit percentage, on-hand value, and year-to-date transactions. This document focuses on the “units sold” ranking, or Popularity Code, and how it can be used to drive calculations for order points and computer suggested orders.

Ranking Codes
~A: Top selling items
~B: Next best selling items
~C: Next best selling items
~D: Slowest selling items
~X: No sales within reporting range 

Ranking Calculation
~The computer assigns a ranking code to each SKU by comparing it to every other SKU on the system. Users determine the breakpoint between codes (for example, where A-ranked items end and B-ranked items begin) by specifying a breakpoint percentage.
~For example, if the breakpoint percentages were set up as A=40%, B=70%, C=90%, and D=100%, the top 40% of all units sold within the year receive a popularity code of A, the next 30% of all units sold within the year receive a popularity code of B (the difference between the A and B percentages), the following 20% would receive a code of C, and the final 10% would receive a code of D.

Why Ranking Is Important
~If using the computer for inventory management and generating computer suggested orders, order points are calculated by rank after the first year the store is open. This allows for different weeks of supply values to be assigned for each ranking code.
~For top-selling, A-ranked items, a lower number of weeks of supply help optimize inventory turns and reduce overstock. For slow-moving, D-ranked items, a higher weeks of supply helps maintain adequate shelf quantities and promote sales.
~When calculating order points by rank, changing the ranking code values may have a significant impact on your overall inventory levels and turns. For example, if the breakpoint percentage for A-ranked items is increased from 25% to 40%, a number of SKUs that were high-end B-ranked items now become low-end A-ranked items – resulting in a lower weeks of supply order point calculation and lower inventory levels. Or, if the breakpoint percentage for A-ranked items is reduced from 70% to 40%, a number of low-end A-ranked items now become high-end B-ranked items – resulting in a higher weeks of supply order point calculation and increased inventory levels.
~To ensure the appropriate weeks of supply value is used when calculating each item’s order point, it is a good practice to rank every store’s inventory file according to the following annual unit sold ranges.

Location Codes
A location code is a brief series of letters and numbers that identify a specific area of your store. A distinctive code is assigned to each four-foot section where the items are displayed or stored. Then, location codes are assigned to every item in your store.

Markups & Markdowns
~A markup is a price increase for an item. This usually is the result of a market price increase for the material(s) used to make the item.
~A markdown is a price decrease for an item. This can result for any of the following reasons:
   -Decrease in market price for the material(s) used to make the item.
   -Unpopular or deadstock item.
   -Overstock of item.
   -Discontinued item.

Obsolete Inventory
Obsolete inventory is merchandise that does not have any true or anticipated demand. Carrying the cost of dead items causes a drag on all of your financial ratios. Every store needs to create a plan to recapture cash from dead inventory, to reinvest in inventory that turns. In recent years, the lifecycle of products has diminished. Today’s hot item is tomorrow’s dead item.

Liquidating non-performing assets can be time-intensive and emotional. Many retailers do not have a dedicated system in place for this, and may view it as a low priority. Some of the reasons for identifying and liquidating obsolete inventory:
~Having a documented process for assessing the value and merchantability of slow-moving inventory assures that these items are kept to a minimum.
~Liquidating obsolete, non-performing inventory for the best price you can get is crucial. Every dollar obtained for a non-performing asset is a dollar of working capital preserved.
~By liquidating obsolete inventory, your store looks fully stocked with clean, in-demand items. Customer visits are enhanced when they can count on finding interesting, updated product assortments.
~Merchandise sitting on a shelf costs money. It is not unusual for a retailer whose inventory has not been reviewed over a period of time to find that 20 – 25% of the store’s total items are non-performers. Even a store that vigorously culls its inventory could have 5 – 10% of total inventory in non-performing merchandise. There are a number of reasons for this, many of which are almost unavoidable. 

There are three components of the costs of carrying dead inventory and its impact on your bottom line:
~
Lost Gross Profit Dollars

   -Using a very aggressive approach and disposing of your dead inventory, even at any price, will generate useful cash and clear up space.
~Real Estate Costs
   -The high occupancy costs of retailing require that every available inch of merchandising space produce a return on investment. For example, if a store with 10,000 square feet of sales space has 23% of that space occupied by non-performing merchandise, and a base rent of $12 per square foot, that store spends $27,600 per year on space for merchandise that is collecting dust. If a store with 10,000 square feet of sales space has just 5% of that space occupied by non-performing merchandise, at $12 per square foot this is still $6,000 per year with no return.
~Other Carrying Costs
   -Inventory is a nonproductive asset – it earns no interest but costs you space, shrinkage, insurance and handling.

Overstock Program
An item is considered to be overstocked when its quantity on hand count is twice its minimum order point. When this happens, the quantity on hand of the item is reduced through inventory reduction procedures. These procedures usually include temporarily lowering the price of the item until it reaches the desired quantity on hand count or temporarily promoting the item until the inventory count is reduced.

Price Changes (RHR)
Merchandising sends over a list (RHR) of new item prices. The stores must adjust their item prices to match the prices on the RHR. These changes are usually a result of changes in market prices. If there is a rise in a particular material, the price of an item made up of this material will reflect the rise in cost. The same applies for a decline in cost.

Processing Claims

RIS
A report that lists items and their respective quantities on hand. Stores use this report to verify that the actual quantities on hand in the store match the counts on the report. Stores view this report weekly during inventory maintenance procedures. Ultimately, the purpose of this report is to retain the most up-to-date inventory count.

Sale Plan Carryover
At the end of each promotion, merchandising sends a report of the sales plan carryover to each store. This report lists the items that the respective stores have an overstock of. The plan is to create a new promotion to reduce the inventory count of the items. Along with the list of items that should be included in this new promotion, the report contains the new promotion prices for the items.

To run the report:
~Log in to the Eagle Browser.
~Type in MIP in the Launch box.
To print the report:
~Type in RUP in the Launch box.
~Click on the Option link and select Finalize.
~Click on the From/To link and select Promotion Type.
~Print report. 

Signs and bin tags with the new prices are made for the overstocked items through Eagle. The items are promoted until they reach a certain point in their respective inventory counts. The signs and bin tags are removed and the original prices are reinstated.

Store Supplies
Store supplies are items you purchase to use within your store or give away. They are not normally sold to customers and you may be required to pay sales tax on them. Some examples include shopping bags, computer paper, and brochures. Store supplies should not be confused with store use items, which are items you purchase for resale, but also use in your store (i.e. batteries, paper, etc.).

Store Use & Donation Items
Store use items are goods that you purchase for resale to customers, but also use in your store. Examples of store use items include paper towels, glass cleaner, toilet paper, snow shovels and batteries.

Store use items are often confused with store supplies, but they are very different. Store supplies are items you purchase to use within your store or give away. They are not normally sold to customers, and you may be required to pay sales tax on them. Examples of store supplies include shopping bags and computer paper.

Donations are items you buy with the intent of selling to customers, but remove from the shelf to give to charity. One example is a power tool that you decide to donate to a Little League auction.

With store use items and donations, it is important to have procedures that ensure the correct quantity on hand is maintained and sales tax is properly applied (if applicable) when these items are used or consumed by the store.

Transfer Program
If a store is out of stock of a particular item and another store has this item, the item is transferred to the store in need. This usually occurs when Customers request a particular item or if a certain store location sells this item more frequently than the other stores and is in need of more. This program only applies to intra-island or intra-state transfers. The transfer program procedure can be found in the Eagle Browser manual.

 

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