Inventory optimization in the “Barvinok” retail chain
With the purpose of Inventory optimization, “Barvinok” retail chain management team chose the expert team of ABM Cloud Company and the system of inventory management optimization called ABM Inventory.
“Barvinok” retail chain opened its first store in 2001 meaning the establishment of the landmark Ukrainian brand of the retail trade.
Since the beginning of its activities, the “Barvinok” retail chain has been expanding its existence on market and today it is the biggest regional retail chain comprising 48 stores and more than 1450 employees.
The “Barvinok” retail chain is steadily developing its business in the western region of Ukraine: 13 stores in Lviv and 13 in Ternopil, 18 stores in Lviv region, and one store each in Volyn, Ivano-Frankivsk, and Khmelnytskyy regions.
Inventory optimization. Project prerequisites
Inventory optimization enables to achieve better finance indicators within a short period of time. Moreover, now the company’s decided competitive advantage is the ability to respond quickly to market changes and manage its business effectively at the same time. That’s why the management team of the “Barvinok” retail chain chose the system of ABM Inventory for optimization of the company’s stock structure.
The system of ABM Inventory enables to see and trace each SKU of the stock in each point of supply chain (in central and regional warehouses), and as a result, to improve and accelerate the processes of stock replenishment. It allows keeping the stock in the amount necessary for effective usage of the primary resource – money. The solution of the Theory of Constraints – Dynamic management of reserve buffer is a basis for the Inventory algorithm.
Stock optimization and increase of stock availability – the main project objectives.
Before starting the project, the following objectives to be achieved were stated:
- Stock optimization and shortening of non-liquid assets.
- Increase of stock availability.
- Transparency and clearness of order placement.
- Reducing the net cost of operations in the supply chain in order to increase the competitiveness.
The business process of working with stock was changed during the project: from extruding to extraction. Training was performed for the employees regarding the methods of Inventory based on the Theory of Constraints.
System of accounting and analytics was implemented and is abundantly used:
- Top Movers analysis – goods generating more that 80 % of income.
- Lost sales and overstock in SKU.
- NON-Movers analysis – goods generating less than 5 % of income.
- Report on accuracy of order fulfilling by suppliers.
Number of category managers dropped (in 7 times!), appropriation of a department comprising several persons for performing the purchasing functions. Manager’s functions in the system are the following:
- Анализ отчетности
- Approval of not reduced / not increased buffers
- Confirmation of schedules
- Recalculation and correction of buffers
- Issuing shares of stock
Implementation of the ABM Inventory for the “Barvinok” retail chain enabled to shorten the labor forces during order placement, to improve the quality of placed orders, and to eliminate the available problems that are connected with the “human aspect”. The lost sales were minimized (shortened by 7 %) and the overstock was shortened (reduced by 20 %). As a result, turnover of the company’s floating assets became faster, while the warehouse space was used more effectively.
Customer feedback about the results of the Inventory optimization for the Barvinok chain.
Also, during the biggest summit of retailers from the Eastern European countries, the financial director of the Barvinok chain – Konrad Pyrz reported about the implementation project process and about how the Inventory optimization at the stores affected the orders, the personnel, the finances, as well as the suppliers. Watch the video of this speech (language in the video is Polish).
We would like to wish you the optimal stock level and offer you to evaluate the effects of your business after implementing the ABM Inventory system.