Using Saved Item Criteria
Preventing Margin Erosion
Tip: Using CDBWin reports to identify profitability
issues.
Margin erosion strips away the retailer's ability to maximize profitability.
It is not unusual for an operator to say, “Sales are good, but I don’t have what
I should in the bank and I don’t know why.” This could reflect the fact that the
organization's focus on margin per item is insufficiently sharp—perhaps the person receiving the merchandise is not fully
cognizant of new costs being passed along by vendors so these
trends aren't being communicated to management.
Two key reports
produced by CDBWin can help detect and correct margin erosion. Let's see how.
In our example, we'll start with the MTD Store Purchases report, which provides an overview of each Direct
Store Delivery (DSD) purchase organized by department for a specific date range (on the Reports
menu, click MTD Reports > Store Purchases > View).
We are going to organize our report by Vendor ID. A partial view of this report
appears below:
Here we can locate margin discrepancies that might otherwise
be overlooked in the flurry of daily operations. As you can see, each line shows an invoice and its contribution to the store’s profitability for the
selected date range.
In the above case, invoice 75866 stands out among the purchase invoices that
have been received for the
retail beverage department (Dept. 6)—it displays a significantly lower margin
than the other invoices.
If this is a concern, the next step is to take a more detailed look at the
items on the invoice to see if further insight can be attained regarding the sub-par margin.
In CDBWin, this is accomplished by using the Inventory Line Items report
(on the Reports menu, click Items/Inventory > Line Items >
Purchases). To find possible problem items in our example, you would filter on the date
of the invoice (1/21/2009) as well as on department 6. This
filtering provides the following item sample:
Three line items immediately jump out on this report, the 12-pack soft drink
items that are circled in the above illustration. They carry a margin of 7.82%,
which appears far below the store's average for retail beverages. If this is the
case, management may want to adjust their retail strategy to assure a healthier
margin. Retail/list price changes made to the items in CDBWin can
then be sent to the POS. This helps assure that the increased retail prices and
ensuing
profit margins will take effect on the inventory items
already out on the shelves. If you have a multi-site operation and use Central
Price Book, these retail changes can be pushed out to multiple sites quickly and
accurately.
In short, this combination of reports can be an effective tool in the
proactive prevention of margin erosion, especially when run on a weekly or even daily basis.
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