Implementation of automatic ordering and inventory management system the company «iStudio»

Custom business information

iStudio is the official partner of Apple since 2011. The company owns a network of iStudio mono-brand stores that work in authorized Apple formats: Apple Premium Reseller (APR) and Apple Authorized Reseller (AAR). To its clients the company offers:

• Full range of Apple hardware, software, accessories;
• Professional consultations and demonstrations of the products;
• Professional help in mastering technology and software, eliminating technical problems;
• Training in working with hardware and software;
• Full technical support from Apple;
• Localization of equipment and services;
• An official warranty from Apple (warranty and post-warranty service at any authorized service center).

IStudio stores offer a wide range of accessories for Mac, iPad and iPhone. Qualified Apple experts will help you to choose products and solutions from other  manufacturers:

• Accessories from Apple and the world’s leading brands: Amber, Lab.C, Marshall Headphones, Mophie, Moshi, Native Union, Nomad, Parrot, Plusus, Satechi, Skech, Sphero, SGP, Urbanears, White Diamonds, JBL, Beats etc.
• Acoustic systems, headphones, gadgets, software, cases, protective films, bags and much more.

Prerequisites of the project

Successful operation of the company is possible with the successful solution of the classic conflict of the Theory of Constrains: achieving operational efficiency on the one hand and financial efficiency on the other. For a retail company, this is possible only with the optimization of inventory level: keep the level of inventory big enough not to lose sales and small enough to maintain the proper level of turnover.

At the time of the pre-project survey of the company, all orders of the network were formed in a semi-automatic mode in the accounting system based on 1C and Exel. There was no assortment matrix in the accounting system. The orders were formed manually on the spot using current balances of goods. This approach to the formation of orders required a lot of time and generated inevitable errors related to the human factor.

ТОР-management decided to optimize and automate the inventory management system, introduce additional tools to monitor the level of commodity stocks.

Causes of choosing ABM Inventory

When choosing a solution for inventory management, iStudio management decided to start the project of implementation of ABM Inventory Management System of ABM Cloud Company based on such factors as:

• The system operates on the TOC methodology: with the help of the buffer indicators, the system maintains the optimal level of stock of each product in each store/warehouse;
• ABM Inventory calculates key inventory management indicators: inventory, sales, lost sales, surplus, and turnover in real time;
• The flexible analytical module allows you to analyze key indicators of inventory management in any sections;
• ABM Inventory is written on the HTML5 platform, which allows you to flexibly work with even the largest data sets;

• ABM Cloud Company provides a deep expertise in the field of inventory management in all parts of the supply chain: from production to retail sales.

Description of the project

The project envisaged the simultaneous connection of network stores to orders for the Central Warehouse and orders to external suppliers from the Central Warehouse through a cross-docking system.

Before the start of the project, the goals were set:

•  Reduction of surplus stock and optimization of the assortment;
•  Improvement of turnover indicators;
•  Automation of orders;
•  Automation of assortment management.

The implementation process at all stages was accompanied by the training of users:

•  Training workshop on TOC inventory management methodology;
•  Learning to work with the program, its algorithms and customization;
•  Training to work with the reporting system.

During the project, all major categories of goods were connected to the inventory management system of ABM Inventory. At the moment under the control of the system, there are about 9 thousand items of goods (active assortment by retail outlets and warehouses). The system automatically generates and sends orders to the central warehouse on a daily basis. Then on the same day, cross-docking orders are formed depending on the schedule of orders agreed with the suppliers.

At the initial stage of connecting the goods, buffers were calculated (the target level of the stock at each storage point) for each SKU. After several replenishment cycles, the system corrected the buffers in accordance with the actual consumption of the goods. Thus, the Dynamic Buffer Management algorithm operates.

Fig. 1. An example of dynamic buffer management by product

As described above, orders from stores to the central warehouse are automatically generated, and then, at the user’s request, the system forms a consolidated order to the supplier, which includes the need for all stores.

Key indicators of inventory management are presented on the main screen in dashboard format. Data is updated in real time, which allows you to quickly monitor the status of stocks. On the upper part of the panel there are displays for goods that require the manager’s special attention: TOP-mover (goods that generate 80% of the company’s turnover), new goods, goods in promotions. Using the color solution allows you to visually emphasize the attention of managers in problem areas – surpluses and lost sales.

Fig.2. Manager desktop with indicators

In addition to the formation of orders, the system daily revises the size of the buffers for the goods that are under its control and, if necessary, gives recommendations on the changes in buffers.

Also, the system monitors delayed orders because these orders affect the quantity in transit for subsequent orders.

ABM Inventory is a stock management system with a powerful analytical module for analyzing and controlling key indicators of inventory management in various sections and analysts.

The main report is the weekly dynamics of key indicators, which is consolidated information with the necessary details: by product groups:

Fig.3. Weekly dynamics of key indicators

Also in the portfolio of reports there is a report on the turnover of each specific goods, which allows you to assess the ratio of inventory to sales, to understand what products are the leaders of turnover, which – outsiders and potential candidates for withdrawal from the matrix.

For the analysis of surplus and lost sales, the system provides a drill-down analytics – for a detailed analysis of the causes, groups and specific goods that caused surplus or lost sales.

The report “The average surplus for the last and 4 previous weeks” shows the dynamics of the indicators of surplus and is sorted in descending order of surplus in monetary terms to focus attention on the most problematic positions:

Fig.5. Report on surpluses for the last and 4 preceding weeks

In the left and right side of the report there is a color indication:

• On the right side, blue is allocated to the amount of surplus, if the surplus remained at the same level compared to last week. Red – if the amount from the surplus increased compared to last week and green – if the amount of surplus has decreased.

• In the left part of the report, product groups are highlighted in green (you can also select the manager, store, supplier), for which the amount of surplus decreased compared to last week, and red, respectively, if the amount has increased.

For further analysis, you must select a group/ manager/store/supplier and go to the next report – Report on the causes of surplus in the drill down system. This report gives an insight into which stores or other filters there has been a change in the state of the surplus compared to last week, up to the specific goods that led to this change and % of the change (deterioration) of the indicator and this indicator in absolute and monetary terms.

There are 2 similar reports exist for the analysis of lost sales.

In addition to the analysis of lost sales and surplus, the analytical module also provides recommendations for the redistribution of surpluses to stores that have a need for an order in the “Report on surplus goods with lost sales”:

Fig.7. Report on surplus goods with lost sales

Results and effects

The company iStudio implemented a centralized inventory management system ABM Inventory. For the period from November 2016 to August 2017 the following results were achieved:

1. With average sales growth of 57%, average inventories increased by 27%. A new store was opened during the project;
2. Due to this, turnover increased by 36%;
3. Stock in stores became more harmonious, taking into account the dynamics of sales.
4. Orders are automated and the ordering process and inventory management in general, has become transparent;
5. With the help of analytics, the surplus is redistributed to stores with the need without ordering the goods from the supplier, which improves turnover.

We thank the project teams for their professionalism and fruitful work to achieve their goals. Special thanks to the company’s top management for the active position in the implementation issues, as well as for being open to changes and revising the principles of inventory management, making decisions aimed at improving the efficiency of the company.

We wish iStudio to capitalize on new opportunities for development and expansion of business, achievement of goals, successful projects and constant improvement of performance indicators!