Episode 2: Retail Jewelry Challenges
Although Sales were on a rise and customers happy, Jane realized the business had lots of challenges.
This retail jewelry business started with only one branch and a limited capital. Over the years, it grew and expanded into six, geographically dispersed branches. Revenue grew by 30% year-on-year and the market demand for jewelry seems to be on a rise. This is both good and bad news for Jane.
Inventory Challenges
Management requires an up-to-date inventory report
Joe was having his morning coffee when Jane passed by. Judging by Jane's looks, Joe knew management gave Jane a tough challenge. Jane and Joe entered the Meeting Room to discuss.
Performing a Physical Count was, by itself, a challenge. Last time a physical count was performed in the largest branch, it took the audit team 12 hours to complete, as there were more than 25,000 items to verify.
Jane informed Joe of the challenge. Management wanted to know exactly what was the inventory of Gold, Silver, Platinum and Diamonds worth in all branches. This was very challenging, as the six branches are geographically dispersed, the Point-of-Sale (POS) machines in those branches were not inter-connected and there was no option to determine the current inventory except with a physical count.
Performing a Physical Count was, by itself, a challenge. Last time a physical count was performed in the largest branch, it took the audit team 12 hours to complete, as there were more than 25,000 items to verify. It was literally impossible to perform the physical inventory on all items in all branches in time to meet the management's request.
Joe noted the challenge. The POS technology was providing little help to address the Inventory Challenges. Was the solution to replace the POS devices with a newer technology? Although the solution may seem obvious, Joe realized that the root cause of the problem was way further than that. Why wouldn't the Branch Manager be aware of her/his inventory the first place? Then, why isn't the Head Office aware of the inventory? Isn't the Head Office responsible for the distribution of items?
Since there is no network between branches, someone from the branch needed to arrive at the Head Office to pick a USB Drive, which would then update the POS with the new items
Joe asked Jane for clarifications. Jane informed Joe about the way the business operates. The company would purchase some items from a Supplier. Branch Managers would arrive at the Head Office and pick and choose the items they believe they can sell in their branch. Then all selected items would be weighed together as a batch and custody would be transferred to the Branch Manager. At the Branch, the team works on sorting the items into a list. The list is then sent back to the Head Office for entry into the POS system. Since there is no network between branches, someone from the branch needed to arrive at the Head Office to pick a USB Drive, which would then update the POS with the new items. When an item was sold, the POS would automatically remove it from the available items list, but the Head Office would not be informed of the sale until the USB Drive is returned to the Head Office on the next business day.
Having more insight into the inventory problem led Joe to the next business challenge.
Sales Challenges
The POS solution had no metadata to inform it that an item is gold, silver, platinum or diamond. To comply with local rules, it was important not to mix precious metals together in the same invoice.
Joe was curious. Was the POS solution capable of handling sales as it should be? Jane helped clarify things for Joe. She informed Joe that since every POS solution was running on its own in a branch, a barcode identifier in one branch could possibly be repeated in another branch and the items are guaranteed to be different, as no two jewelry items are the same. Furthermore, it was imperative for their business to incorporate the fluctuations in the price of gold into the sales. This implied that they were not able to enforce the price of an item in the POS solution. They would allow the Salesperson to adjust the prices based on the fair price of gold in the market. This was auditor's nightmare, as they had to verify each and every sales invoice for conformity.
Every POS solution was running on its own in a branch, a barcode identifier in one branch could possibly be repeated in another branch and the items are guaranteed to be different, as no two jewelry items are the same.
The POS solution had no metadata to inform it that an item is gold, silver, platinum or diamond. To comply with local rules, it was important not to mix precious metals together in the same invoice. Hence, if a customer bought gold and silver, separate invoices needed to be issued. However, this was left to the Salesperson, as there was no way to enforce this rule in the POS solution.
The POS solution did not support returns. If a salesperson issued an invoice and made any mistake, the POS solution would allow her/him to edit the sales invoice to make corrections. This was a double-edged sword. Although it made things convenient to the Salesperson, it gave the auditors another nightmare.
If a customer who had unpaid dues walks into a different branch, this branch had no information about this customer's dues. There was also no way to enforce a Credit Limit on a customer.
A Sales Invoice had no detailed information about the customer and made no distinction on the payments they made. Hence, it was not possible to determine whether the customer paid using cash, debit card or credit card. Customer payments are not fully recorded in the POS and hence, it was not possible to tell whether the customer paid the full amount, part of the amount, or made no payments at all and bought the items on credit. Since there was no way to capture the full details of a customer, Accounts Receivable were not able to cover 100% of the customer debts. This was lost business.
What made the problem worse is the fact that this critical information was kept within the boundaries of a single branch, the one where the transaction took place. If a customer who had unpaid dues walks into a different branch, this branch had no information about this customer's dues. There was also no way to enforce a Credit Limit on a customer.
Relationship with Suppliers
To fix, or not to fix Gold
Which batch was sold and which one is still in the branches? Are gold prices in the market suitable enough to trade money for gold today?
When the business buys items from a Supplier, the items are packed in a batch. Items of similar metal type, making charges, and karats would end up in the same batch. Although this applies mostly for gold, when gold prices fluctuate, so does the business's dues to the Supplier. Currently, the business issues an IOU to the Supplier stating the total amount of gold and total making charges of the items the business bought from the supplier. After a few weeks, suppliers begin asking to be paid back in gold, money or a combination of both.
The business is encouraging branches to purchase used jewelry from the market. They can easily use these items to settle their dues with the Suppliers. The business also has ways to perform Gold Fixing, by convincing the Supplier to trade money for the owed gold.
Due to the inventory challenges mentioned above, it was not possible for the business to make an informed decision on which batch of supplies should the business settle first. Which batch was sold and which one is still in the branches? Are gold prices in the market suitable enough to trade money for gold today? Will we make profit from the Gold Fixing, or will be make a loss? All these questions had no answer. Jane was worried, as she predicted that Management would be asking her for such a report during the next meeting.
Just how much do we owe a Supplier anyway?
In the absence of integrated Sales data, it was not possible to determine which Supplier's items were worth purchasing.
The business may purchase more than one batch of items from the same supplier. Currently, the business maintains its dues to a supplier in a spreadsheet stored on the Purchasing Manager's computer. When requested, the spreadsheet is updated to show the total amount of gold and making charges the Business owes a supplier. In the absence of integrated Sales data, it was not possible to determine which Supplier's items were worth purchasing. Purchasing personnel would occasionally visit branches and ask sales personnel about which items' sales were more successful.
Other Business Challenges
Human Resources Challenges
The business uses paper to track its employees, their passport and residence expiry dates, the courses they attended and the vacations they took or are eligible for.
Keeping track of its most valuable assets, Human Resources is even a bigger challenge. The business uses paper to track its employees, their passport and residence expiry dates, the courses they attended and the vacations they took or are eligible for. This error-prone, inefficient way to manage the workforce resulted in many dissatisfied employees who left the organization alongside their skills and expertise and joined the competition.
"The business was losing talent to its competition!" according to Jane.
Finance and Accounting
The business was basically running is silos and every function was in an island of its own. Finance and Accounting was not an exception. This business-critical department was the last to know about sales, purchasing or fixing with suppliers. This resulted in a few issues. Sales reports and Accounting reports had discrepancies, with each team insisting that their figures were the correct figures. Management was divided between these two figures and was not sure whether sales was getting their fair share of rewards, or was the business over-rewarding the sales personnel.
Much like the challenge with inventory and accounts receivable from customer dues, it was difficult to maintain accounts receivable from employees, as the Human Resources operations were not integrated with Finance operations.
Accounts were maintained using an off-the-shelf accounting package. Although the package was meeting the needs of Finance, it was not integrated with the rest of the business. Sales, Purchasing and Fixing data was entered manually into this system. This operation is error-prone. Productivity was lost when paper-based reports are shared from other business units.
Much like the challenge with inventory and accounts receivable from customer dues, it was difficult to maintain accounts receivable from employees, as the Human Resources operations were not integrated with Finance operations. An employee may have unpaid dues and be allowed to leave the organization without first checking with Finance. Although this issue occurred rarely, It was eminent as the number of employees grew with the business.
Joe proposes a solution
SharperRetail - Jewelry Edition comes to the rescue
After an in-depth research, Joe found a viable solution that would address all the business challenges. Joe proposed purchasing SharperRetail Jewelry Edition as the end-to-end retail jewelry management solution. Jane asked Joe for an explanation.
Solution to Inventory Challenges
Joe explained that SharperRetail - Jewelry Edition provides ways to track purchases made from Suppliers. At any moment in time, it would be possible to determine how much does the business owe any supplier. When a batch of items arrives from a supplier, the items would be sorted at the Head Office (instead of the branches), and placed under the custody of the Head Office Branch. Every sorted item would get its own barcode identification immediately and would be available for transfer to any branch.
SharperRetail - Jewelry Edition provides ways to track purchases made from Suppliers. At any moment in time, it would be possible to determine how much does the business owe any supplier.
When items are transferred to a branch, custody of items moves from a branch to another. At any moment in time, it is possible to determine the items available at any of the branches. Since there is metadata about every item, it is possible to determine which supplier was the item purchased from and hence, it would be easier to settle accounts with suppliers.
When an item is sold, custody is removed from the branch and the Head Office is the first to know about the sale. This meant that using SharperRetail Jewelry Edition, it is possible to determine the inventory of any branch at any moment in time. SharperRetail - Jewelry Edition has a Physical Inventory function. This works by capturing a snapshot of the current inventory at a branch as a baseline. Then items that were found in the branch are scanned and verified. If an item is found, it is marked as "Found". Items that are missing are also marked. This means that the business is able to perform a Physical Inventory efficiently and in a much shorter period of time.
Solution to Sales Challenges
Fluctuations in the prices of Gold are automatically incorporated into the system. The solution also automates the process of collecting fair market prices from known resources. This implies that the business can, at any moment in time, determine the net worth of jewelry items as of date.
Now that every item is uniquely identified, metadata about each item is available and the current custody is known, it is easy to issue a sales invoice using SharperRetail Jewelry Edition. Fluctuations in the prices of Gold are automatically incorporated into the system. The solution also automates the process of collecting fair market prices from known resources. This implies that the business can, at any moment in time, determine the net worth of jewelry items as of date. When an item is sold, the solution can mark items that are being sold below cost and informs the user of this fact.
SharperRetail - Jewelry Edition keeps track of every customer. Customer records are kept as a separate list and hence, is made available for sales, purchasing and accounting resources. Instead of having to type all the details of customers, SharperRetail - Jewelry Edition uses the Smart Civil ID technology to automatically capture a customer's details from the Smart Civil ID. This makes data significantly more accurate and saves time during sales. Auditors love the new solution, as it saves them the trouble of identifying the customers who have unpaid dues.
Since all branches and the Head Office are connected by a data network, all branches are aware of customers who have unpaid dues.
SharperRetail Jewelry Edition keeps track of customer payments in detail. Auditors appreciate the fact that now they can determine the paid amounts by cash, debit or credit card. Customers with unpaid dues are marked in the system. Since all branches and the Head Office are connected by a data network, all branches are aware of customers who have unpaid dues. Auditors can rest now and focus on improving the business.
Improved Supplier Relations
SharperRetail Jewelry Edition makes it possible to determine which shipment from which supplier was already sold and which ones are struggling to be sold.
SharperRetail Jewelry Edition makes it possible to determine which shipment from which supplier was already sold and which ones are struggling to be sold. Since the solution has data about the prices of gold at the date of the purchase, the business can now make informed decisions about which shipments from which suppliers need to be fixed or paid. Accounting can now determine whether the settlement resulted in a positive gain or a negative one. The business may later decide to return any part of a shipment back to the supplier. The solution would make it significantly easier to recall the items, as all their barcodes are known.
Advanced Human Resources
SharperRetail Jewelry Edition provides a Human Resources module. This module helps the business keep track of all its workforce, their demographics, etc.
SharperRetail Jewelry Edition provides a Human Resources module. This module helps the business keep track of all its workforce, their demographics, leaves, courses attended, payroll, rewards, deductions and much more. Now that data is integrated with the rest of the operations, HR personnel can easily share payroll details with Finance, who in turn can share Employee unpaid dues with HR. This would save the company a lot of money.
Integrated Finance and Accounting
SharperRetail Jewelry Edition provides a Finance and Accounting module. This module allows maintaining the Chart of Accounts in a visual, hierarchical manner.
SharperRetail Jewelry Edition also provides a Finance and Accounting module. This module allows maintaining the Chart of Accounts in a visual, hierarchical manner. It also allows pulling sales, purchasing and payroll figures directly from the system and automatically prepares a journal entry. At any moment in time, Accounting personnel may decide to post one or more journal entries into the General Ledger.
This automation allows the organization to generate Financial Statements at any moment in time. Balance Sheet, Trial Balance, Statement of Cash Flow are examples of reports that can be automatically generated by the system, making the lives of auditors and accountants easier.