Focus on: Inventory Management
With more than 6,800 stores nationwide, Family Dollar is a leader when it comes to operating a tight ship. Most recently, with threats of rising operating costs, the Matthews, N.C.-based discounter put a renewed focus on inventory management. An important priority: automating inventory auditing operations in an effort to speed up the recording process and improve reporting accuracy.
Two years ago, Family Dollar embarked on a chain-wide “Store of the Future” initiative to revamp its IT infrastructure, which included the addition of new merchandising and assortment planning solutions. With those systems now well-established chain-wide, the retailer focused on its internal, store-level processes.
First, the chain worked to automate its fulfillment process, with an automated replenishment system that enables it to automatically order items as they are recorded as purchased at point-of-sale. The process supports Family Dollar’s just-in-time inventory strategy.
“To be successful at this strategy, we need to have visibility into inventory levels, so data integration between inventory and automatic replenishment systems is important,” said Stan Johnson, director of inventory control, Family Dollar.
While the company was making strides to automate its fulfillment processes, it was also managing an informal, manual inventory auditing process whereby it conducted nearly 7,000 inventory counts a year, hitting each store at least once a year. Managers physically counted each piece of merchandise on store shelves and recorded data on paper-based spreadsheets.
An inventory count could take an average of six hours, and the auditing review could last another few hours. Further, the chain was working with two industry counting services partners to complete this task, which made the process even more cumbersome.
“Since we were making strides in inventory control, it was important to get a formal, standardized program in place,” Johnson explained.
The first step toward a more efficient process was to migrate from two-service providers to a single partner. The company chose to move forward with one of its existing partners, WIS International, San Diego, which worked with Family Dollar to develop an electronic inventory audit process.
Within 24 months, store managers traded in pencils and spreadsheets for wireless handheld auditing terminals where they can input inventory information. Data are instantly transmitted to WIS’ inventory database, and audits are now a part of its inventory files and records.
“There is no longer concerns about mailing paper audits or tracking down lost paperwork from a store,” Johnson explained. “By having a single [electronic] report at the store instead of 25 to 30 [physical] pages, we have fewer chances of store personnel sending us incorrect audit results. This has greatly helped us improve our auditing reconciliation efforts.”
With so much more data available, Family Dollar now takes advantage of more types of exception-based and customized reports to further improve its auditing efforts. For example, new out-of-stock reports provide store managers with a list of items that are out of stock on the sales floor, so post-inventory the managers can focus replenishment efforts on the merchandise that will provide the most return on increasing sales and customer satisfaction, according to Johnson.
Meanwhile, the details revealed in exception reports allows Family Dollar greater insight into building and maintaining inventory count accuracy, as well as identifying old and discontinued merchandise.
“WIS partnered with us to develop procedures to help us identify and remove stale and recalled items,” Johnson reported. “This effort has also greatly reduced our exposure to legal and regulatory concerns caused by lead, phthalates and other restricted merchandise.”
Besides cutting the auditing process to half the time, the electronic process has also helped Family Dollar eliminate 200,000 to 250,000 pages per year.
“It just makes good sense from an environmental standpoint to eliminate those reams of paper printed during an inventory,” Johnson added.