Benefits of Scott’s POS ServiceÓ
Note: Scott’s POS ServiceÓprovides a
wide area network where all
stores are networked with headquarters and their suppliers. Put simply, it
creates an environment where all participants are using a single large central
computer where they share a common database of information.
1. Store Perpetual Inventory
2. Technology Aversion
3. Increased customer service level
4. Reduced in-store stock levels
5. Seasonal product control
6. Integration of Systems
7. Total & Complete Elimination of Data
8. Use of POS data
9. Centralization Importance
10. Category Management Systems
11. Total Elimination of Purchase Orders
12. Total Elimination of Invoicing
13. Total Elimination of Delivery Driver Theft
14. DSD (Direct Store Delivery) Rack Jobber Controls and
15. Communications Between Supplier and Retailer
16. Consumer Satisfaction
17. Store Level Procedures Strictly Enforced
19. Remote Store Controls
20. Managed Supplier Partnerships
21. Miscellaneous Benefits
From Barbara V. Anderson’s book,
“The Art and Science of Computer Assisted Ordering”:
”Store perpetual inventory is an accurate picture of a store’s product on
hand. All changes to inventory, increases and decreases, apply to a base
inventory initiated through a physical count. Perpetual inventory can represent
both a quantitative and financial picture of a store and is a statement of the
In Ms. Anderson’s book, she describes a Perpetual Inventory System as one
that can be “real-time, with all increments and decrements applying
immediately, daily, or weekly.” Scott’s
is real-time, with all decrements and increments occurring immediately.
As a result, information is made available to headquarters and suppliers
instantly, as the changes occur.
There is an important distinction between this method and one that is updated
periodically. By applying ‘sales’, ‘audits’ and ‘received’ to the perpetual
inventory system in real time, the information can be used for immediate decision making and problem
There are three components to our perpetual inventory:
initial physical count of items – Scott’s
provides a program to set up the initial inventory levels by scanning
the items on the floor using a hand-held data terminal connected wirelessly to
the host computer, located at a central site and made available by Scott
Systems Inc. Using the handheld devices, an average store can be audited in
less than 10 man-hours. Since audits and sales occur in real time, audits may
be taken ad hoc, during the sales and receiving processes, and the count will
transfers, received inventory – Scott’s
provides an interface to existing POS systems that allow access to
“tendered transactions”. The interface can be networked to the cash register,
or it can poll the cash register every few minutes, depending on the type of
service subscribed to, and the inventory is incremented or decremented when the
polling takes place. Transactions affect inventory immediately, or almost
immediately, in the order they occur,
not randomly or in batch.
3. Scott’s POS ServiceÓ provides
programs for use in the transfer processes. Transfers can occur when it has
been determined that the company’s inventory is not balanced between stores, or
when product is received at one store that needs to be redistributed to other
stores. Usually transfers are scanned into the store. The incoming inventory is
handled in the same way as inventory received from suppliers, with the
exception that an invoice is not created when the inventory is scanned.
Inventories ordered in bulk, can be redistributed to other stores where it is
profitable to do so. Too much
inventory on the sales floor decreases sales.
inventory can arrive at various times and for a variety of reasons. Other than
transfers (see previous paragraph) inventory usually arrives when the supplier
brings it into the store. When inventory arrives, it can be scanned using a
hand-held device, provided by Scott’s
or it can be entered into the store’s computer using a program running
on our host system through a local PC designed for the purpose of receiving
inventory. Inventory may be accepted electronically, based on the items
shipped, and audited later.
5. Audits - No inventory system is worth
its salt without frequent audits to check the accuracy of the inventory on
hand. Scott’s POS ServiceÓ provides
a hand-held wireless, personal data terminal for “Audits On-Demand” using the
audits” allow store employees to audit sections or entire gondolas on a regular
schedule. We recommend 3 hours per day to be set aside for audits. Audits can
occur during slow periods and should occur during slow periods when the need
for two active cash registers is unnecessary.
check” audits provide tools to order store audits on specific items on demand. Possible
triggers to schedule “Spot-check” audits include.
of a specific product falls below expectations
prior audit identified a ‘suspicious’ item condition
number on units on-hand falls below zero
on hand is less than or greater than expected
product on hand does not meet service level before next delivery date
audits” on fast moving and/or expensive items such as cigarettes can be
scheduled by shift or at the end of the day
third-party audits” are reduced to spot checking the store inventory in a
series of random audits. Using the computer to control audits by store
employees will eventually eliminate the necessity for third party audits.
Category audits are a waste of time.
are processed in real time, solving the problem of backing out sales and adding
purchases that may affect an audit’s accuracy
inventory is not received electronically based on the supplier’s electronic
shipment notification, received inventory should not be put on the sales floor
until it has been checked in.
In the book “KMART’S 10 Deadly Sins”,
the author quotes a Microsoft associate as saying:
”Early on, Kmart passed up the opportunity to computerize inventory and
ordering into centralized systems because local managers balked about giving up
control. Wal-Mart, on the other hand, installed efficient electronic systems
wherever it could.”
In another paragraph in the same
“Even if Kmart revamps the
infrastructure and puts better processes and technology in place today. It
would likely still trail Wal-Mart”
By and large, every retailer that operates in a Wal-Mart environment finds
itself in a similar situation. Scott’s
POS ServiceÓ advantage
is the use of inexpensive technology that
utilizes efficient electronic systems and the power of the Internet to provide
a more level playing field.
Profit margins will continue to deteriorate. Micro-management of
inventories cannot be done manually. Prices must be adjusted to take advantage
of the highest profit margins available.
According to the National
Association of Convenience Stores (NACS),
Emory University completed a study that says “stores
miss out on 4% of potential sales when they run out of popular items.”
get moved around on shelves, covering “holes” popular items once
occupied. Clerks often miss reordering popular items because of this type
of accidental camouflage.
involves, trends, promotions and seasons – all which may be missed by
busy store clerks when re-ordering stock.
Miller Brewing recently completed a study that says: “If inventory on the sales
floor is reduced to 2.5 days, sales will increase by 66%.” Reasons may include:
Too much inventory on the sales floor hides
An increase in clutter.
Needed inventory not ordered because of clutter.
The Scott’s POS ServiceÓ assists
the retailer by holding down the number of items needed in the store to the
quantity needed to satisfy consumer demand and enhance store presentation. The
average retailer has 50% more
inventory than needed to meet customer service level requirements,
resulting in cluttered, unsightly shelves and lost sales opportunities due to
the lack of space needed to handle a greater variety of items.
The costs associated with
carrying unneeded items in the store is also greatly reduced. Inventory
received monthly cost five times as much to manage as inventory received as
To accomplish this, Scott’s POS ServiceÓ
uses historical data, seasonal changes, trends and promotions.
helps reduce back room stock and helps prevent ordering of new
inventory when back room stock is available to place on the store’s shelves.
It is an almost
certainty that not one item
in the store’s inventory is priced for its highest profit potential. Pricing is
generally the result of the supplier’s recommendations based upon an analysis
of the entire industry, or upon the generalized “belief system” of someone at
headquarters; or more often left entirely to an uneducated, overworked and
underpaid store manager.
allows us to work closely with the retailer and his suppliers to get
the maximum profit out of each and every
item in the store. Profits can be epitomized by manipulating retail
prices to affect turns. “Prices” are like the gas petal on a car and “turns
multiplied by profit” is the “efficiency monitor”. High turns may indicate a
price is too low. Low turns tell us just the opposite. Somewhere in the middle
is the “perfect” price. The trick is to use our software to get the highest
efficiency out of each and every item in the store. This is done by slightly
altering the prices (staggered pricing), letting a computer monitor the turns,
compare the efficiency rating to historical data and zeroing in on the perfect
price for each and every item in the store.
Scott’s POS ServiceÓassists
retailers by allowing the retailer to plan for increases and decreases in floor
stock and to adjust retail pricing during high and low seasons.
Scott’s POS ServiceÓ
integrates the business rules of disparate systems. This environment allows
retailers, suppliers and software companies to integrate business functions
with a minimum of hardware and software changes.
XML or other file transfer activity is possible but usually unnecessary.
System-to-system direct integration saves businesses the costs and
complications of writing and maintaining file transfer programs.
systems are constantly in a state of flux and create an environment of
separate systems for the supplier, distribution centers, stores and their
headquarters. Scott’s POS
is designed to put into place “Functional Integration”, which
allows disparate systems to operate independently, yet function as
one. The Internet is a good
example of functional integration. A “web browser” provides the tools to
connect to each and every computer attached to the Internet regardless of
the brand of computer or the operating system being used.
Scott’s POS ServiceÓ
eliminates data synchronization problems simply by eliminating data
synchronization. Scott’s POS ServiceÓ
provides a centralized platform that allows the retailer and supplier
to agree on a single version of the truth regarding items and processes,
and Progressive Grocer says “a tremendous impact can be made on overall cost
This ‘platform’ can be used by both
parties without the need for additional costly inventory and software. A POS
device capable of retaining tendered transactions on individual items and
Internet connections for the retailer and optionally the supplier, are all that
is needed to utilize the service.
In the past, POS data (T-Logs) have
been of little use to the retailer. Scott’s
tracks and uses the retailer’s T-Logs to manage the inventory in real
time, and stores it for use by the retailer. The data can also be made
available to the retailers’ suppliers on a case-by-case basis, allowing suppliers
to assist retailers in their inventory management processes. If you need proof
as to how suppliers feel about this, take a drive to Bentonville, AR and see
for yourself how many major manufacturers have established a presence there
just to be close to Wal-Mart’s RetailLink.
Further evidence may be found in
Martin Layton Turner’s book ‘K Mart’s 10 Deadly Sins”:
“Allowing suppliers to play an active role in managing Wal-Mart’s own
inventory gave [Wal-Mart] an advantage that Kmart would never have thought of, had its own suppliers not pushed the
company to develop a system similar to [RetailLink].”
Store perpetual inventory systems
must be centralized to function properly. Managing the timeliness and order in
which the data is processed is necessary in maintaining the accuracy of the
data. If sales, transfers, received inventory and audits are not processed in the
order they occur, the disposition of the
inventory is ambiguous. For example: In traditional systems, during the auditing
processes it is not necessary to close the store to get an accurate count. Scott’s POS ServiceÓ insures
order and timeliness by processing sales, transfers, received inventory and
audits in real time and in the order that the transactions occurred, so
activity of all kinds can continue at will.
Category management systems use
average costing of categories or departments to ‘estimate’ store profits. A
perpetual inventory system uses average cost of an individual product on hand
to get the true cost of sale for every sale. Scott’s POS ServiceÓ
allows the retailer to have unique item inventory control AND category
management reporting by tracking the sales, transfers, received and audit data
in both dimensions. So if a retailer has a category management system in place,
Scott’s POS ServiceÓ can provide
a more accurate tool to feed his category management system. Note: Category
management has no value whatsoever in a Wal-Mart RetailLink-like environment.
store executives will balk at the idea of allowing the computer to “order” the
inventory. We wholeheartedly agree!
The computer should never be allowed to function unmonitored. Scott’s POS ServiceÓprovides the
necessary tools to allow the retailer to control the ordering process by
adjusting parameters within the inventory record such as “preferred on floor”,
“Active/Inactive Status”, “Discontinue Dates & Flags”, “Seasonal Changes”,
“Push Product Authorization”, “Re-evaluation dates”, etc.
managers can selectively be given access to the tools governing the “Computer
Assisted Ordering Process”, as required.
omissions and mistakes on purchases orders are eliminated as well. Product
codes cannot be accidentally transposed and unneeded or undesired
product cannot be ordered.
Grocer Magazine, in their February 15, 2004 issue stated “Just a simple error
on one purchase order can create a wave of confusion throughout the grocery
organization – from shipping and receiving to buying, merchandising and
backroom inventory – and have
detrimental impact on customer service and sales”.
instant the supplier confirms that product has been shipped to the retailer by
issuing an electronic “Pre-Shipment Notification”, a
record is generated for the retailer indicating the product is en-route to the
the product arrives at the retailer’s location, and the retailer scans the
product’s arrival, an invoice is generated for the retailer in the supplier’s
behalf and a copy is forwarded to the supplier and the retailer’s headquarters.
If the retailer opts to accept the inventory as described in the supplier’s
“Pre-Shipment Notification”, the invoice is created according to the supplier’s
Grocer Magazine, in their February 15, 2004 issue stated “60 percent of all
invoices generated have errors, 43 percent of invoices result in deductions, an
each invoice error cost $40 to $400 to reconcile”. Let’s get rid of costly, error-filled invoicing once and for all.
Driver Theft” has a negative impact on both the retailer and the supplier. By
tracking the inventory from the warehouse to the store, Scott’s POS ServiceÓ
monitors the entire process. When the inventory arrives, in the
instance when product shipped is different from product received, the Scott’s POS ServiceÓ can instantly
inform the supplier and the retailer of the discrepancy. The “invoice”
may be created for items received OR items shipped, determined by the contract
shared between the supplier and the retailer; however, the discrepancy is
permanently logged and can be retrieved by both parties.
ability to track inventory from the supplier to the store in real time is a
valuable tool to augment the receiving process.
Push Product Authorization feature with Scott’s
prevents the unnoticed receiving of unordered or undesired inventory while at
the same time accepting unordered inventory when an agreement exists between
the supplier and the retailer.
Through the processes of Received
Inventory and Returns Scott’s POS
assists the retailer and the supplier in recording and maintaining
accurate and timely records on DSDs. Inventory
received may be scanned in and inventory returned scanned out with the retailer
given credit for returned merchandise and charged for the new inventory
received. An invoice is instantly created and forwarded to both parties.
complete and electronic.
According to Barbara V. Anderson’s
book, “The Art and Science of Computer Assisted Ordering”, consumers want
“improved service, quality, price and ambiance at all locations” and have “no
tolerance for an unpleasant or disappointing shopping experience”. ‘Consistency’
is the key to improving customer satisfaction. A consumer may switch stores if
a retailer does not carry his or her favorite brand, but consistency in the
brands that are normally available is even more important. Scott’s POS ServiceÓ
can be used to insure that consistency in brands carried is maintained at its
data is accurate and up-to-the-minute, allowing store-level procedures to be
monitored and enforced in real time, allowing the retailer and the supplier to
use POS real time activity and historical data to determine product needs at
the individual store.
transfers, sales and received inventory are constantly updated providing the
most accurate inventory accounting and tracking system available anywhere in
3. Scott’s POS ServiceÓ monitors
inventory and personnel problems and functions as an “Electronic Store Manager”
constantly relaying store activity to headquarters and store personnel.
Shrink, spoilage, theft, grazing,
it all adds up to one thing – lost profits. The Scott POS ServiceÓ is
the perfect tool to lessen the occurrence of shrink. Frequent surprise audits
have an enormous psychological effect on store employees. I have often heard
retailers say that the idea you are being watched does more to curb shrink than
any other management procedure. Management can make an on-demand request to
audit a specific item in the store and receive an instantaneous rely in the
form of an audit which will adjust inventory and report any discrepancies
The need to track shrink over time
is eliminated. The Scott POS ServiceÓ monitors each and every item as if it were the most
important item in the store. Minor variances in profit, vendor selling price,
turns and shrink allow the retailer to maintain a constant vigil.
A gentleman approached me recently
with convenience store operations in Houston, TX, and with management located in Chicago, IL.
With Scott’s POS ServiceÓ ‘logistics’
go out the window. You can monitor and run one store in Moscow,
Russia and one in Melbourne, Australia
from Chicago if
Managed Supplier Partnerships
enable the supplier to become proactive in helping the retailer manage his or
her inventory. This is done through a centralized database, accessible by all
When Wal-Mart began to form Managed
Supplier Partnerships with their suppliers, it was so profitable to their
suppliers that Wal-Mart’s suppliers began to approach other retailers to adopt
a similar strategy. The benefits to Wal-Mart are self-evident, but the benefits
to the suppliers are enormous.
According to the book KMART’S 10
Deadly Sins, “One of Kmart’s biggest failures is that it failed to properly
take advantage of Internet technology. The Internet has made it possible to
link stores, POS systems, store headquarters and suppliers into a safe and
secure network. Scott’s POS ServiceÓ provides
the software and platform to make this possible.
determination or the elimination of the need for order determination
Profit and Loss Statements
Aid to planning
Promotion and season management
Ability for the supplier to make interim stops between
normal delivery cycles to replenish a store’s inventory
effective method for suppliers to announce promotions and new inventory
Affordable for any size retailer
cost changes from the supplier and POS retail price changes from store
reduction in back room safety stock