Everyone who's ever tried being their own boss knows that starting your business is the easy part, but what comes after is the tricky one. For example, when the COVID-19 pandemic struck, some entrepreneurs had to shut down their businesses they spent over 20 years building and start from the beginning again. We know one of those entrepreneurs personally and we have witnessed his online shop launch followed by a supermarket opening in Zagreb. Our acquaintance dealt with all the challenges in record time, including supplier search, contract signing with suppliers, making a web shop, payment getaway set-up and others – he took care of all of it in a few months. And just when we thought he was finally on his own two feet, he admitted the challenging part had just started for him and his business.
The better we manage our supplies, the higher our income
The real problems started when the said entrepreneur realized that most of his ordered goods have been going bad. There is a lot of consumer goods among his over 20.000 items, including bread, fruit and vegetable, and dairy products, and a great part of the supplies he had ordered from the suppliers, so that he would have something to deliver to his customers, had gone bad. This led him to having to deal with two big issues just a few months into starting his new business:
If he orders too much supplies, they will go bad. If he orders too little supplies, he won't be able to compete on the market.
The quantity of goods ordered varied substantially from month to month. He would sell a thousand yoghurts during one month and only 150 during the next one.
He soon realized that a key to good supply management is the way the database of products is structured in the software it uses.
The advantages of supply management via application software
Supply management systems are focused on the right supply quantity available in real time, but it is also important for that supply to be of appropriate quality. Supply management includes three elementary costs: taking stock, ordering and the cost that accumulates if a certain good is out of stock. Using the example of our acquaintance, we can conclude that his poor supply management led to the accumulation of „deal supplies“ and the drop in his income, and in this case poor supply management led to deterioration of his relationship with the suppliers and partners.
Naturally, after having a bad couple of months, our acquaintance came to us for help, knowing that we had developed the innovative Dimension Management System software that improves work processes. It might sound incredible, but the truth is, it only took as a coffee and a brief conversation to pinpoint his problem. The software he had been using to manage supplies didn't have a developed hierarchy of product complexity, which is why the products were ordered from the suppliers according to intuition, instead of real sale statistics.
Detailed product descriptions aren't only important to customers, but to warehouse managers as well
To illustrate this problem, here is a simple example. Let's say the customer has walked into the store and bought „cornbread in a mold“. Our entrepreneur only had two levels of product description in his supply management system – „bread“ and „cornbread“, so after the cashier scanned the barcode „cornbread in a mold“, the entrepreneur only had access to the information that the supply of „cornbread“ had dropped. This wouldn't have been a problem if our entrepreneur hadn't had „homemade cornbread“ in stock as well as „cornbread in a mold“.
To illustrate this even further, here is another example. Let's say that you are in the short-sleeved T-shirt business. If your software were not to allow you describing product variations on multiple levels, you would have to open up a new code for every shirt in a certain color and a certain size. But thanks to the possibility of describing products on three levels – „shirt“, „blue shirt“, and „XL blue shirt“ – you don't need to open three codes, it is enough only to note the variations. These variations, for this product specifically, can be colours and sizes, and in the case of bread, the variations can be ingredients or the shape of the bread.
What we are trying to say is that softwares on the market mostly only have two levels of description details: (1) less detailed and (2) more detailed product description. But in some cases, like the one we have presented today, that just isn't enough. This experience we had with softwares that don't fulfil everything entrepreneurs need has inspired us to create our innovative DMS software, which „thickens“ the abstraction with another description level. We offer our clients the choice to use two or three description levels in DMS, which helps them reduce „dead supplies“ and boosts their income.
This kind of approach to product hierarchization enables the client to manage supply and sales, but also the stock process, using a description level he decides is the optimal one for that specific product at that specific time.
If you have recognized yourselves or your business in our story and you think we can help you, contact us. We understand your daily challenges and we are happy to help you deal with them.
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