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Doing More With Less
Large corporations use the word "downsizing". "Work restructuring" or "repositioning" have been polite words that deal with the same idea. While "cutting back" says in simple terms to reduce expenses, reduce exposure of assets, or in an extreme case, selling assets to cover liabilities. One explanation that has been given is that hard economic times will teach us how to get by with less.
While many stores have experienced these situations, we have sometimes been surprised to see that we have managed to do more with less. This lesson is important to be remembered by all stores that have survived rough times. And for the stores that know rough times are coming because of new or enlarged competition in your area, the experiences of others can be helpful so that you will not have to travel these same roads. And finally, for the stores that know that they will not ever meet these difficulties, these situations can perhaps help to make you more profitable.
In doing more with less, there are several occasions from our store that we would like to share. Over a year ago, we began to eliminate our warehouse. When we started, it was our intention to just remove the shelving that was built in 1959. Then, and for many years, it made sense to have plenty of back stock, or at least we remember it that way.
We remember the manufacturer that we used to write a large seasonal order with. One of the events that caused us to decrease this large seasonal order, was the year that we received the report that we had purchased twelve cases of one item from the manufacturer. But, the reports from two of our wholesales showed that we had reordered cases from each of them. And yet at season's end, we found one of the cases from the manufacturer still in the warehouse.
Later as we reduced our inventory levels in the tough times, these warehouse shelves became the home of "lost" merchandise and a convenient place to store defective or return merchandise until we found time to deal with it. When we finally decided to clear it out, we found that there was over $5,000. in inventory sitting on these shelves.
After working to get credit for this merchandise, we began to work with our saws to cut down and remove the shelving. About this time, we found several departments that needed some additional space. The bird feeders, bags of ready mix concrete, roofing materials, plastic guttering, lumber, were all moved to the warehouse area. It is not the most attractive looking sales area, but it is functional and now some of our departments have enlarged their selection. The pleasant surprise is that it all started with wanting to clear up a mess.
We have had a couple of similar situations dealing with the sales representatives that we allow to write their own orders. With one of the situations, the representative was making weekly visits to our store. But when some rearranging on our sales floor eliminated the majority of the space where we allowed this vendor to keep additional inventory, the sales representative did not need to write orders for the next two weeks.
Watching this reduction of unnecessary inventory occur, we next took our efforts to another area where we reduced a series of peg hooks from 6 inches to 4 inches. We boxed all of the additional merchandise and asked the vendor to issue a credit memo. Again the same results, with several weeks before he wrote another order, and what appears to be no loss in sales. We have to be careful to make sure that we do not eliminate the needed inventory for "project sales", but we do not believe that we can afford to become an extension of the warehouse of some of our suppliers.
We have also found that being able to do with less, or even do more with less, has also shown merit in our scheduling. For several years, we had a small engine mechanic that was not on commission. At the time that we hired him, our repair business was not sufficient to support a 40 hour per week mechanic so we paid an hourly wage.
To justify his position, we had him spend part of his time helping our warehouse person check in merchandise. And from time to time, we found that we had him spend some time on the sales floor. Our repair business, for which we charge $34 per hour, did not grow. And somehow, no matter how large or small our weekly warehouse orders, the merchandise was completely checked in on Friday afternoon - no earlier or later.
Today, we have a mechanic who is paid entirely on commission. He has no guaranteed base salary, so if no repairs are made, he receives no pay. He does not check in merchandise, and he does not ever work on the sales floor.
But in writing the schedule today, we do not make any provisions to cover the time that he was on the sales floor. Yet our sales continue to increase. As for our warehouse, we have one person scheduled to assist our warehouse person for one day each week. The merchandise still is completed by Friday afternoon.
We believe that this is a case of team members having adjusted their work speed to meet an established goal. While we have already managed to eliminate a large portion of what appear to be unnecessary hours, we are continuing to work to motivate our team members to complete the merchandise processing "as soon as possible" as compared to having the job done by Friday afternoon.
These examples can be extended to many other examples throughout our store - insurance (being aware if your policy covers seasonal fluctuations and purchasing for the lower amount), advertising (sending sales flyers to areas that produce marginal results), outside services (buying supplier's reports from which you to make few profitable decisions), or accounting services (that could be done in- house for less).
Of course nothing replaces sales for increasing the profits, but nothing makes profits quicker than cutting expenses and doing more with less.
This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 1577, St. Petersburg, Fl. 33731. Phone 727-464-2182. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.
Profits Plus Solutions, Inc.