Inventory Management Maturity Model

Level 1 : Manual Inventory Management

• Manage incoming and outgoing inventory Excel or manual register
• No central system to see inventory across the enterprise
• Huge delay in processing of sales and inventory updates 
• No ERP system available, even billing might be done manually

Level 2: ERP Enables Inventory Management

• Near Real Time Data flow architecture across the ERP systems
• Single source of truth for inventory
• Day -1 update of inventory and updates

Level 3: Auto Replenishment Enables Inventory Management

• Automated replenishment of repeated orders
• Reduced Inventory holding cost without impacting forward cover
• Central and regional ARS enabled distribution system

Level 4: Planning and Forecast Driven Inventory Management

• Demand Forecasting system enabled Merchandising Planning
• Open to Buy enabled purchase order management
• Replenishment Optimisation based on product lifecycle
• Business Analytics driven by Day-1 data warehouse setup

Level 5: Actionable Insights Driven Inventory Management

• Contextual BI and actionable Insights driven operational decisions
• Near Real time perspective analytics to end user
• Track Inventory ageing and forward cover
• Optimised Push & Pull Strategy for profit centers driven inventory control
• Near real time to real time business analytics supported by OLTP systems

SALES TAX & VAT/GST - Their applications in Retail

Taxes have become mandatory around the world. There is no clear evidence when actual taxation system began and how it spread around the world. More formal tax systems were created by British Colonial Rules in their empire which was also used as a means to suppress the indigenous people by exploiting their earnings via stringent tax systems.
There are currently 2 types of taxes applied on goods majorly across the globe.
1. Taxes on Sale of Goods to end customer
2. Values Added Tax (VAT) or Good and Services Tax (GST)

1. Taxes on Sales of Goods to End Customer or Sales Tax:
This is the tax applied on the final retail price of the goods i.e when the final finished good is sold to the customer or the consumer. In this case the goods at source, manufacturer, wholesaler, distributor are not taxed. Such taxes are collected as a percentage on the final value of goods sold and there could be multiple taxes applied such as state, central, luxury,  sin taxes, etc. This leads to inflation of price at point of sale.
But this process also simplifies tax collection as there is only one point where tax is collected in the entire supply chain but to control tax evasions the retail industry should be an organised sector like in case of developed countries like USA, UK, etc. Such taxes are difficult to be applied in a country where unorganized retail in more prevalent like in case of India, Bangladesh, etc.,

Let us see a simple example of sales tax applied in a state of USA.
A manufacturer buys raw material from farmer and makes 2 bottles of whiskey for total cost of $40. He applies 20% margin (25% Markup) and sells them for $25 each. The retailer buys them from manufacturer directly. He then sells them for $38.5 each after applying 35% margin. If there is a discount then the taxes are applied on the discounted values of the goods sold.

Manufacturer to Retailer : 25 x 2 = $50
Sale of Goods    : 38.5 x 2      = $76.9
State Tax 5%     : 76.9 x 0.05 = $3.85
Central Tax 3% : 76.9 x 0.03 = $2.31
Sin Tax 4%       : 76.9 x 0.04 = $3.08
TOTAL VALUE PAID BY CUSTOMER : $86.13
TOTAL TAX COLLECTED : $9.23
This tax amount collected is paid to the government as part of tax returns quarterly or more frequently based on respective country's finance policy.

2. VAT or GST:
This is the tax that the seller collects on the incremental value of good from the buyer. The major difference between sales tax and VAT is that Sales tax is applied only on the final price of the product that the consumer pays to the retailer and VAT is a stage wise application of tax on the value add all the way from manufacturer up till the consumer. In both the cases consumer is the one that bears the burden.
VAT and GST's definition is similar and the difference can only be made based on the application defined by the government. Some institutions apply VAT on tangible products and apply service tax on intangible services rendered to customers. GST is usually a blanket tax applied across tangible and intangible goods and services on the value added amount. In case of VAT or GST it is always included in the selling price unlike sales tax which are applied on the selling price.
Let us see a simple example of how VAT can be applied in a state of USA.
A manufacturer buys raw material from farmer and makes 2 bottles of whiskey for total cost of $40. He applies 20% margin (25% Markup) and sells them for $28 each. VAT applied is 12% i.e. $3. The retailer buys them from manufacturer directly, he buys them for $25 + $3 VAT. He then sells them for $43 each after applying 35% margin and 12% VAT on net retail. If there is a discount then the VAT/GST is applied on the discounted values of the goods sold minus the landed cost.
Total cost of manufacturing : $40
Manufacturer to Retailer      : (20/(1-0.2)) x 2 bottles = $50
VAT Amount (12%)             : 50 x 0.12 = $6 (paid to manufacturer by retailer)
Now 25$ becomes the cost of goods purchased by retailer and $3 is the VAT paid by retailer to manufacturer.
Retail to Consumer               : {((25/(1-0.35)) x (1+0.12))} x 2 bottles = $86.15
VAT Amount collected from customer = 86.15-{(86.15/(1+0.12))}= $9.23
VAT already paid to manufacturer = $6
Balance VAT to be paid to government =$3.23 i.e ($38.46 - $25) x 0.12
There by the VAT is applied only for the difference of the value in every movement of goods from manufacturer up till the consumer where in the total burden of VAT is born by the end consumer who bears the total VAT of $6 and $3.23 i.e total of $9.23

Formula for calculating net retail i.e. retail excluding VAT = ( Selling Price / (1+Vat%))
                                                                                              = (43.08 /(1+0.12))
                                                                                              = $38.46

Formula for calculating Selling retail from Cost = (Unit Cost / (1-Margin)) x (1+vat%)
                                                                              = 25 / (1-0.35)} x (1+0.12)
                                                                              = $43.08

In both cases the tax paid to the government is the same but in case of VAT the partial tax is already collected and paid to government even before the goods are sold. In the case of Sales Tax, the tax is paid only upon the sale of goods there by increasing the wait time for tax collection.
Also the unit retail paid by customer also remains pretty much the same in both the cases.

FOOTFALL ANALYSIS

Footfall is also known as 'Walk-in' in the number of people walking into a retail store for the respective period be it a day, week or month. With the advent of technology and IOT, it has become easier for retailers to track footfall attributes accurately. It lets a retailer understand the success of the retailer's marketing strategy and brand power. There are huge benefits in analysing the footfall and its attributes. The below are few of the analysis that can be done by collecting footfall information (in brief) :
- Direction Analysis
- Gender Analysis
- Age Group Analysis
- Time Analysis
- Conversion Rate
- Location Analysis
- Loyal Customer Walk-ins

1.Direction Analysis: 
Customer tend to move towards a direction, either right, left or straight when they walk into a store. Display of mannequins, gondola display, store layout can force customers to move it a specific direction which will cause drop in sales to the areas of the stores which get minimal footfalls.

2.Gender Analysis: 
Brick and mortar stores have limitations with respect to space, which cannot be expanded. So analysing the percentage of male and female walking into your store will help you plan your assortment such as few stores may require better assortment and range of products suiting female customers compared to male customers. This is more important in fashion retailing.

3.Age Group Analysis: 
This analysis helps retailer under the age group it is catering to by understanding what percentage of walk-in is kids, millennials, baby-boomers/senior citizens, etc. Classification of age group can be coupled with gender to give better meaning to your analysis so that assortment and display can be planned accordingly. For example if a store has more of senior citizen walk-in then display has to be structured in such a way that their respective products are kept at reachable heights and easily accessibly aisles of the store to give a comfortable shopping experience. Also retailer can provide facilities like wheelchairs, electric carts with shopping basket attached, etc.,

4.Time Analysis: 
This analysis helps retailer understand the peak hours, peak days and peak seasons. Based on the analysis outcomes in-store promotions can be planned to liquidate inventory and make the best use of peak walk-in. Shifts for staffs can be planned according to the peak hours during the day, weekend or sale season so that customer service is not compromised due to staff shortage. Retailers also higher contract staffs for bagging and for visual merchandising during off-sale to maintain the shopping environment and visual merchandising standards. For example if the walk-in is more in the evening then the retailer can plan for clearance price in fruits and vegetables after 6 PM to clear the unsold ones from the morning so that fresh stock can be stocked the following day there by reducing wastage and retaining freshness in Fruits and Vegetable section.

5.Conversion Rate:
This analysis will let the retailer know what percentage of customers who walk in to the store actually buy from them. Conversion rates are usually low in Mall Store formats and high in Stand alone stores. But by understanding what is the actual reason for drop or increase in conversion rate during various time frame will help retailer to take necessary action to sustain higher conversion rate.

6.Location Analysis:
This analysis will let the retailers understand which stores in their chain has highest walk-in. This coupled with conversion rate will give insights into which store has high walk-in compared to which stores are actually converting this walk-in into sales. ATL and BTL marketing activities can be conducted to increase walk-in.

7.Loyal Customer Walk-In:
With advance in technology and IOT, retailers can differentiate between Loyal customers and new customers who can be converted into a loyal customer. In-store routers and mobile app can assist retailers achieve this. If there is high percentage of loyal customers coming into a store and the store is also a top performer in location analysis then the store team is hitting the right cord with the customers there by maintaining high level of customer satisfaction.