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Optimising Arch Enterprise


Background: the purpose and function of Arch Enterprise (AE)

  • A specialised merchandise management system that facilitates central operational control for retail operations
  • Optimises and maintains efficiency and, ultimately, profitability in a multi-store enterprise
  • Allows central management of:
    • Procurement cycle – ensures the operation is optimally stocked
    • Margin control – sales price maintenance and campaigns to maximise profits
  • Data flow is central to the solution, with two main categories:
    • Master data – product and supplier information that creates the trading environment
    • Transactional data – operational data uploaded from the stores’ trading
  • Integrated Business Intelligence (BI) across stores which:
    • Centralised reporting eases the management burden
    • Plays an important role in making strategic business decisions

Project overview
The project was undertaken for a group consisting of a mix of 56 retail and wholesale outlets which had lost significant market share and turnover during 2017/18. Some of the apparent issues were that products were not competitively priced and frequent out-of-stocks on key lines while being grossly overstocked on non-movers. The key objective of the project was to regain market share without adversely affecting margin. A margin and replenishment strategy were therefore developed to price goods more competitively and minimise out-of-stock situations.

Problem areas identified
The following problem areas were identified, with the aim to rectify:

  • General ownership and responsibility of Arch system not clearly defined, thus no responsibility and accountability
  • Poor master data quality
    • Article variant links
    • Inefficient department hierarchy complicated reporting
    • No margin plan for different business models and divisions
    • Incorrect article listings
    • Fragmented use of AR and AE functionalities
    • No formalised replenishment cycle / order planning
  • Receiving process
    • Stock not always received against original purchase orders
    • Arch configured to use back orders on purchase orders, but orders not updated up or deleted
  • Stock control
    • Stock adjustments (weekly hazard counts) were not updated in the system, resulting in incorrect stock-on-hand figures
    • High number of recounts needed to verify correct stock-on-hand, resulting in time-consuming financial stock takes
    • Number of lines active in each store (80,000) resulting in onerous stock counts
  • General
    • Debtor payment terms not enforced
    • Service department items recipes not implemented resulting in inaccurate stock on hand figures and GPs
  • IT division
    • Data communication problems – critical
    • Incorrect printers and scanners used for selected business model
  • Master data
    • Incorrect article listings
    • Legacy data in need of clean up

Remedies implemented
  • Designed and implemented a new department structure
  • Optimised and rationalised central article master, reducing it from 86,000 to 28,000
  • Reduced blind counts during financial stock take from three to one with a focus on variances
  • Implemented new processes in AR and AE
  • Implemented a formal replenishment / order plan
  • Installed correct printers and scanners for business needs
  • Trained store managers, assistant managers and buyers
  • Trained head office buyers, category managers, executives, directors, regional managers and IT department personnel
  • Built and implemented a butchery process (recipes)
  • Built BI reports in Arch Enterprise
  • Custom-designed AR reports
  • Built executive reports in AE
  • Implemented business model analyses

Overall results achieved
Comparing 2019 (remedies implemented) with 2018:


Conclusions
The objective of the project was to ensure that AE is optimised and applied diligently in the operation. All measures implemented were in line with the objective.

Results indicated a 16.1% increase in turnover and a resultant 14.7% growth in cash profits. This marked improvement has come at a minor sacrifice of only 0.1% drop in GP percentage.

These results were achieved by implementing a three-tier strategy comprised of a margin, stock and buying plan. It allowed the stores to price more aggressively without sacrificing materially on margin and at the same time minimise out-of-stocks. The project highlighted the importance of the margin plan and stock plan as strategic drivers in AE.

 

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