Aversi is a sizable Georgian pharmaceutical retailer with 299 stores across the country. The company is dedicated to providing customers access to high-quality, affordable medicines and a high level of service.
Aversi continues to develop and launch new outlets. To do this, the company is constantly investigating internal business processes in order to improve the service for its customers. One of the key optimization areas is inventory management. After all, it is extremely important for pharmacies to always have the right items of the entire product range and the right quantity.
Challenge:
Facing financial losses in decentralized inventory management setup
Prior to the launch of the system in each pharmacy, purchases were made independently. At each location, managers placed orders manually, formed an assortment matrix, and calculated order quantities. In this complex and essential process, the purchasing managers relied on their experience and vision.
But the human factor was the biggest bottleneck in such a setup:
- sometimes managers missed important positions and didn't order the required quantity;
- there were cases when managers wanted to accumulate a certain amount of goods "just in case" in order to play it safe and reduce the risk of empty shelves.
The problems became more evident as the business started scaling and expanding its assortment. Then the company initiated a project on centralizing inventory management with the help of a new software system. It was necessary to minimize human involvement in the process so that the subjective decisions of the managers could not affect the profitability of the entire chain.
The new system had to automatically calculate the optimal order quantities, reduce overstocks, and reduce waste.
Aversi realized they needed an inventory management program to automate inventory management and help build a centralized business process. The first option was to develop an in-house solution. However, the management quickly realized that investing resources in product development is more expensive than paying for a cloud subscription.
Up to 5 different vendors were considered and rigorously compared. Ultimately, the LEAFIO Inventory Optimization Solution was chosen for the following reasons:
- the product is cloud-based, which makes operation easy and convenient;
- the system is regularly updated, and the business gets access to valuable new features;
- the algorithms are configurable, flexible, and effective.
Process:
Implementation stages
Each pharmacy was gradually onboarded by the implementation team into the system, and over time inventory management became automated and centralized.
Aversi has allocated 6 people for the project: one project manager, a department head, purchasing managers, and an IT department.
"We worked well with the vendor team despite the different locations and countries. We had regular meetings and a clear action plan. We were steadily getting closer towards the goal, realizing that it was crucial for the business," said Aversi’s project manager.
Result:
The system has redefined inventory management
The project has revealed weak points in Aversi's business process. When the initial surplus data analysis was completed, we had received the scope of work to be completed.
Large orders used to generate a surplus that froze up capital and made the business struggle financially. Now, the approach to making orders has completely changed. This is done by 8 people in the central office throughout the chain, which greatly simplified and accelerated the process. Stores are now placing automated orders with optimal quantities to cover the demand. This allows the capital to work more efficiently.
Performance metrics in LEAFIO Inventory Optimization Solution
Aversi management is actively using system reports. They are available visually in the form of graphs and tables. With the help of the analytics, the managers are monitoring indicators across the entire chain:
- turnover;
- lost sales (the company did not have these figures);
- overstocks.
Overstocks have decreased by several million, which is a significant achievement for the business.
The system also helped to optimize the promotion management approach. The company adopted an internal standard for how to plan promotions. Before that, everything depended on managers: when they would order goods for the promotion, in what quantity, and so on. Therefore, the launch of the trade promotion was often late. Now the event is announced two weeks in advance, and before it starts, managers set an expected increase in sales rate in the tool.
The business has made a vast amount of time available for customer experience improvement vs. routine calculations of the orders.
"We love what we do and are always looking forward to improving our service. We offer great products and excellent services for our customers’ satisfaction. And we are always trying to introduce new technologies into our company." That was the main takeaway of the Aversi company manager for all retailers.
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