L Cosmetics is the only drugstore retail chain in Estonia selling daily commodities at affordable prices. The network consists of multi-brand and mono-brand stores with personal care products, cosmetics, perfumes, and all kinds of household goods.
There are 26 L Cosmetics stores throughout Estonia with an assortment of more than 10,000 SKUs.
Challenge: Inefficient Decentralized Inventory Management
Before the Leafio Inventory System introduction inventory management was carried out by three company departments: retail, distribution, and purchasing. Orders were generated through the accounting system. All inventory management used to work in two different directions:
- for retail stores;
- for wholesale.
Order generation for retail stores was decentralized by store managers based on minimum balances and sales, partially controlled by the purchasing department.
External suppliers’ orders from the central warehouse, as well as marketing activity distribution management, were carried out by the bulk purchasing department.
The retail chain regularly encountered inventory management problems:
- The most significant problem that directly affected sales was empty shelves, which led to lost sales. There was a lack of a tool that would allow for the correct and timely creation of orders. This was especially evident during the launch of promotions when the goods simply did not arrive in the store at the beginning of the promo.
- The group of high-selling products was overstocked because the retail store managers sought to order products with significant stock. For a retail network, this was a large amount of overstock.
- Placing orders took a lot of time. All operations were carried out manually, which led to an excessive workload. At the same time, there were simply not enough human resources for strategic calculations and evaluation of the main KPIs in inventory management, since the analysis was also carried out manually. This resulted in another problem – the lack of analytics features that would allow you to detect problem areas and their causes.
Management realized the need for a separate system to solve these issues by automated inventory management business processes. In addition, the company required new analytics to help analyze inventory management efficiency across the entire retail chain.
Leafio Inventory Management addressed the need for order automation and reduced the managers’ workload. Leafio’s key benefit was the customer support and after-project implementation maintenance. The Customer Success Department supports users throughout the subscription.
Process: Teamwork is the key to success
A team of 14 specialists from the retail chain was involved in the system implementation: a project manager, an IT specialist, and specialists in retail, distribution, marketing, and warehousing. The project was supervised by the Leafio Project Manager.
The vendor had a proven methodology in project implementation, and the efficiency was confirmed by more than a dozen clients. First, the inventory management processes are analyzed, the project implementation plan is prepared, all the necessary data is prepared for the Leafio system exchange, and user training is carried out. The teamwork establishment between the vendor and the client is important throughout all the project stages.
"The process of team interaction was as comfortable as possible. We never interacted live on video. The implementation and training took place entirely over the phone.
The client fully trusted our company’s expertise, leading to positive results and timely project completion." - Yana BODNAR, Leafio Project Manager.
Three main markers of the system implementation success:
- Transition from a decentralized order generation process to a centralized one.
- Changing the delivery approach. Backdating elimination made the process absolutely transparent.
- Focus on the result and trust in the solution.
The system helped fundamentally change the inventory management approach, leading to positive results.
During the project, a proven implementation methodology was used, the effectiveness of which was confirmed by more than a dozen clients. After planning the tasks, we started to launch it. The following stages were completed: audit of business processes in inventory management, implementation of data exchange between the ERP and the Leafio system, user training, piloting and scaling in terms of connecting goods to auto-order, studying the analytical module, summarizing the implementation and achieving the set goals.
In the course of the work, both sides understood that the main objective is the result, which will ultimately lead to a higher KPI in stock management. The team has established effective communication and cooperation, which played a major role in advancing the implementation process and achieving the goals.
“We have complete confidence in the system, so we didn't want to impose our processes on it. Let's see what Leafio Inventory Management has to offer.” - A representative of the L Cosmetics retail chain.
Result: Automation Improves Inventory Management In Retail
There are no random results in project management. All achievements are the product of well-defined objectives and a dedicated effort to achieve them.
The following goals were set at the start of implementation with the approval of the project contract:
- optimization of inventory management processes (connecting auto-order, freeing up buyers' time to work with the assortment);
- stock reduction;
- turnover improvement.
At the time of the implementation completion, both qualitative and quantitative results were achieved. Optimized order processes: orders are generated automatically on a schedule, 50% of order schedules are auto-sent, orders are sent directly to suppliers resulting in the department’s work performance, as manual calculations cause errors, and automation helps to avoid incorrect orders.
L Cosmetics is focused on good working conditions for employees, where the Leafio system also proved to be useful. Now purchasing managers spend less time on routine operational tasks and are more involved in the strategic development of the company.
The following figures reveal the implementation results:
- 100% of the store assortment and 25% of the central warehouse assortment are connected to the system.
- Turnover rate was reduced by 25%.
- 6% average surplus reduction.
These results were achieved over 3 months. It should be noted that, depending on the size of the organization, the average payback time for Leafio projects is 6 months.
L Cosmetics is planning to put greater efforts into the analytical system unit, involving the Leafio Customer Success manager to provide more than 20 different reports. This will help analyze the inventory management efficiency throughout the retail chain and identify bottlenecks. Improvement to be continued!
