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A major German furniture store with a nationwide network of branches and regional warehouses has switched from full inventories to sample inventories. This step was possible thanks to the software solution Stasam® from Stat Control.
A large German furniture store’s sales figures are soaring. The company is continuing to expand and would like to keep its administrative costs under control in this respect. Against this backdrop, the trading company introduced sample inventories last year. Since the furniture retailer used the continuous inventory method, it was made aware by its accounting firm of the sample inventory method as an alternative to the time-intensive and costly full count.
It was quickly convinced that a sample inventory wouldn’t just be much faster, but also more reliable and accurate than the traditional full inventory. It’s pretty clear-cut that errors are inevitable if 20,000 different items have to be counted manually in one place. An incorrect inventory and basis for planning are the result. In other words, the full inventory gives stores a false sense of security. Paragraph 241 of the German Commercial Code (HGB) permits so-called sample inventories to be carried out by warehouses and shops stocking 1,000 items at least and using a computer-assisted warehouse management system. In this regard, the furniture store relies on “Moeve”, the ERP system developed specifically for the furniture trade, and the supplementary inventory management solution LogoMate® from Remira. On this basis, the company has reliable inventory data that is not disturbed even by unavoidable shoplifting or other losses.
The sample inventory method benefits from the phenomenon that roughly 20% of all stock items represent 60 to 75% of the stock value. When preparing the inventory, the stock must therefore be determined based on random samples using recognised mathematical and statistical methods too. It is absolutely essential that the methods used comply with the generally accepted accounting principles (GAAP), while the sample inventory result must be within the specifications permissible in Germany. On the hunt for a suitable supplier, the IT, Organisation, Financial Accounting and Auditing departments started the selection process in summer 2013. Hamburg-based Stat Control GmbH secured the order with its solution, Stasam®. The software enables sample inventories with all four permissible extrapolation methods. In addition to the program, the personal impression also played a key role in the decision-making process. “Stat Control’s presentation was very convincing and credible,” recalled one of the decision-makers. He particularly liked the “Stat Control employees’ high level of expertise and the fact that Stat Control focuses exclusively on the topic of inventories”. And last but not least, the price was right too.
The furniture store bought ten Stasam® licences and signed a maintenance contract. “The subsequent implementation process with an interface to Moeve, the ERP system, was child’s play,” said a spokesperson for the company, who also reported that the Stat Control compiled exact instructions for performing sample inventories and had them “approved” by the auditor. The furniture retailer wanted to use this tool to initially switch 30% of the furniture stores and the regional warehouses to the sample inventory in 2014. But the solution was used for the first time in 2013 at a premises in southern Germany.
It was here that Stasam® determined that around 400 items out of the total product inventory had been counted by 15 employees in just two hours. The local count results were within the legally prescribed thresholds, and the time savings for the Auditing department and the employees on site were huge. For the Auditing department, this meant that the work involved was reduced from seven man days to one when supervising a store audit. The savings in the actual counts were even greater. 40 to 45 employees worked for two whole evenings on the full inventory. Additionally, a lot of time was spent on the preparation process, and this was cut considerably as well with the random sample method. Another advantage is that each store manager can now independently decide whether to count during or outside of shop opening hours.
So it’s no wonder that the initial positive experiences resulted in the retailer changing its plans. Instead of 30%, 45% of the premises were switched over to sample inventories within the first year. The remaining sites, meanwhile, would benefit from Stasam® by 2015 as well.