Hardware wholesale merchants often encounter many problems in cargo management.
Lao Chen from Jakarta’s Glodok Hardware Wholesale Street found during an inventory last year that his account showed 470 pieces of 4-point copper ball valves, but only 210 pieces were actually left in the warehouse.
The reason is that wholesale shipments are recorded as “boxes” and retail sales are recorded as “units”, so the two sets of accounts cannot be reconciled.
There are more than 1,800 SKUs in his store, such as water pipe joints, expansion screws, cutting discs, raw material tapes, etc. Once the specifications are refined, the quantity will increase.
90% of hardware and building materials stores with over a thousand SKUs will encounter this problem.
For the following four things, for hardware stores with over 1,000 SKUs, they are not “better if you do them”, but “you will definitely lose money if you don’t do them”.
The first thing: change the classification from “feeling” to “rules”
At first, the hardware store owner mostly memorized the classifications by himself, such as putting water pipes in one row, electricians in another row, and tools in another row.
But when the SKU reaches more than 1,000, this method cannot hold on.
The same kind of screws, self-tapping screws, expansion screws, machine screws, wood screws, each with different specifications such as M4, M5, M6, M8, etc., are all squeezed under the category of “screws”, and you have to look for them.
The correct approach is to classify them into three levels: the first level is based on usage, such as plumbing pipe fittings, electrical materials, hand tools, fasteners, consumables and auxiliary materials; the second level is based on material or type, such as plumbing pipe fittings are divided into copper parts, PVC parts, and stainless steel parts; the third level is based on specifications and models, such as copper parts are divided into 4-point straight-throughs, 6-point elbows, and 1-inch tees.
The more categories, the better.
A merchant in Jakarta who has been doing hardware wholesale for 8 years originally divided more than 60 secondary categories. As a result, employees were slower to select categories than to find goods.
Later, it was reduced to 28 second-level and 120 third-level, which was faster because the SKUs under each category were controlled between 30 and 80, and the human eye could locate them at a glance.
The second thing: barcoding SKUs, not labeling shelves
Many bosses interpret barcoding as “numbering the shelves”, which is wrong.
The barcode is for each SKU, not the location.
The same 4-point copper ball valve is placed in row 3 in area A and in row 1 in area B. The barcode should be the same because it is the same SKU.
If the barcode is coded according to the shelf location, the barcode will be invalidated once the goods are moved.
There are two practical details in barcode generation that are easy to get into trouble: First, the units must be unified.
Wholesale is shipped by “box” and retail is sold by “piece”. This is the most common scenario in the hardware industry.
The solution is to use barcodes to distinguish units, and generate box codes and individual codes separately. The system is set to 1 box = 200 pieces, and the incoming and outgoing warehouses are automatically converted.
Lao Chen suffered a loss before because he did not do this conversion. He wholesaled 3 boxes, but the system only deducted 3 boxes.
Second, the barcode must be scannable.
Most of the goods in the hardware store are small items, and the labels are too small to scan out.
It is recommended to use labels of 30mm × 20mm or above, and the printing resolution should be no less than 203dpi.
For cylindrical expansion screws, the barcode should be affixed on the flat surface of the packaging bag. Do not affix it around the cylinder. If the curvature is too large, the barcode scanner will not be able to read it.
The third thing: Set up inventory warning, it is better to wait for replenishment than to replenish in advance
The replenishment cycles of suppliers of hardware and building materials vary greatly.
Standard parts (screws, nails, raw tape) usually arrive in 2-3 days, but special pipe fittings (stainless steel 316 elbows, high-pressure ball valves) may have to wait 2-3 weeks.
If there is no early warning and the customer waits until the product is sold out to find the supplier, the customer would have gone to the next door to buy it.
The early warning value cannot be set on the head. A practical formula is: early warning value = average daily sales × number of replenishment days × 1.5.
A factor of 1.5 is a safety buffer.
Take the 4-point copper ball valve from Glodok in Jakarta as an example. The average daily sales is 12 pieces, and it takes 5 days to replenish the goods. The warning value is 12 × 5 × 1.5 = 90 pieces.
The system will automatically remind you when the inventory drops to 90 pieces. Place an order at this time, and 200 pieces will arrive in 5 days, which is just in time.
However, there is an exception. Seasonal products must be set up separately.
For example, for waterproof coatings before the rainy season and irrigation pipe joints during the dry season, the average daily sales volume during the peak season is 3 to 5 times that of normal times. The early warning value must be recalculated based on the peak season data, and the annual average cannot be used.
The fourth thing: Reconcile accounts once a month, don’t wait for the year-end inventory to discover problems
The inventory differences in hardware stores have one characteristic: the differences are small but persistent.
The difference of a few dozen pieces per month may be considered by the boss as “not too much”, but the accumulated goods in a year may amount to tens of thousands of yuan.
The significance of monthly reconciliation is to control the differences within the traceable range. If there is a difference of 50 pieces, you can remember which batch of goods was the problem, but if there is a difference of 5,000 pieces, you can only admit it.
Reconciliation does not require suspension of business.
It is recommended to select 20% – 30% of the SKUs by category on the afternoon of the last working day of each month. Focus on three categories: high-value products (power tools, copper parts, special valves) in full quantity; high-frequency goods in and out of the warehouse (screws, cutting sheets, raw material tapes) in full quantity; and low-frequency but long-tail SKUs in all quantities.
After the order is completed, the system automatically generates a discrepancy report and checks the reasons item by item.
There are three most common sources of discrepancies: wholesale shipments are shipped in boxes but the system deducts them individually, returns are not recorded, and suppliers ship less but do not check when receiving the goods.
Adjust the account on the spot after finding the reason, and don’t carry the difference to next month.
Kingdee Wisdom Notes International Edition Ailit is an AI-driven intelligent purchase, sale and inventory system developed by Kingdee Group specifically for small and medium-sized merchants. The four things of hardware and building materials business classification management, barcode generation, inventory warning, and monthly inventory can be completed in this system.
For merchants in Southeast Asia’s hardware and building materials hubs such as Jakarta, Ho Chi Minh, and Bangkok, using a set of intelligent purchase, sales and inventory to straighten out the chaotic situation after SKUs exceed a thousand is a more cost-effective option than hiring an additional warehouse manager.
