Profitect's Profit Amplification Suite Helps Combat Retail's $800 Billion Problem

WALTHAM, Mass., May 15, 2012 /PRNewswire/ -- Out-of-stock and overstock are more than just a major source of frustration for retailers. According to IHL Group, a retail analyst firm, the combined costs of out-of-stock and overstock – caused by Inventory Distortion – adds up to a staggering $800 billion annually.

(Logo: http://photos.prnewswire.com/prnh/20110712/NE33204LOGO)

Inventory Distortion has been part of every organization and supply chain for decades.  However, as the number of SKUs, channels, systems and people increase, in both number and complexity, so will lost revenue opportunities.

The underlying causes of Inventory Distortion range from forecasting and allocation errors to behavioral issues: for example, grocery cashiers who scan similar (but different) items multiple times instead of individually; irregular distributions of sizes for apparel retailers; poor tracking of short product shipments. These are problems that retailers can't completely eliminate. Instead, the key for retailers is to identify trends and correct the underlying behaviors.  The pattern-seeking technology in Profitect's Profit Amplification Suite can help. Retailers are able to pinpoint the root causes of Inventory Distortion, and receive actionable tasks which eliminates profit leakage and lost revenue opportunities across the retail organization.

In a recent IDC Research "Analyst Connection" report, analyst Greg Girard says, "Retailers can reduce, if not eliminate, profit leakage by maintaining the integrity of the profit pipeline. Most of the value in profit leakage can be identified and recovered in repeatable patterns. Analysis of those patterns can link profit leakage to discrepancies between what should be the case and what is the case in data, processes, and task performance."

For example, Profitect's Profit Amplification Suite has helped retailers:

Prevent $1.25 million in markdowns and out-of-stocks. Profitect identified an irregular distribution of size allocations for one retailer and determined that a buyer had been receiving discounts for ordering the less popular sizes – resulting in stockouts on some sizes and overstocks on others. By correcting the behavior, Profitect saved the retailer $1.25 million by preventing markdowns and out-of-stocks.

Recover 2 million pounds Sterling annually in lost revenue. Profitect's solution helped one UK retailer realize they were only receiving 23% of the credit due on product returns due to consistent overstocks – a seemingly insignificant problem but one that amounted to a 2 million pound annual problem across the entire retail chain. Armed with Profitect's information, the retailer was able to correct the problem.

Prevent merchandise damage due to DC errors. In another example, Profitect identified a pattern of increased claims in the fragrance category in a particular region. As it turns out, pallets were improperly loaded at DC, with heavier boxes being placed on top of lighter ones, causing boxes to split and open. By improving training at the DC and correcting the behavior, Profitect saved the retailer $110,000 in a single quarter, while preventing a recurring problem. 

"Retailers must focus on correcting wrong behaviors of people, processes and systems," said Guy Yehiav, CEO, Profitect. "Retailers can vastly improve profitability and minimize Inventory Distortion quickly by addressing the many issues of profit leakage in their organization."

About Profitect

Profitect's profit amplification software enables retailers to quickly discover and actualize untapped growth and profit opportunities across the entire value chain.  Increased revenue and reduced costs are achieved by identifying opportunities with intelligent, prioritized actions across the entire retail organization, providing scalability, sustainability, and accountability.

Profitect's modular, non-disruptive solution pinpoints value chain margin leakage, inventory distortion, on shelf availability, shrink, waste, damage, process compliance, and operational risks.  Innovative pattern seeking technology identifies opportunities and delivers best practice solutions, impacting personnel, system, and process behaviors, enabling excellence in the ordinary.

SOURCE Profitect