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Lower Costs Equal Higher Profitability?

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Who would have thought??  All kidding aside, this example of tight cost controls for supply retailers, such as Office Depot Inc. and OfficeMax Inc., teaches us the exact correlation between lower costs and higher profitability.

Both office-supply retailers reported earnings in the third quarter of this year.  In “Office Max beats profit expectations despite weak sales,” posted in the Chicago Business Journal, Office Max noted a decline in personal computer sales, but noted that they were focused on their core business which drove in stronger operating margins.  Office Depot also noted a reduction of computer sales, but an increase in tablets and e-readers, according to “Office Depot Beats on Bottom-Line – Analyst Blog,” posted on Nasdaq.com.  Both major retailors indicated top-selling and bottom-selling products for this quarter.  How well do you know your own best/worst selling products for the quarter, the year, or for any other time period?  Being familiar with top customers, top products, the marketing campaigns that generate the best leads and the best sales, are all ways to discover how to lower costs and generate higher profits.

These retailors, and many other types of businesses, rely on an enterprise resource planning (ERP) software solution to provide the insight into core business operations.  Microsoft Dynamics® GP, for example, manages finances, supply chain, project and services management, sales and marketing, human resources, and other operations.  This integrated software solution can provide visibility into your operations so that you can find ways to streamline operations, control costs, and boost profitability.  Learn what inventory is selling well so you better forecast what to have on hand, and at what volume, especially during this upcoming holiday shopping season.  Knowing your best customers will identify new opportunities to cross-sell or up-sell.  You might be able to provide complimentary products to those best-selling products and expand your core offerings.  Evaluate the products that don’t sell quite as well and figure out why.  Maybe certain products are becoming obsolete, not the quality that consumers are wanting, or maybe they are too far away from your core business.  You might determine that cutting out certain products is more beneficial than re-working marketing efforts.

You can use your ERP software solution to find ways to streamline operations and reduce labor costs, as well as improve sales with your best customers and boost sales with other demographics.  You can also use ERP to strengthen relationships within the supply chain which can improve inventory control, reduce wasteful over-stocking, and get your products to customers faster with lower shipping costs.  The information is there, you just need to look for it and use it.  Contact Socius for more information about finding ways to lower costs and increase profitability.

By Socius, Ohio Microsoft Dynamics GP Partner

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