Metrics That MatterThe Most Effective KPIs to Help Transform Your Business

What’s Inside

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Inventory Turns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Days of Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Sell-Through Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Gross Margin Return on Investment (GMROI) . . . . . . . . . . . . . .7

Number of Transactions Per Day . . . . . . . . . . . . . . . . . . . . . . . .8

Average Transaction Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Profit Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Why Retail Businesses Choose Epicor Eagle Analytics . . . . . . .11

2 | Metrics That Matter

IntroductionRetail businesses thrive or fail based on their ability to identify, define, track, and act upon key performance indicators (KPIs). The faster and more accurately KPIs can be accessed, reviewed, analyzed, and acted upon, the better the chance an organization has for success. KPI improvement initiatives position organizations for growth and are well worth the effort.

Sophisticated enterprise resource planning (ERP) and business intelligence tools have made it possible to quickly calculate and report KPIs and metrics. When evaluating your business, it’s important to create a KPI improvement program focused on a balanced approach. This will enable you to make performance improvements that matter across your business—

without sacrificing any one area of your business.

“The Eagle® system allows us to manage against key inventory metrics. Our

inventory dashboards empower store managers to see inventory levels and

turns by category, class, and SKU. Managers can easily see sales, margins,

and what hasn’t sold and may become literally ‘dead stock’—or ‘dumps’ as

we call them.”—David Weisman, CFO | Armstrong Garden Centers

Click here to learn how Armstrong Garden Centers uses business analytics to improve operations .

Metrics That Matter | 3

Inventory Turns Inventory Turns = Cost of Goods Sold / Average Inventory

“Inventory turns” describes the number of times stock is sold during a given time period and is perhaps the

simplest metric you can monitor. This metric enables you to have better insight on inventory so you can make

smarter purchasing decisions, keep merchandise moving, and sell more items your customers want. Keep an

eye on inventory turns, because they will allow you to identify items that have started to move slowly and are

building up in inventory. When inventory turns slip too low on any item, look at your forecasting strategy, sales

of related items, and safety stock settings. Do this regularly, and you’ll see higher inventory turns and a better

bottom line.

When Klem’s started using Inventory Planner they saw significant results.

“The difference in our business since beginning use of Inventory Planner has

been quite substantial. We reduced our inventory cost by 10 percent over the

past 12 months. We have a better mix of ‘A’ items, while nearly eliminating

stock outs without overstocking—over the past 18 months, our inventory turns

increased by 15 percent.”—Nick Kachadoorian, IT Manager | Klem’s

Click here to read the entire Klem’s success story .

Inventory turns increased

4 | Metrics That Matter

Days of Supply Days of Supply = Average Total Inventories / Cost of Goods Sold

“Days of supply” measures inventory levels regarding how long you will have inventory on-hand if the

item continues to sell at the current rate and shelves remain stocked. Implement suggested orders and

choose a forecasting strategy that makes sense for your important selling times, and you won’t have

many stock outs or too much excess stock. Keep an eye on days of supply for items to see if it changes. If

it does, consider adjusting your forecasting model, safety stock, or other variables to make sure you don’t

run out of stock and lose any sales.

“Using Inventory Planner, we maintain a high in-stock level while cutting

down on excess, which substantially saves inventory dollars. Since we began

automatic replenishment, we reduced our inventory by nearly 25 percent and

decreased our out-of-stock rate from 10 percent to less than 1 percent. We

also perform ‘what-if’ scenarios with inventory, which lets us see what might

happen before it goes live.”—Nathanial Polky, IT Manager | McLendon Hardware Inc.

Click here to read the entire McLendon Hardware success story .

Metrics That Matter | 5

Sell-Through Percentage Sell-Through Percentage = Units Sold / Beginning Inventory On-Hand

“Sell-through percentage” is the percentage of what’s in stock that gets sold in a specific time frame versus

how much inventory is available. When the percentage changes, it gives clues you won’t see by tracking other

metrics. It’s especially useful for seasonal items that only sell during specific times of year. Historical trends won’t

be perfect due to weather and market force impacts, but you’ll have a sense of how much stock to carry during

different times of year. The sell-through percentage also helps you determine which items should be discounted

or whether you should reorder a particular product.

“We use the Epicor Compass and Eagle Performance Manager tools

to analyze business data. This allows us to build dashboards and

seamlessly run reports every day—helping us to dive deep into areas

such as inventory to aid our decision making. We’ve been able to

identify dead stock much better and put dollars into new products,

new lines, and new brands. In our old software, we didn’t have

visibility on when we sold into the negative. When we hit zero, we

clearly saw the empty hooks. Through the combined use of the

Compass, Performance Manager, and Inventory Planner solutions, we

have decreased our ‘empty hook’ or ‘stock-out’ issues by

40.3 percent.”—Nick Kachadoorian, IT Manager | Klem’s

In this quick video, discover how to reduce hidden inventory costs .

6 | Metrics That Matter

Gross Margin Return on Investment (GMROI) GMROI = Gross Profit Dollars / Average Inventory Cost

GMROI is a key metric for protecting your cash flow and tells you how hard your inventory is working for you

to help earn profits. The real power of GMROI is determining where the big profits and cash flows are in your

business, products, or product categories. GMROI can give you a solid indication of how your store is doing

as a whole and how much money you got back for every dollar you invested in inventory. It can also tell you

how well specific products or departments are performing so you can get insights on how you can optimize

inventory and merchandising. With GMROI at hand, you can make highly informed decisions about what to

stock and in what quantities.

Watch this short video to discover the best way to grow margins

using technology .“Epicor Compass and Epicor Eagle Performance Manager have been

major tools for us, because they give us the detailed data we need

in regards to revenues. For example, we have a report automatically

generated for managers every Monday that provides the revenues by

department with gross margins, profit margins, and averages—with

comparisons to that time last year. It shows us quickly where we’re

really successful and where we’re struggling.”—Derek Ellis, CEO | Ellis Home and Garden

Metrics That Matter | 7

Number of Transactions Per Day Number of Transactions Per Day (Obtained through POS data)

The number of transactions per day is a metric that tells you how many sales were made in a given day. Your

POS system data can provide this information. When tracking number of transactions per day during specific

time periods, it’s a good indicator of the ebbs and flows of traffic in your store during the day. This metric can

help you make staffing decisions, evaluate in-store marketing strategies, customer service, and more.

“I can’t live without Epicor Eagle Mobile Manager. Even when I’m not in the store, I can look at current total sales, last year’s sales on the same day, popular items, and customer accounts.”

—Jeff Rogers, President | Conwell Ace Hardware

Click here to learn how Epicor mobile solutions provide visibility into your business wherever you are for faster decision making .

8 | Metrics That Matter

Average Transaction Value

“With Epicor Eagle Performance Manager, we see critical information minute-by-minute, identify the exceptions, and then make immediate improvements. We correct margin errors, move product between stores, and increase or decrease orders—all because we so easily spot opportunities with Performance Manager. Each of our top managers uses Performance Manager to view different data and see trends. We recently looked at what to merchandise with drop cloths, and based on Market Basket analysis, we created an end-cap display with drop cloths along with joint compound and high-end paint brushes. Sales over the weekend increased by five percent for all items displayed.”

—Carolyn Epstein, CFO | Dr. Ike’s Home Center

Click here to see how having critical information is making a difference in Dr . Ike’s Home Center’s business .Click here to see how having critical information is making a difference in

Dr . Ike’s Home Center’s business .

“Average transaction value” will show the average of what customers

spend in your store, as well as the types and quantity of products they

buy. Valuable insights can be gained from this KPI. A high average

transaction could mean that customers are purchasing more expensive

items or they are buying larger quantities. A low average transaction

could indicate that you need to evaluate pricing, upsell tactics, or

bundles or create offers to get customers to spend more in your store.

Average Transaction Value = Total Revenue / Number of Transactions

Metrics That Matter | 9

“Epicor Eagle N Series software merges everything we’ve bought and built to date—enabling intelligent, timelier, and ultimately more profitable decisions. The software ‘brings to life’ Compass analytics because it puts useful information into users’ hands. They say the nail that sticks up is the one that gets hammered down. Eagle applications are so highly integrated and the analytics so powerful that it spotlights the nails that are sticking up in every area of the business. All we have to do is execute and sink the nails. We focus on parts of the business that are outperforming or underperforming and capitalize on that to deliver better results.”

—Virgil Cox, Owner | Cox Hardware

Profit Margin Profit Margin = Gross Profit / Total Revenue

Learn how Cox Hardware uses analytics to make timelier and more profitable decisions .

“Profit margin” is the main measure of profitability

and shows how much revenue is earned once the

costs for the goods sold is deducted. It’s a valuable

barometer of how much money is actually going into

your pocket. If it’s costing you more to carry products

than what you’re earning from sales of those

products, then you’re not making a profit. Profit

margin allows you to evaluate whether you need to

lower costs or increase efficiency in your business to

widen your margins.

10 | Metrics That Matter

Why Retail Businesses Choose Epicor Eagle AnalyticsThe Epicor Eagle system constantly collects precise data about your business and gives you instant access to

visual, real-time, and in-context analytics. A wide range of standard reporting options keeps you informed and

helps you make timely decisions that can dramatically improve business results.

Epicor Compass analytics software provides you with up-to-the-minute insight into the dynamics of your business—presenting information your way through its powerful reporting features. Advanced drill-down capabilities can quickly take you from distilled summaries to the raw underlying data.

Epicor Performance Manager gives you answers to your important business questions and provides a snapshot of how you’re measuring up through a series of customized dashboards that you can design for specific users and business needs.

Eagle Inventory Planner brings more precision to a number of key planning elements—lead times, usage computation, order points, and more. It can even give different weights to specific time periods to reflect seasonal or other market fluctuations or promotions that may have impacted sales.

Epicor Mobile Manager allows you to access critical data from your smartphone or tablet. You can monitor for alerts, view Compass Analytics and reports, and take your business’ pulse—when and where you want.

Epicor Compass

Epicor Performance

Manager

Eagle Inventory Planner

Epicor Mobile

Manager

SummaryA balanced approach for KPI improvement

starts with the proper use and evaluation of

metrics. Retailers who take ownership of data

and metrics will be in the best position to

reach optimal inventory performance and

financial success.

Find out which lenses to look through when choosing a technology partner that will fit your business, is easy to use, and that will grow with you .

Metrics That Matter | 11

About Epicor

Epicor Software Corporation drives business growth. We provide flexible, industry-

specific software designed to fit the precise needs of our manufacturing, distribution,

retail, and service industry customers. More than 45 years of experience with our

customers’ unique business processes and operational requirements are built into

every solution—in the cloud or on premises. With this deep understanding of your

industry, Epicor solutions dramatically improve performance and profitability while

easing complexity so you can focus on growth.

For more information, connect with Epicor or visit www.epicor.com.

The contents of this document contain Epicor viewpoints and opinions and are for informational purposes only and are subject to change without notice. Epicor Software Corporation makes no guarantee, representations, or warranties with regard to the enclosed information and specifically disclaims, to the full extent of the law, any applicable implied warranties, such as fitness for a particular purpose, merchantability, satisfactory quality, or reasonable skill and care. The results represented in this testimonial may be unique to the particular customer, as each user’s experience will vary. This document and its contents, including the viewpoints, dates, and functional content expressed herein are believed to be accurate as of its date of publication, March 2019. The usage of any Epicor software shall be pursuant to the applicable end user license agreement and the performance of any consulting services by Epicor personnel shall be pursuant to applicable standard services terms and conditions. Usage of the solution(s) described in this document with other Epicor software or third-party products may require the purchase of licenses for such other products. Epicor, the Epicor logo, and Eagle are trademarks or registered trademarks of Epicor Software Corporation in the United States, certain other countries, and/or the EU. Copyright © 2019 Epicor Software Corporation. All rights reserved.

Contact us today eagle@epicor .com www .epicor .com