Placeholder Value and Fastener Dump SKU review

This is an annual report (contained in December's report run) showing: 

  1. Placeholder SKU inventory value (typically for the fastener department).
  2. The margin assigned to your fastener dump SKU (the SKU you ring loose fasteners to).
  3. Vendor Minimum P.O. Line amount (only if it's under the recommended minimum).

  • Many stores use "placeholder" SKUs to estimate the value of a class of inventory where stock information (quantity on hand) is not kept at the SKU level. Since these Keep Stock Info = N SKUs (Codes tab of Inventory Maintenance) do not have a QOH value, corresponding inventory value (QOH * Cost) is zero dollars. To compensate for this lack of inventory value, stores create a single SKU to represent (or hold) the inventory value for this class of SKUs. Placeholder SKU value should be checked periodically as part of a good inventory valuation process. For example, many stores will use a single placeholder SKU to represent the inventory value of the entire fastener department, for which each individual SKU's Keep Stock Info is set to N. 

    Caution: adjustments to placeholder SKUs have a dollar-for-dollar change in cost-of-goods-sold and therefore taxable gross profit. Make adjustments with owner/CPA approval

    • What is a Placeholder SKU?
      A Placeholder is a special type of SKU which does not represent a specific item, rather it is set up specially to represent (or hold) the inventory value for an entire class or category of inventory for which stock information is not kept.  For example, many stores do not keep inventory (QOH's are blank) for their Fastener department so they set up a single "placeholder" SKU which holds the inventory value for the entire department. 

      Why?
      Ending inventory reported by Mango and your Eagle (Business Advisor and RIV) is calculated by multiplying quantity-on-hand times cost for each SKU in your inventory file. If an entire class of SKUs are set to Keep Stock Info = "N" then their quantity-on-hands are blanked out and therefore have zero inventory dollar value.  In this case, your store can prop up its inventory with a placeholder SKU so inventory dollar value is not under-reported on its balance sheet.

      How?
      It's important to set up a Placeholder SKU in a way that Mango can identify so that it does not get reported on your Count Sheets, Cost Exceptions or your Overstock Report!  Below are a few rules to follow when setting up Placeholder SKUs.

      1. (optional) SKU = FASTENER (FASTENER is the default SKU for fastener department placeholder. You can continue to use your own SKU if different, or if setting up for a non-fastener class).
      2. Set Rep. Cost and Avg. Cost to $500.00 and Retail to $1000.00.
      3. Last Received and Last Sale date must be blank.
      4. If a Fastener Placeholder then put it in a Fastener Class 580.  Or, if the SKU is representing Ace Warehouse inventory then set the appropriate class.
      5. Set the SKU's Location to INVAL
      6. Use Qty on Hand (times cost) to determine the Placeholder's total Inventory Value.  For example, to represent $15,000 of inventory then you would set QOH to 30 (30 x $500 = $15,000).

      Note: if $500 is too high of an average cost increment then you can use a lower Avg. and Rep. Cost, but keep them above $100.

      • Steps to use placeholders to keep drawer-level inventory value for specialty fastener drawers ("Hillman drawers").

        1. SKU (can be any SKU).
        2. Class = 578
        3. Fineline = 57899
        4. Last Received and Last Sale date must be blank
        5. QOH = 1
        6. Set the Cost, Avg Cost, and Mfg. Cost to the total cost of the drawer.
        7. Location (can be any location).

      • There are two common mistakes stores make when using Placeholder SKUs.

        1). The covered class of inventory is set to also accumulate QOH values. For example, if you create a Placeholder SKU to cover your Fastener department then make sure the SKUs the Placeholder SKU is covering are set to not Keep Stock Info (Codes Tab of Inventory Maintenance, Keep Stock Info = "N"). Otherwise, these SKUs will accumulate inventory value as they are sold (Negative Value or run the risk of accumulating positive QOH value errantly).

        2). The Placeholder SKU value becomes stale. If your store chooses to use Placeholder SKUs then it is up to you to establish a process for periodically updating its inventory value. For example, if you are using a Placeholder for your Fastener department then you will want to figure out a way to ascertain an inventory value at least once per year. You can use Mango's Excel-based Inventory Value Analysis tool to make sure your Fastener or Bulk Placeholder SKUs have reasonable value. It is important these SKUs Inventory Value do not become stale over time.

      Rental - Rental SKUs that carry an inventory balance need to have the location code of "RENT".  These SKUs will be specially classified in Mango and will not show up in Obsolete value, Count Sheets, will be treated as Excluded Shrink. 


      Important - Placeholder SKU
      Changes to your store's inventory value (through Placeholders or otherwise) which do not have corresponding sales or receipts will directly affect the store's Cost of Goods Sold equation and therefore its Gross Profit.  Adding to net inventory value will generate a one-time Gross Profit event and lowering value will create a loss.  Take care before setting up or changing Placeholder SKUs to make sure your owner, bookkeeper, and/or CPA is in sync with this change. Your bookkeepers may already be compensating for this inventory by making adjusting entries.

      Many stores will set up a "Dump SKU" to handle both the purchasing and selling activity to the covered class of SKUs.  Make sure this SKU is set to Keep Stock Info = N so that it does not accumulate inventory value.

    SKUs showing up on this report have a placeholder signature (high static inventory value without a Last Receipt date).

    Steps to process this report:

    1. Determine if the listed SKU is a placeholder.
    2. If it's not a placeholder (it is a sellable item) then enter an estimated Last Receipt date in Inventory Maintenance (this will keep the SKU from showing up on this report in the future).
    3. If it is a placeholder SKU then review its associated inventory value in Mango's Excel IVA report.
    • If it is a fastener or bulk placeholder then use Mango's Excel IVA report to make sure it is categorized correctly.
    • If it is classified as type "Fasteners" (or bulk) under the Fast & Bulk tab of Mango's IVA report then it is classified correctly (see example below).
    • Look at cell F:7 in the IVA's Overview tab. If this percentage is close to 8% then your fastener and bulk values are likely good (for a typical non-lumber store).
    • If your store is outside this range then consider revaluing your fastener or bulk departments. Please contact us for guidance before going about this!
      1. To adjust your placeholder's value, increment or decrement its quantity on hand in Inventory Maintenance using QOH * Cost to estimate its best value (Rep. Cost and Avg. Cost should be made the same).
      2. After you have reviewed your placeholder, update its Last Physical Date in Inventory Maintenance to indicate the date the value was reviewed.

      • Dump SKU Margin Review Report Example

        1. Above, we see a HILLMAN placeholder SKU representing $17,000 in average cost (34 QOH, times $500.00 Average Cost)

        IVA Fast & Bulk.png

        2. Above, we see our placeholder categorized properly (Column A, Type = Fasteners) in Mango's Excel IVA report under the Fast & Bulk tab.

        IVA Overview.png

        3. In the IVA Overview tab, cell F:7 shows the value of SKUs classified as Fasteners, Keys, and Bulk representing 7.7% of total inventory value. The benchmark for the typical non-lumber store is 8.0%. Note: if your store's Productive Packaged Ace value (G:7) is less than 70% then your Fastener, Keys and Bulk value may be less than 8% due to your store's atypical inventory mixture.

  • Having a reasonable set margin for your fastener Dump SKU (the SKU where loose fasteners are sold) helps your store report a more accurate overall gross profit percentage. Most stores are set with a reasonable margin percentage (typical store is 53%) but many times we see whacky margins! If your store's average margin (AVG MARGIN column) is between 45% - 60% then you are good. To adjust your margin, follow the steps below (get permission from your owner/CPA first).

    1. If Mango is picking up an incorrect fastener Dump SKU for your store then please let us know

    2. The PERCENT OF SALES column is for reference only. It shows the percentage of sales your fastener Dump SKU contributes to overall sales

    Dump SKU Margin Review Report Example

    Steps to change your change your fastener dump SKU set margin

    1. Open Inventory Maintenance.
    2. Display your fastener dump SKU.
    3. Click on the Codes Tab
    4. Turn "Keep Prices" to Yes and press Change (F5)
    5. Click on the Pricing Tab.
    6. Enter the new margin percentage in the Desired GP% box (example below).
    7. Press Change (F5).
    8. If Keep Prices was originally set to No, go back to the Pricing Tab and change Keep Prices to N
    9. Press Change (F5).

  • The minimum PO line amount is the lowest amount of money that can be spent on an item within an MPO order. Using this function will act to increase the order quantities for low-cost and low-order multiple items and thus reduce your reorder frequency on these items (saving labor expenses). It is an Ace best practice to set a minimum PO line amount of $1.50 in MVR (Vendor Maintenance) for vendor Ace.

    Steps to adjust your P.O. Line Amount

      1. In the launch bar of Eagle Browser type MVR and press Enter
      2. Type ACE into the vendor field and press Enter
      3. Click the Order Info tab
      4. Set the P.O. Line Amount to 1.50
      5. Click Change (F5)
      6. Done.