Retailers, bankers, and wholesalers have something in common–they have to manage change! But no, this article is about the "management of change" as taught in management schools. It is about the management of change as in "loose" change.
Retail Pricing Tips
Aside from the traditional analysis of trade margins and customer affordability, there are other concepts that are often forgotten. These concepts became very clear to us when a food stall in the public market was observed.
The first observation had to do with the single price policy of the store. All the food viands were priced at the same amount. However, what was interesting was that the sizes of portion varied and were adjusted to meet margin and price constraints.
What was equally interesting was the determination of the constant retail price. The amount was designed such that it would be easy to calculate the bill without a calculator and the mind of a math wizard. The other logic was to issue out the total bill with less complication on change. Another logic was to price at a level that would allow the customer to have a little of everything.
For example, each viand was priced at P10 or about 20 US cents. The price allowed the customer to have fish or meat and vegetable on top of the rice. If the person wanted more, a viand can be doubled. At the end of the meal, the number of viand plates are simply summed up and multiplied by ten. Since the total bill is a multiple of 10, the change will either be a multiple of ten or none at all.
The system allows for two things to happen–less time lost to determine the bill and less time lost for the paying cycle. There is less time consumed for bill calculation and no time lost looking for change. Translated into resource management, this can mean less resources needed for billing and paying activities or more time for marketing and selling efforts.
Wholesaling And Banking
When retailers replenish their stocks from the wholesalers, they use loose change to pay. When retailers go to the bank to deposit their sales for the day, it is in loose change. Loose change is the denomination of money used in the retail trade. This is most specially true in area-based convenience stores called sari-sari stores in the Philippines, which is akin to a variety store because of the diversity of products offered. This is also true for the many game arcades and videoke machines all over the country which are activated by coins. The currency of the entrepreneurs is in coins and will have to be deposited in a bank at the end of the day.
In many cases, the wholesaler (grocery or supermarket) will have to deal with about 100 retailers or sari-sari stores daily. These retailers pay their P5,000 (about $100) purchase with a mix of five-, ten-, 25-, and 50-centavo as well as P5 and P10 coins. Aside from these coins, there are P10, P20, P50, and P100 bills. Of course, there is usually more of the smaller denominations.
Often, it takes a longer time to count the money than it takes to actually choose the items to be purchased. Typically, the retail storeowner already knows what stocks to buy. One can readily imagine how much waiting time is wasted by the checkout counter person who must count the payment with accuracy.
Let us consider a bank near coin arcades. The daily deposit can be as much as P50,000 (about $1,000) in P1, P5, and P10 coins. How long will it take the teller to count the deposit, not to mention the space the coins will occupy in the vault of the bank?
This loose change issue is not a new problem. Banks as well as supermarkets which have become wholesalers have had this problem for the longest time. In the early years, the management of change was caused by coin-operated jukebox machines and soft drinks vending machines. (For the benefit of our readers younger than 35 years old, jukebox machines were popular from the 1940s to the early 1970s. They were found in restaurants and customers chose and listened to their favorite songs using a coin-operated jukebox machine. In the 1950s and 1960s, schools had coin-operated soft drinks dispensers). Today, these vending machines can still be found in the streets of Japan. This time, they sell a range of items from camera batteries to coffee.
The coin counting machines is the response of technology to the management of change. Large banks have utilized this technology to address the counting of loose change. The question is: Should a small branch of a bank invest in a coin-counting machine that is utilized for one or two clients? Or should a countryside supermarket invest in a coin-counting machine?
An innovative entrepreneur in the vending machine game came up with a simple solution 20 years ago. It was based on the fact that there is very little difference in the look, size, and weight of coins in the same denomination. The key word is weight. Using a standard, commercially available but accurate weighing scale, standards can be determined on a kilo or even on a 100 grams basis. Weight standards can be determined on a per denomination or type of coin basis. This is the same technology used in the case of candies being sold on a weight basis and of vegetables in the supermarket being sold on a weight basis. There will be error using this less sophisticated technology but the cost of the error will be small compared to the cost of being accurate.
A supermarket owner in northern Luzon created a counting counter where the sari-sari store owner can have the money counted while the customer’s shopping list is being prepared (since the sari-sari store owner already knows what was to be bought). This system decongested the check out counters since there was less counting of coins.
What this has shown is that we can free people to do things that have a direct impact on new sales and revenues instead of frittering away precious time in the counting of coins that represent a sale already made. The management of change can really be a powerful tool in one’s enterprise productivity improvement drive.
(Alejandrino Ferreria is the dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: [email protected]. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//:www.aim.edu.ph).
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