A case study on JIT inventory…

Problem:  A large national casual dining brand was struggling with maintaining proper gift card inventory – especially during the high selling months of November and December.  At times, they found themselves out of stock, resulting in lost sales and high costs to expedite replenishments.  There was no system in place to manage and order new gift card inventory, nor were they interested in adding another system and process to store management’s plate.  Optimum Card Solutions met with brand representatives to discuss their objectives:

• Eliminate out-of-stock situations
• Eliminate expedited shipping costs
• No added systems or processes for ordering
• A cost-effective solution that is ROI positive within a year

Solution:  Optimum Card Solutions proposed and launched a completely customized Just-in-Time fulfillment solution.  The solution integrated with inventory levels and real-time sales data provided by the brand’s stored value provider.  Minimum stock values were assigned, based upon each store’s sales history, and when those stock levels were reached, the system automatically generated a replenishment order, ensuring arrival in advance of card inventory depletion.  Additionally, there is a secure online reporting module that is user-friendly and provides reports on shipments, tracking numbers, serial number data, shipment dates, inventory adjustment capability and more.

Results:  Since adopting this solution in 2013, it has met and exceeded all key objectives defined by the brand.  In addition, it significantly reduced overall shipping costs, saved a substantial amount on card production costs due to the tighter inventory controls, and eliminated customer service calls about inventory and shipments as a result of the online portal.

For many retailers, selling gift cards through a third party is a major sales channel.  As a retailer selling gift cards in the third party space, you have to be cognizant of inventory, maximization of peg space, and of course, fraud.  Many retailers don’t know or believe there is a fraud problem, and assume it only occurs with certain brands or dollar values.  In reality, fraud happens to almost every brand at every dollar amount.

Card swapping and card tampering are just a couple of the ways thieves are perpetuating fraud.  Your customer thinks they are activating their card, but are unknowingly activating a card in the hands of a thief.  It’s one thing to be on top of fraud that is happening in your stores, but how do you prevent fraud that is occurring in third party locations?  As one of the leading global payments technology companies, VISA understands they may never eliminate fraud completely, but they are constantly monitoring transactions to learn how the fraud is being executed and taking action to lower the incidence.

How do you monitor gift card fraud in your organization?  What processes do you have in place to ensure your managers at the store level are reporting issues with zero balance cards?  Is Customer Service involved with the reporting and resolution of these issues?  By handling issues at the store level, your well-intentioned store managers may be addressing customer issues at the surface, but could actually be covering up a larger issue.

Awareness of this issue is one way you can begin decreasing its impact.  Operational training at the store level on how to process and report zero balance card transactions as well as defined processes at the corporate level on how to research those reported transactions gives visibility and definition to the overall issue.

In addition to awareness, it is also important to make your cards more secure.  Below are some actions you can take, in order of level of security from lowest to highest, to begin making your cards more secure:

• PIN Scratch-Off: Cover the PIN number.  This keeps simple fraud like photographic capture of card and PIN numbers from occurring.
• Full Number Scratch-Off: Protect both the card serial and PIN numbers.  This makes tampering evident.
• Mag Stripe: Encrypt the card number within the mag stripe.  This leaves no human readable number or standard bar code visible to steal.
• Secure Packaging: Wrap the card completely inside a carrier, seal the package shut.  This is proven to be the most effective method to reduce fraud

Optimum Card Solutions utilizes all of the above listed methods with our retail partners.  In 2015, we invented a new, cost-effective secure package that is already being hailed as the industry’s premium standard for card security while keeping overall print costs low.   We use paper tear die marks, a proprietary application of hot and cold sealing glues, and an additional application of glue that secures the entire package.

Gift card secure packaging is one of many areas of expertise for Optimum Card Solutions.  Contact us today to learn more about more about the solutions we can provide for you that can improve your card program and positively affect your bottom line.

Gift card distribution practices vary widely from organization to organization.  What you may not realize is the amount of money that can be saved by making minor modifications to tighten up your program.  Here are the top 5 distribution enhancements that can affect your bottom line:

1. Warehousing:  Gift cards are often lumped in with signage, menus, and other such print items, but they require a high attention to detail, because they are both product and a tender type which can be redeemed for your products and/or services.  Make sure your gift cards are stored in a secure area to avoid fraud and theft.
2. Tailored Distribution:  Rather than replenish your stores with a standard level of inventory, use prior years’ sales performance to determine a level more appropriate to individual locations.  This allows you to be more accurate in card production orders to avoid overproduction.
3. Order Limits:  If you have an understanding of individual store sales trends, placing limits on gift card replenishment orders from individual stores prevents hoarding and alleviates the potential for overproduction.
4. Arrive Early:  Take advantage of shipping rates and arrange for a planned distribution to arrive before Thanksgiving to prepare your locations for the holiday rush ahead of schedule.
5. Card Captain:  Assign a specific person or position at each location to handle all gift card communication, ordering, questions, and needs.  This reduces miscommunication, prevents card hoarding, and streamlines card operations.

Optimum Card Solutions offers a user-friendly, cost-effective, secure, web-based distribution and fulfillment solution that is proven to improve card operations, inventory, and lower distribution costs.  Our solution gives you data capture on all aspects of your distribution and greater visibility into your card program.

After implementing our distribution system and suggested process changes, a nationwide restaurant chain client stopped over a million dollars in fraud on their bonus card program, which was perpetuated by their own employees.  Additionally, by modifying their gift card ordering process, it alleviate the cost and frustration of over-producing cards.

Gift card distribution is one of many areas of expertise for Optimum Card Solutions.  Contact us today to learn more about the numerous solutions we have to improve your card program and positively affect your bottom line.