Grow Your Business

Drugstore chain South Star Drug automated part of its operations as early as 1986, at a time when small businesses were leery of information technology solutions because they were thought to be costly and complicated to set up.

South Star began as a Chinese herbal medicine store in Naga City, Camarines Sur in 1937. Family patriarch Tomas Dy Makao, an apothecary, formulated the medicines sold in the store. The American forces’ arrival in the country after World War II had the family adding a Western touch to the Chinese pharmacy.

The Dys attribute their success to their strategies of opening in hard-to-reach areas, offering competitive prices, and making medicines readily available, and which accounted for their steady growth for 69 years. But like many long-standing businesses, South Star’s tried and tested system had also brought forth serious problems, such as pilferage. In 1998, the Dys lost around P8 million worth of drugs in a span of six months.

“What the thieves did was to replace the contents of milk cans with powdered drugs, so that it appeared that they were buying a P900 milk formula when actually it was worth P15,000.” The Dys suspected it to be an inside job, and that erring employees were conniving with big syndicates targeting pharmacies. “I was able to confirm this when friends from the industry related similar experiences,” relates Manuel.

The owners wasted no time in creating and implementing a point of sale (POS) system to take care of their front end. But like their first system – the IMS – the POS was also made in-house to handle inventory management and was used only to collect and store sales data, including bar code reading and credit card authorizations.

But even with all the stores using the POS in 2003, the owners were not happy with the system because it could not produce financial reports quick enough to enable them to make financial decisions in a snap. “We decided to look for another solution that would help us make fast decisions. In business, the financial aspect is the most important thing,” says Manuel.

Three considerations guided the Dys in their search for a solutions provider: that the system to be designed would be flexible, that it had to fall within their budget, and that it had to be the work of a reputable, stable firm. After a careful study, the owners decided on SAP, a company known for its Enterprise Resource Planning (a business management system that integrates all facets of the business, from planning, manufacturing, sales, to marketing, and is usually intended for big corporations).

Before, it would take the owners at least six months to get financial reports and make decisions on a poor performing branch, but with Business One, each South Star branch is able to generate financial reports in real time, enabling the Dys to make swift decisions. “Since we treat each branch as a profit center, we can immediately know if it is time to close the branch or relocate based on its performance,” Manuel shares. “Six months is too late to cut the losses. If you do not have the right tool, it really might be too late,” adds vice president for finance and distribution Dahlia Dy.

“Aside from a timely financial report, we can generate queries like ratios, store profitability, store performance comparisons, yearly budget comparisons, among others. We can instantly get critical data needed for making important business decisions such as determining the financial feasibility of the project,” says Mariel Lee, South Star’s Finance Manager.

Since they started running on Business One solution, South Star – currently among the top 5 retail pharmacies in the country – has grown to 93 branches from 66 when they acquired the system in 2004, with all its outlets booking 35,000 transactions monthly, and growing by 20 percent annually from the previous eight to 12 percent. The Dys say the new solution is helping them compete better and achieve the growth level they are aiming for. “There are so many aggressive players in the industry and competition is stiff that if we don’t do something, we will really be left behind,” says Dahlia.

Things to consider when shopping for an information technology solution:

• Getting different applications for each business function (sales, inventory, purchasing, for example) would cost more in the end since they were not designed to communicate with one another. Harmonizing these systems so they can work together – called systems integration – is a long and tedious process that may result in wasted effort and opportunities, and costly inefficiencies.

• To ensure that you are getting your money’s worth, make sure that the solution is flexible enough to allow you to integrate past and future solutions, as the South Star experience would show. The solution you choose must be capable of being tailored to your business processes, but is versatile enough to meet your company’s future requirements.

• Get a solution only from a stable and reputable firm that has in-depth industry knowledge, and with highly qualified consultants in its roster that can help you in every step of the automation process.