Monday, May 16, 2011
The Case Against Category Management –Exercise #4 -5
This process is both an art and a science. There are far too many variables involved to make it a purely scientific exercise. Experimentation, based on intelligence about the products and your market is the best option. In order to do this, you must collect the data and develop, or somehow acquire the tools to test each and every product in your store, and squeeze every penny you can out of every one of them. And the quickest way to do this is to monitor the turns.
A colleague of mine brought up an excellent question the other day, “How can you look at the turns and determine how a product is performing?” The answer is: to be aware of the turns to begin with. You should be able to pull up the information you need for any item at any time.
Take a look at this simple chart at http://www.cstorepod.com/html/exercise__4_-5.html
Notice how the sales begin to slide going into October. Something happened. Do sales for this product normally drop off at this time of year? Maybe there were stock-outs, maybe the price is too high. The point is, does anybody know why our biggest seller in milk products began to drop its turns?
You may say, “There are 3,000 items in my store, how will I know which items I need to look at?” Your computer should tell you when something goes wrong and alert you of situations like this. A computer system that monitors an item’s turns every day can notice abnormal trends before humans become aware of them. In most cases like the one above, the opportunity to correct a problem is lost forever, because by the time you’re made aware, the opportunity for more sales are lost forever. Like the Persian poet Omar Khayyám wrote, “The moving finger writes, and having writ moves on.”
You may recall in the movie ‘2001’ when the H.A.L. computer sensed a problem with a piece of equipment and alerted the crew it would malfunction within a certain number of hours. Although the movie was science fiction, in some ways the capabilities of today’s computers have equaled that of the H.A.L. computer in the movie; e.g. in our system, when something appears to be abnormal, we alert our customers via email, or even on their cell phones. We do it all the time, and the advantage of knowing something is amiss translates into profits.
For example: If we haven’t received a POS transaction within the past five minutes, an alert is sent via email as a warning. Five minutes later, if there is still no data from the POS, the computer moves the alert to a higher status, etc. Within fifteen minutes, if the computer is still not able to contact the POS, everyone who is responsible for that store knows about it. As the constant nagging reaches fever pitch, someone is going to take action to fix the problem… I guarantee it.
You may also look at the turns of the same product in other stores, and if you find it higher, the answer might be right under your nose.
If something’s headed in the wrong direction, the distance between you and it will only get further away. Sometimes all it takes is a gentle nudge to get it back on course… that is, if you correct it quickly enough. Wait a little longer and you may have to go hunting for it.
How many Snicker bars do you have on your shelves this very minute? Are their turns increasing or decreasing? Will the product last until the next delivery? Can you decrease you cost and increase your turns, making a higher overall profit? It’s all about pennies that accumulate into nickels and dimes and hopefully profit within your categories. You can’t just look at a category and see what’s wrong. You’ve got to have extensive knowledge of the items. Categories may display symptoms, but you’ll need more than symptoms to fix a category that’s ailing.