Wednesday, July 6, 2011

Thirty Years of Jobbers – Chapter 4-2

Several years ago, I attended a seminar in Hawaii featuring an American businessman who was operating in Tokyo, Japan. One of his topics was of course, why Japanese-ran businesses appeared to be more efficient and profitable than their American counterparts.

He used a baseball game as an analogy when he said, "If we were to watch a baseball game between America and Japan, we would notice when the Japanese batters step up to the plate they would keep their eyes focused on the ball; while the American batters would be constantly looking over their shoulders at the scoreboard." His point: The current score is worthless information during the game.

I know many businesses are experiencing financial and other business difficulties at this very moment. Some of them are laying off employees, going broke, or already broke and running out of credit. Many of these companies could be saved if they would only focus on the details and forget about the score. Smart people have learned the best way to solve a problem is to drill down to the lowest common-denominator and build from there.

There's a software package that links a PC to your automobile’s computer, and as you drive down the highway your computer constantly monitors and records every stroke of the piston, the current oil pressure, the transmission temperature, the turbo-boost, exhaust temperature, even the tire pressure. A vehicle monitored in this fashion and maintained accordingly would last indefinitely. This is the epitome of micro-managing a situation.

Some believe the big opportunities are gone, i.e. there will never be another Walmart…  I don't know. But I do know this. Using micro-management techniques properly, you can tell where the problems are, and if you address these problems and correct them, like the automobile in the previous paragraph, you could last indefinitely.

In Barbara V Anderson’s excellent book, “The Art and Science of Computer Assisted Ordering,” she writes: “Computer Assisted Ordering is one of the most misunderstood and underutilized strategic weapons available to retailers today.” She published that book fifteen years ago. You may have many problems, I’m aware of most of them, but there is none more dangerous than investing your hard-earned working capital in untimely purchases.

Every jobber knows, as the price of fuel is increasing you keep you tanks topped off, and when prices are falling you do just the opposite. It’s just ‘common sense’, and you don’t need a computer to figure it out. But, when it comes to their retail stores, managing non-fuel inventory becomes a hit and miss operation.

The margin on fuel pales in comparison to the margin on a Snickers bar or even on a single gallon of milk, yet the cost of convenience store merchandise is becoming more volatile as prices continue to rise, and these increases are often missed or completely ignored by management. With net profits in stores hovering around 2 percent, there is even less room for error.   

While it’s a well understood fact that micro-managing fuel inventory is critical, why is doing the same with non-fuel inventory considered unnecessary? Operators need to sit down with their managers and get an answer to that question while there’s still time to do something about it.

No comments:

Post a Comment