Monday, May 28, 2012

Automated Store Replenishment – Volume V

Now, some of you still reading this are thinking, “This guy doesn’t know what he is talking about.” Well that may appear to be true, because I am thinking outside the box, and anyone who dares to think outside the box is definitely suspect. One thing three decades of experience in this industry has taught me—thinking for myself is immensely more rewarding than subscribing to some general opinion that seems to prevail as everything around me is changing. Struggling retailers moving slowly down the slippery slope toward bankruptcy are low hanging fruit, and they are likely to fall for most anything if it gives them hope. The easy way out is to follow the leader, hence the 1970s belief, “Nobody ever got fired for buying IBM”.

There are still several unknowns that need to be solved before the topic of ASR is settled, and waiting around to see if someone ‘smarter than you’ can figure it all out, is a poor excuse for not taking the action to improve your lot. Else, you will be right back to where you are today, doing what everybody else is doing.

You may be one that thinks, ‘everything is fine the way it is’. Believe me, a 2% ROI is not a sign of prosperity, and I think you can do better than that, a whole lot better. As it stands, there is no conceptual framework that makes the adoption of ASR possible, and it suggests to me that we may not be able to get there from where we are today. In other words, the status quo is preventing us from succeeding.

The main purpose of ASR is to prevent out-of-stocks while at the same time, lowering the overall levels of inventory. So there is dichotomy of sorts to be dealt with. In an industry where a condition of overstock is common for the prevention of out of stocks, cultural differences get in the way. For example, to justify overstock, we are often told shelves that are NOT full create a poor store appearance. There is a lot to be said in defense of that statement, but I have found nowhere it is stated that it has to be stacks of the same stuff.

With the general opinion in most operations being to err on the side of overstock, it has led us to a situation where it has gotten WAY out of hand. For example, if analysis shows you are selling four items per month on one particular brand (not uncommon), and you get two deliveries per week, common sense tells us we do not need a box of 36 on the shelf, but we may not have a choice. I was talking to a store supervisor this morning and she said, “If we have an item that only sells once a month, it needs to be replaced with something else that will sell”. However will the V/P of store operations allow that? Probably not! That’s why we rely on a re-order trigger. We can set the trigger to whatever we want based upon the desires of the person running the stores. If we have an item that comes in a box of thirty-six, we can set the trigger to eighteen so when it reaches half a box the system will automatically re-order another box.

There are alternatives to making the store appear to be full, and one of them is to remove gondolas and widen the aisles. However, convincing most operators is fighting a losing battle. They won’t listen to anybody. They think they’re smarter than everyone else. Examining the problem closer, often you find their primary concern lies with all the kick-backs and perks they get from their suppliers and they’re likely to switch suppliers in a heartbeat if they misses out on a big screen TV or a trip to Kauai.

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