Monday, June 4, 2012

Automated Store Replenishment – Volume XI


Over the past three decades, the emphasis has been on purchasing computer software and using it to cut cost and improve efficiency. Decisions made based on gut feelings and wild guesses driven by flawed assumptions. Kmart knows a great deal about this.

Your racecar sits in the pole position. It’s a bright sunny day at Daytona and track conditions are perfect. Your fuel-injected, 850 horsepower ‘Kwik-Mart Chevy’ roars like a tiger. You can’t wait for Waltrip to shout, “Boogity, Boogity, Boogity.” You are the favorite to win the series and take home the cup… but you know what? All four tires are flat.

DATA spoils faster than crab shells in the hot, Louisiana sun. Yet, data in the right hands and at the right time has the potential to provide clues to solving almost all of our problems, but we have squandered vast amounts of it. It has been lost or it deteriorates in boxes filled with computer printouts. Months, or even years later the cost of gathering the information is too high and besides, it is probably too late to make the effort worthwhile.

You live day-by-day, month-to-month, year-after-year, hoping to get some indication that you are doing something right. When the truth finally makes it your way, it serves mostly to point out what you did wrong, and you start the next period hoping to do better with no inkling as to what new problems you picked up along the way. What information you do get was decided by a software company who has no idea what your specific needs are, so they throw everything they’ve got at you; some good, but most of it just useless drivel emphasizing what went wrong months ago, too late to do anything about it. Maybe the conditions that created some of your problems do not even exist anymore, but your policies assume otherwise.

You still have no idea whether your current sales transactions, your customers, or your stores are making you any money until the next period rolls around, and the vicious cycle remains repetitive. In some cases, old data is worse than none at all, because things may have been better and unnecessary changes to old problems just put us right back to where we were, only worse now.

The decades to follow will be different. Success will be determined through our ability to gather and use data mere seconds after it occurs. “Did we make a profit on the sale of that last candy bar that left our store? Did someone steal from us today? Did we get the inventory we ordered? We typically sell four of an item each day, and we have gone a day without selling any at all. Are we out? Did the supplier’s costs go up causing our margins to shrink? Is this product being cannibalized? Is the current promotion costing us profits instead of doing what it was supposed to do? Who put a thousand days of Laffy Taffy candy on my gondolas?” It’s a never-ending tome of questions you can’t answer today, but you will be able to answer tomorrow.  

Data is like smoke from a fire. If we see smoke, we know something is burning, but looking at the smoke alone does not tell us what is burning, and throwing the wrong substance on a fire can make things worse—a lot worse. You may have a new idea, based on something you’ve heard, something you’ve read, the advertised success of a peer, or just an idea you came up during a sleepless night, and you need to see the effects of changes you make in your stores immediately.

You could make a change in one store, test it, and day-by-day carefully analyze the results so you can change things back if you made a mistake, or implement the new change throughout all of your stores. One thing is for sure, you won’t find answers to these questions in a box stored in your attic and overflowing with printouts.

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