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Route to Market & Supply Chain Blog

FMCG/fast food ABC stock holding - do you want fries with that?

Posted by Dave Jordan on Sun, Mar 24, 2013

People who work in fast food outlets – I really cannot label them as restaurants – must have specific training in dealing with non-standard orders. Can you imagine the temptation to groan when in a crowded outlet someone asks for a Muck Chicken Burger but without the usual mayo and salad?

Or worse still, the guy at the front of a mile long drive-in queue asks for a Big Muck Burger but without the bread bun – I have seen this. Quite why you would want a burger without the bun I have no idea but it is the order so on both occasions the well trained staff groan internally and then advise that this will take a few extra minutes.

The groan ripple then reaches the preparation area where a special non-standard ticket is picked up and acted upon by a “chef”. Instead of continuing the slick production line rolling out the fast moving standard menu items, someone has to specially cook and prepare something that is not on the menu. The burger-less bun is probably relatively easy to serve unless the customer is a coeliac where even a trace of wheat will result in an urgent bathroom search.

Inventory and stockWhat about the Muck Chicken Burger? Would they dare simply wipe the mayo and associated goo off a standard burger? I doubt this, so a special has to be made and this is then sent to the counter with special wrapping or a flag on a cocktail stick. There are so many potential variations that it would be impossible to "make to stock” so in this case “make to order” is correct.

In FMCG/Brewing/Pharma there is a similar logic in terms of sku availability. Those skus that sell in large volumes and generate high margin should always be available. Going out of stock on an “A sku” is unforgiveable. Where possible such skus should be produced frequently e.g., weekly or even daily depending on your sector.

Those “D skus” which are slow moving and generate little or even negative profit can afford to go out of stock at times as they are relatively unimportant to you. If they are absorbing some fixed cost element then ok they have a role but they will not make or break your results. Where space exists you should produce and store higher stocks of these skus reserving factory flexibility for more profitable output.

Of course, this will lead to a higher stock value than you might desire but it is right for customer service. If your current stock policy calls for the same cover for all skus then you might consider a growth promoting review and adjustment.

Have a nice day!

Image courtesy of Marin / FreeDigitalPhotos.net

Tags: SKU, Dave Jordan, Performance Improvement, Inventory Management & Stock Control

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