Supply Chain Blog

Key Performance Indicators or just monthly data dumping? 

Posted by Dave Jordan on Tue, Mar 27, 2018

Last month I spent a few weeks enjoying the UK weather disaster as 10mm of snow brought life to a halt. While there I moved the heiress into her new apartment - not a flat now as student days are over, very posh. Hopefully, that will be the last time I have to manage boxes down a narrow and winding staircase and my glass back can get a much needed rest.

Job done, I made my way back to base with an unpleasant 15 hour delay on BlueAir but at least there was no jobsworth amongst the crew.  Despite the weather I continued my minimalist approach to clothing to ease my way through the various security screenings. I wore no belt, no watch, no metal at all in an attempt to glide through the checks without being patted, prodded or made to make a second pass through the metal detector. Unfortunately, my innocent pack of UNO playing cards looks like plastic explosive, apparently.

The end of the world was in progress on arrival back in Bucharest. Heavy dark and angry clouds were dispensing precipitation by the bucket load and it was relentless. The sleet quickly soaked my UK grade Arctic coat and everything underneath including socks.  Futile attempts at shelter included the held-aloft flat newspaper and the rather dangerous shopping bag with eye holes over the head. Even the all in one little black bin bag number a girl was wearing (or was it a dress?) was ineffective in diverting any of the torrential downpour. This was a real storm without escape where complete saturation was guaranteed and inevitable. 

I felt rather like an FMCG CEO. Saturated by data that people believe he/she needs to see in order to run the business. Not actionable information but raw data. Completely submersed in meaningless numbers and perceived trends. Often, that data is aimed at passing the buck to other departments for failure or lack of success or to ensure backside protection during the post-mortem that takes place long after the month or quarter or whatever period has closed.

Even if you do not run a swish ERP you need to be able to address in-market issues while you still have a chance of making a difference. However, to do that you need to receive information which quickly converts to relevant knowledge and then facilitates actions. To actually see the reality of market performance you don’t need masses of numbers, you need facts.

image.pngIf you don’t have a KPI or Balanced Scorecard then sort one out quickly. If you already monitor performance in this way then take a long hard look at what is actually being reported; is it for the benefit of the reporting colleague/department or for the benefit of the entire company?

Remember that KPIs never tell the full story. When a KPI refuses to improve despite all efforts it may well be due to the impact of another completely different and apparently unrelated measure. In such cases you should adopt a Supply Chain Analytics Approach to deep dive into the detail and really see what is happening all along your Supply Chain.

Image courtesy of SupplyVue at Concentra

 

Tags: FMCG, Dave Jordan, CEO, Performance Improvement, Pharma, KPI, Supply Chain, Supply Chain Analytics

A Practical Guide to FMCG SKU Complexity Reduction 

Posted by Dave Jordan on Tue, Mar 20, 2018

If your business is struggling to cope with day to day sales while managing innovation and range extensions then give your SKU list a thorough review. Not just a cursory glance but a scientific evaluation of what brings in the profit and what eats at the same. Few businesses are lucky to operate with just one or two monster SKUs but an excessive list of items on the price list can severely affect your customer service performance.

In the customer service link above we looked at the cost to have a single SKU on the books and it is not insignificant when you take all elements of supply into account. If SKUs do not pay for themselves and contribute to the bottom line then why do they exist? SKUs plodding along with low margin AND low sales turnover cannot be worth the cost and effort of maintaining them, can they? They are simply getting in the way of potentially more profitable SKUs.

If you could base your business on high margin/high turnover SKUs then of course you would. Life is not that simple and the market place is ever more competitive so you need to constantly review the wisdom of what you are putting in front of consumers. Unless your business is in dire straits a large proportion of your SKUs will be either low margin/high turnover or vice versa. Both situations can provide reasonably healthy growth but wouldn’t it be better if you could edge them towards the high/high green quartile as per the diagram below?SKU ComplexityThe first step is to make a very rough estimate of what your business spends on keeping an SKU on the price list. This is not an accurate science but you need to put a “stake in the ground” and agree a number, say 30,000Eur. If the margin of a particular SKU does not at least break-even then delisting should be considered. Staff who look after those SKUs in the yellow segments need to be challenged on a quarterly basis to get their SKUs away from the red and towards the green, or delist.

If you carry out such an assessment and find that a majority of your SKUs are in the red segment then you might benefit from a professional spring clean of your portfolio. Such an approach will remove any emotion and bias when clinically assessing what you should be placing on shelves.

Image courtesy of Enchange at Enchange.com.

 

Tags: SKU, FMCG, Dave Jordan, Performance Improvement, Pharma, Supply Chain Analytics

Supply Chain Improvement via Analytics - well worth a closer look!

Posted by Dave Jordan on Wed, Mar 14, 2018

Just when we thought winter had been and gone it bit back nastily with a short, sharp shock of bad weather including snow and bitter cold. Typically, UK was unable to cope and as an example I spent 5 hours looking out of a cabin window at Birmingham airport while 10mm of snow gently fell. Eventually I arrived back in Bucharest to find significantly more snow yet very little disruption, as usual.

What else is hitting the headlines at the moment? POTUS Donald Trump thinks it’s a good idea to tackle the problem of gun attacks in schools by arming teachers. Is your cuppa too sweet? Of course, add more sugar. Waistline too big? Eat more food. Everybody except POTUS and the NRA considers introducing more guns to schools is a bad idea.

On the business front, February is over in its usual short, yet sweet way and we are now well into March as the end of the first quarter for many companies draws near. Your ability to make an impact on the Q1 results is slowly vanishing and if you are short at the top or bottom then you should still resist the urge to push stocks into the trade.

Just as arming maths teachers is plain daft, pushing more stock into the trade is similarly unwise yet it remains a go-to solution for some. As bad as this is, what is worse is that it is highly likely you already have too much inventory dotted along the chain. From a planning manager perspective this is about just in case rather than just in time!

A few questions to honestly ask yourself:Supply_chain_analytics_inventory_control_&_reduction.jpg

  • Do you know the precise stock level that will deliver your target service levels and in market sales?
  • Do you know what you need to change to achieve your supply chain and ultimate business targets?
  • Do you genuinely understand what is happening inside your own supply chain?

Like those mustachioed David Bedford money lending look-alikes, you are not alone.

In the last 10 years or so, despite investments in sophisticated ERP and other supporting systems, huge opportunities to further improve supply chain performance have become available.

Why should you be interested in Supply Chain Analytics? It’s………

  • Free: An initial free test drive on a sample of your data will indicate the potential benefits.
  • Fast:  A proven step by step data loading process from your existing source systems.  You don’t have to wait for a lengthy IT implementation to benefit from Supply Chain Analytics.
  • Instant: The software is pre-built with analytics reports, calculations, trends and data collation capability.
  • Accessible: A secure cloud-based platform with access from your PC, tablet or mobile.
  • Profitable: You are weeks away from starting the process of saving millions of Euros AND reaching those ambitious sales targets.

Don’t be frightened by Supply Chain Analytics; they are the future leading towards your Supply Chain excellence. A selection of stunning case studies will be published shortly. Take a look and then get involved.

Image courtesy of Loveluck at freedigitalphotos.net

Tags: FMCG, Dave Jordan, Pharma, Supply Chain, Inventory Management & Stock Control, Supply Chain Analytics

Supply Chain Performance: Budget Airlines and KPIs……

Posted by Dave Jordan on Wed, Jun 14, 2017

I have never been a fan of budget airlines and certainly not since one left me sleeping overnight in the back of beyond that is Luton Airport. That may be an exciting addition to a student’s back-pack holiday itinerary but when you have a glass back it is not so appealing.

Nevertheless, they do fly to or near to where I need to be and the prices are much cheaper if you book well in advance, don’t pay with a credit card, don’t carry any luggage, don’t eat or drink, wish to sit next to your wife or use the toilet (thank you Fascinating Aida).

So, once again I found myself on the busy Birmingham – Bucharest route after visiting the heiress and some things are inevitable on a no-frills airline. I know the dimensions of my carry-on bag but so many others either forget to check or think they will get away with a dayglo sausage the size of Sicily without paying the penalty fare. That’s how they make their money; last minute, extortion, take it or leave it.

My second frequent observation is that there is usually someone sitting in my seat when I board. Yes, they move when challenged but only to another seat which is not theirs either. I know some airlines do or did provide a free seating/chaos policy but when you have a seat allocated on the boarding pass, sit in it!

Finally, we are off the ground and ascending before soon the engines throttle back and this is when I want to shout out some helpful advice to the captain, “change gear now”. I know how planes work but that bit off take off always makes me uncomfortable. The beep of the seat belt sign going off leads to an immediate dash for the toilets (I hope they pre-paid) and a long line of shuffling bodies.

The line of casually shuffling bodies soon turns into a twitching queue of concern as the red toilet sign above the cabin remains illuminated. Phones are consulted to pass the time and refocus the mind; people even read the safety information booklet and the duty-free magazine which is anything but duty free, of course.

Finally, a Flight Attendant needs to transport a metal trolley on inedible stuff to the other end of the plane and realises she cannot possibly conquer the lavatory line and politely knocks on the toilet door. No answer. Another tap-tap-tap plus an enquiry if everything is OK also fails to change the indicator from no-go red to free flowing green. The red light seems to glow brighter as if to irritate those with crossed legs.

This is now serious as the inedible stuff is getting cold and more people are standing in the aisle than sitting in seats. The pilot is probably having to battle with the controls to keep the plane centrally balanced. Something must give and judging by the faces of the queuers, this will be very soon. The red light glows.

Then action; the queue is guided away from the toilet door and back behind the curtain. Male and female crew members are poised to open the door using the emergency switch and they don’t know what or whom they will find. The door is cracked open as male and female eyes strain to see which crew member will take the lead and help the possibly stricken passenger. The red light vanishes and the green for go appears above the curtain. Relief is at hand.

There’s nobody in the toilet. The grateful mass of people takes one step forwards as the end is finally near.

FMCG_SUPPLY_CHAIN_HUMOUR_KPI_ANALYTICS.jpgSo, what went wrong? Will the cleaning service at the destination find something a very unexpected item in the garbage area? Is someone hiding in the skin of the aeroplane plotting something nasty?

There was never anyone in the toilet in the first place and staff had forgotten to flick the switch to make it open for business. The red light stayed illuminated but it was not telling you what the real situation was with toilet occupancy and the impasse was allowed to go on for quite some time. The KPI (kay pee aye) was showing red but it was not telling you the reality and certainly not everything.

Don’t always believe your KPIs are telling you the whole story; challenge them routinely. They are frequently an indication of performance at a certain moment in time and a longer-term view is necessary as the business evolves. If your business is in trouble you may need a set of Recovery KPIs whereas a booming business on a roll may need a set which is far more forward thinking and aggressive. Supply Chain Analytics help you take the longer term view.

Blindly believing long term over or under performance can see your company quickly performance go down the pan.

Image courtesy of phasinphoto at freedigitalphotos.net

Tags: FMCG, Dave Jordan, Humour, Performance Improvement, Pharma, KPI, Supply Chain, Supply Chain Analytics

Global FMCG Supply Chain Transformed by Analytics

Posted by Dave Jordan on Wed, Apr 05, 2017

The Challenge

A leading global FMCG company undertook an aggressive supply chain improvement programme across 150 markets. The objective was 100% alignment of worldwide operational activities with company strategy and objectives. Not an insignificant task! 

The Problem

The organisation routinely calculated and published multiple KPIs and targets, but a lack of data integrity, accessibility and insightful reporting limited supply chain progress. Data was ‘scattered’ across multiple sources including enterprise ERP, market ERP, multiple factory systems and MI systems. No shortage of data but a severe dearth of insight and information.

In several markets, the organisation was suffering from volatile and highly variable short-term supply chain plans and an excess of finished goods inventory, despite a stable and predictable consumption. The ways of working within the supply chain and the interactions externally were traditional, with operating practices and decision making analysis unchanged for far too many years.

The Solution

Engagement with key stakeholders across the business established the corporate need and critical success factors for the analysis. A Toolset & suite of SKU-level Dashboards was developed, focussing on demand, planning, materials, production & execution. Company data was extracted into the toolset to provide information leading to appropriate actions. New monthly reporting and analysis revealed significant inventory reduction opportunities and importantly, operational management had the confidence to drive the required changes with a far greater understanding of potential outcomes.

sc_transformation_supplyvue_updated.pngThe Winning Tool

SupplyVue is a revolutionary supply chain analytics solution.

  • SupplyVue uses existing data to analyse and diagnose problems and successes in the supply chain.
  • SupplyVue provides a suite of tools and dashboards to model different inventory, financial and service level scenarios.
  • SupplyVue provides the visibility, data, information and business case to drive changes in the supply chain while fully understanding potential trade-offs.
  • SupplyVue enables provides visibility across the end-to-end supply chain to deliver better service to internal and external stakeholders.

The Result

Hard work, patience and trust in the analytics tool provided:

  • Improved forecasting accuracy.
  • Senior management tools to set informed policy.
  • For the first time, planners had powerful and relevant tools to perform root cause analysis of supply chain issues.

The big one? The company achieved an inventory reduction of 40% (yes, forty) in 12 markets amounting to US$ 200 million. Not too shabby eh?

Plus, something that is difficult to measure. SupplyVue raised the morale of supply chain staff who were now able to offer intelligent and assured solutions rather than shoulder shrugs and excuses.

The Future

Would you like to read more about analytics?

Supply Chain Analytics

SupplyVue

The Pathway

How to transform your supply chain?

The Next Important Step

Enchange can help you transform your supply chain, the overall business and personal ambitions!

To find out how we can help you and to enquire about our wide range of supply chain and related services please click here and contact us.

Image courtesy of Enchange.com

Tags: Customer service, FMCG, KPI, Supply Chain, Inventory Management & Stock Control, Supply Chain Analytics

Supply Chain Analytics: Sprouts, Imodium & Harry Potter

Posted by Dave Jordan on Wed, Jan 18, 2017

Christmas and new year holidays seem a long way behind. The decorations have been squeezed back into their boxes for another year and Slade, Cliff, Bing, Bowie and others are safely back in their CD cases. Turkeys around the world are rejoicing as much as the children who do not have to tackle Brussels Spouts for another 12 months.

 

As ever, platform 9 at London’s Kings Cross station is a lonely place jam-packed full of people. Fellow commuters all with the same futile hope of securing a double seat with a table and a charging point nearby. A seat of any kind would be a bonus on your daily commute out of London to Cambridge on the 07.44 but at least this train will run and is on time. This must be the only form of transport globally where you can pay a premium seat price to stand next to a blocked toilet. Enjoy!

 

Blue Monday, even the odorous toilet spot has been taken so you are further relegated to the unheated bicycle area which must have been designed for Eskimos with unicycles. Settled as well as it is going to get, your thoughts turn to the new year ahead and the depressing expectation of the same old operational problems and challenges popping up. The slow chug-chug of the train brings the first lines of Bohemian Rhapsody to mind as an apt description of how you feel:

 

Is this the real life?SUPPLY_CHAIN_ANALYTICS_IT_FMCG.jpg
Is this just fantasy?
Caught in a landslide,
No escape from reality.

 

This sneaks into your head repeatedly even as the chugging slows and Cambridge eases into view. Time to snap out of it and get the business hat firmly on. At least the new ERP is in place and after a 3-month error-ridden ramp-up it should be ready to support the business a little better than the in-house, low cost, back of a fag packet version that lasted more than 10 years. There is a lot riding on this expensive ERP; this ERP will finally tell us what is really happening in our supply chain.

 

Well no, it will not.

 

Don’t worry, you have not invested heavily in the wrong software. The ERP will do exactly what is says on the tin which is probably in the German language.

 

Thinking back to that train toilet, consider for a moment that your ERP is Imodium – a fantastic product which does exactly what it claims on the pack. You can trust Imodium to get you from A to B where B is not necessarily where you want to be but it is a place of distinct safety and comfort. Imodium does not tell you what went wrong inside nor does it tell you what to do differently to avoid the same effect at a later date. In short, Imodium slows down your business but doesn’t tell you what is wrong.

 

What you need is some form of Supply Chain Analytics to sit on top of your ERP/Imodium – not a substitute. Your new ERP will have automated your usual ways of working but this seldom leads to huge improvement and often, performance visibly worsens with the increased noise and operator nervousness in the planning processes. Inevitably, the forecast takes the blame. The issues lie within the supply chain processes, the set-up of the IT systems and how add-on tools are being used. To protect themselves, your supply chain managers are buffering supply chains with unnecessary inventory and backside-protecting lead-times.

 

Analytics uses your data to analyse and diagnose what is happening in your supply chain by providing a suite of tools and dashboards to model the implications of your decision making. Achieving extra visibility across the supply chain inevitably delivers better service, lower costs, happier people and a supply chain that is easier to manage.

Analytics is transforming the way organisations improve performance and gain competitive advantage, every day. Even on those cold, wet Mondays when you are at the station contemplating another standing commute. Take a look at Supply Chain Analytics and you will find yourself with exclusive access to Kings Cross Platform 9¾ and we all know what magic is possible there!

Image courtesy of Poulsen Photo at freedigitalphotos.net

Tags: FMCG, Dave Jordan, CEO, Humour, Supply Chain, Supply Chain Analytics, IT

FMCG Planning: If you like chocolate, now is the time!

Posted by Dave Jordan on Wed, Jan 11, 2017

Overeaten chocolate during the holidays but still want some more? Get yourself and a large blue IKEA bag down to your local supermarket as chocolate is heavily discounted. Easter is not far away this year so why not save a little cash and stock up now - use by dates permitting, of course!

Post Christmas I have been taking a look at International Key Account retailers and seeing how they are coping in the continuing economic squeeze. One question came to mind after seeing well over 20 outlets of various retailers. What do they all do with all that chocolate and other Christmasy confectionery?

Planning Chocolate Sale The same scenario is also present after Easter. Shelf after shelf and gondola after gondola of seasonal chocolate in all sorts of formats, shapes and sizes. Not simple packaging either and it must cost a fortune to pack a 15cm tall chocolate Santa or rabbit into a multi-coloured coffret. To be fair it is not just one manufacturer who has suffered a forecasting blip, every major name chocolate producer appears unable to get it right. For all of them Christmas must be a peak period and one that can make or break the year-end results and with no time left to remedy any sales deficit. Similarly, the timing can also place an un-provisioned hole in Q1 numbers even before you have taken down the decorations.

Of course, nobody wants to disappoint consumers and run out of stock at those peak periods but how can they afford the apparent over-stocking? If the goods are on consignment or “sale or return" then I can perhaps understand why retailers let displays hang around for several weeks. Even then I doubt the retailers would relish wasting valuable sales space on Easter themed chocolate into June and beyond.

Considering the power retailers have over producers I do not understand why stock is allowed to gather dust on shelves. Certainly, for many foodstuffs the listing contracts will contain clauses to withdraw stocks but usually only when the sell-by date approaches or off-take is ridiculously low.

What is the destiny of chocolate Santas and bunny rabbits after the sell-by date arrives? You cannot do much with it, can you? You cannot send it to a sink market in another country and with the vast majority of edibles you cannot recycle the stuff into fresh production as you could with washing powder, for example. If you have to write-off stock you have to pay to have it destroyed professionally and you frequently have to pay VAT on the stock value as if it was a sale.

Whatever the destiny of all that yummy chocolatey goodness, it is indicative of a lack of rigour in forecasting and/or sales expectations. Diverting some investment from stock that does not sell into taking a long, hard look at your Sales & Operational Planning (S&OP) process could offer a very rapid pay-back for those companies willing to break the chocolate losses mould.

As a step further, Supply Chain Analytics can help you to fully understand what is really happening in your peak periods and why you continue to miss your sales targets. Presently, there is a free of charge offer to analyse some of your data and expose the reality of your decision making.

Image courtesy of Nora Ashbee at Enchange.com 

 

 

Tags: FMCG, Christmas, Dave Jordan, Supply Chain, S&OP, Forecasting & Demand Planning, Supply Chain Analytics

Supply Chain Analytics: Is your data providing information & actions?

Posted by Dave Jordan on Wed, Nov 09, 2016

Who coined the term “Big Data”? How did we get there without tiny data, ordinary data, slightly larger data, chubby data and bordering on big data? People working in or associated with Supply Chains seem obsessed by data yet data itself tells you absolutely nothing. Really, not a lot apart from the fact that something is being measured or calculated.

Firstly, a couple of information irritations. If you need to renew your UK passport (must be similar for other countries too) you need to have your identity confirmed by someone in a certain profession, e.g. doctor, teacher and be a person of “good standing in their community”. The allowed list of professions includes Bankers which baffles me these days. Anyway, the signatory must provide information confirming your identification and you get the passport. Information and not data gets the job done.

 

My bank writes to me – note, sends me a physical letter – asking me to confirm my address! “If you know where I live why do I have to call you to confirm what you already know?” TINA as Maggie Thatcher would say, there is no alternative so you must bite your tongue and provide the information.

In Supply Chains the data obsession is growing. “Show me the data. How does the latest data look? Will the data protect my backside?” Data is only valuable if you know what it is measuring, what it means and what you need to do to change or influence an aspect of future business performance. For data to be useful it must be converted into useful information and then into appropriate actions.

Someone is shouting “data is information isn’t it”? Well, no it is not and as Michael Caine insists he never said, “not a lot of people know that”. Consider this example.

Due to some poor forward planning by the travel department you find yourself airborne for the duration of a vital end of season relegation encounter. On leaving the plane you ask an airport worker about the big football game. All he/she can tell you is that 4 goals were scored. Is that helpful?

CANALYTICS_SUPPLY_CHAIN_DATA_INFORMATION.jpgertainly, the match sounds like it was entertaining but your overpaid wimpy football idols needed a win. The data you have been given is 100% accurate but it does not actually tell you anything about the outcome. Was it 2-2, 3-1, 1-3 or even a diabolical 4-0/0-4?

When you understand the final score was 3-1 in favour of your football wimps you are elated and think about kissing the moustachioed guy at security but back down just in time – that metal detector sausage could cause some damage. Instead of being as sick as a parrot you are over the moon, y’know what I mean?

You have converted that raw goals scored data into information and then into celebratory actions. In terms of actions this means you have wisely decided against kissing the Village People lookalike security guard to head off to quaff several pints of the foaming ale. When you only had the 4-goal data you had no idea of the outcome.

Increasingly you need to turn to analytics to understand what is actually happening in your Supply Chain why it is happening and most importantly, what needs to change for future business success.

Image courtesy of ddpavumba at freedigitalphotos.net

Tags: Supply Chain, Inventory Management & Stock Control, Supply Chain Analytics, IT

Supply Chain Analytics: The birth of a new Dawn, or Daniel

Posted by Dave Jordan on Wed, Nov 02, 2016

Anyone expecting their first child has probably been told by a gloating-doting grandparent-to be that their lives are about to change dramatically. This is of course untrue as in reality dramatically is too simple a word and in any event, that “change” is far, far different than granny suggests. Your pre-natal life as you know it will become obsolete at the snip of a chord.

Sleep, sanity, social life and other activities beginning with “s” will soon become history as you become slaves to the mini-me you have created who appears to have over active exhaust systems at both ends. Night and day whizz past in a blur of endless demands for food and cleaning and screaming and that is just the husband.

Did you know what sex the little darling was before the big day or did you wait and see what would be delivered? Did you and the family try to predict boy or girl based on family history? You know, things like the first born is always a boy if the birth takes place in summer. Or, it must be a girl based on the size of the baby bump etc., etc.

Supply_Chain_Analytics_CEO_Planning.jpgDespite all the indicators and family history and old wives’ tales you got the sex of the baby wrong? Dear me, there are only 2 options after all! If you can get that 50/50 prediction wrong how on earth do people cope in the supply chain business when the number and type of variables is enormous? (You knew the segue was coming and there it is!)

What is going to happen in the future is always difficult to predict even remotely accurately.

Hold on a minute but what about all that Supply Chain data? Your Management Information System is running red hot; the KPI Dashboard has digital steam coming out of its ears and you can see numbers bursting out of the air vents on the top of the Data Warehouse. You have more data available than you can shake a USB Data Stick at!

The problem is that all those numbers and colour coded percentages help to tell you everything that has already happened in your Supply Chain. Good to know of course but isn’t it better to know why certain events happened and how they can be avoided in the future?

I can imagine your last S&OP meeting involved making considered changes to plans and activities to correct certain deficiencies or to take advantage of opportunities. All well and good but the internal operational deficiency you have is that you must wait weeks or months or longer to find out if your strategy was successful.

What you need is an analytical tool to take advantage of all that data and convert it into actionable information. A tool which allows you to diagnose the precise causes of past events and which allows you to model the probable results of your decisions into the future. These tools exist as cost effective cloud based solutions but most companies stubbornly remain convinced that their expensively installed MIS/ERP should be sufficient. Put simply, alone, they are not.

When you were thinking about starting a family if you knew which “tadpole” was most likely to win the race you would not be on a ladder hurriedly repainting the nursery blue!

Image courtesy of dream designs at freedigitalphotos.net

Tags: CEO, Forecasting & Demand Planning, Supply Chain Analytics, IT

Fashion Retailers: Is inventory eating into your profits? (It is…)

Posted by Dave Jordan on Wed, Aug 31, 2016

I touched on the problem of expanding UK waistlines a few blogs ago and the topic popped up again recently when I was out and about shopping for clothes – no, not me. This is not as regular an event as it may be for senior management but due to the imminent arrival of a few dry and summery days, I was in need of new shorts and T-shirts.

Nothing special or posy, just bog-standard items that do not have some sort of advertising logo blazoned across for which I receive no payment.  Similarly, I was keen to avoid those that look like someone has been assaulted by an ultimate, all-topping, deep-pan, soft-cheese pizza. Oh, and no fashionable rips and tears, either. Plain and simple and in one “quiet” colour; that’s me.

Fashion_retail_inventory_supply_chain_analytics.jpgIf I look at the internet – it’s all true there isn’t it? – then I am about the top end of average as long as it is not Christmas, Easter or holiday time. As everyone knows, bathroom scales do not work accurately during those periods and clothes shopping then is silly anyway. There started my rare shop for T-shirts and shorts in the medium/large size range. Should be relatively simple I thought as I started to dodge the bodies of the newly pedestrianised high street throng.

Alas, no BHS, no Austin Reed and now not even an Old Guys Rule to replenish my summer wardrobe but plenty of retail options remained. With a spring in my step I activated the soft hiss of the sliding doors and there I was in one of the largest clothes retailers in the game. No names mentioned in case it jinxes the chain and we lose another big name!

The choice in style and colour was good and the racks were very well stocked with lines and lines of T-shirts and shorts. Then the problem hit me. Although I was looking for M or L sizes the only items available were extra small, small, extra-large, XXL and even XXXL! (Don’t get me started on why extra small and XXXL must be the same price.) This was not an isolated case and after checking I realised this was true for the gaudy coloured stuff and the “stylish” pre-damaged items. What is going on?

This may only be a sample of 1 but this major UK chain with several international franchise locations is probably operating with several hundred thousands of Euros hanging on racks with only a small chance of being sold anytime soon. Sizes which fit a large proportion of the population are out of stock (OOS) presenting a huge lost sales problem. And it is not just T-shirts and shorts; have a look at hugely expensive suits, coats and shoes. The same may also be true of the ladies’ fashions but I decided against browsing those racks.

In FMCG, if your Heinz beans are OOS then you pick up HP or an own label offering in the same outlet and it does not really impact on the retailer or the consumer. Not so in clothing retail where alternative options are dotted around the adjacent shopping centres. Seeing multiple Mr. Averages walk out of your store due to OOS while a host of other sizes hang around is just plain daft.

How long does that working capital flap about in the stores eating into your profits? Inevitably, the seasons change and with that the styles adjust. New designs and new ranges are introduced but where do you put them? Eventually, to create space you have to withdraw the S/XXXL stock and either marginally discount it internally or more heavily with a third party.

The problem is not only about having too few top sellers but also about how you plan for the success of the entire size range and avoid over-stocking profit guzzlers. Nobody has a functioning crystal ball but you can apply some clever supply chain analytics to ensure your store inventory is designed for success and not for failure.

Image courtesy of mapichai at freedigitalphotos.net

Tags: CEO, Inventory Management & Stock Control, Supply Chain Analytics, Integrated Business Planning, retail