The most cost effective part of a product’s journey is from the shelf to the checkout, we rely on the consumer to carry out this handling process. The most expensive exercise is getting the product to the shelf.
Whatever branch of retailing you are in, the area that is absorbing most energy is in supply chain management.
The supermarkets, who are also in pet products, lead the way. In Australia, Woolworths have saved $2 billion Australian dollars by reducing their distribution centres from 31 to 11 and have also ensured their inventory turnaround has gone from 16 days to 12 days. Tesco in the UK have reduced their inventory at store level to 5 days. These are real savings to the retail industry.
Push it or pull it
Traditionally the industry has pushed products through the industry. Suppliers have sold products to retailers, retailers have put them on the shelf with the hope that consumers would buy them.
The industry will change to a pull supply chain management system. This is where the chain initiation starts with the consumer who buys a products, this triggers a process where the retailer orders product from the supplier based on a “just in time†process.
Supply chain management really means supply chain integration. We all have to work together.
Why now? There are a number of reasons. The dominance of Wal-Mart’s (the world’s biggest business) slow growth in retail sectors, high inventory levels and high out of stocks have forced retailers and suppliers to analyse the supply chain and look for means of improvement.
Where do you start?
Start with the store, re-look at the category with the customer in mind, develop best shelf practice planograms, list the shelf strategy and work backwards towards the vendor.
This process is a challenge for all concerned. It is more than looking at IT strategies. It includes taking on board RFI (Radio Frequency Identification), something all Wal-Mart suppliers have to have implemented by 2005. It includes re-looking at distribution channels and who organises and pays for the channel.
About the Author
John Stanley is a conference speaker and retail consultant with over 20 years experience in 15 countries. John works with pet retailers around the world assisting them with their merchandising, staff and management training, customer flow, customer service and image. Visit www.johnstanley.cc or email us on newsletter@johnstanley.cc.
