All the Low-Hanging Fruit Have Not Yet Been Picked
Many retail logistics practitioners who are good at their jobs will swear to you that all the low-hanging fruit on their optimized logistics tree has already been picked.
Sure, one way to face today’s challenges is to cut transportation and logistics costs. But what’s hanging on the other side of the tree in the orchard of retail success?
There may be simple strategies to fast-track sales growth, even in a down economy.
One good idea comes from a recent conversation I had with Randy Fields of Mrs. Fields cookies fame. Randy now heads a company called Park City Group Retail Solutions, Park City, Utah.
He conducted a study for a prominent supermarket chain that typically does a good job managing its supply chain. After analyzing one product category with 10 fresh poultry SKUs in 343 stores, Randy’s study identified $19.2 million yearly in lost sales opportunities due to stock-outs.
Lesson learned: Stock-out-driven lost sales assume a greater importance in lean times when margins are under siege and as a greater portion of recovered sales goes right to the bottom line.
In a down economy, tuning up your demand-driven logistics practices to gain fuller inventory insight may prevent customers from giving you the brush. Art supply distributor Dick Blick invested in technology to boost inventory accuracy and better match volatile demand signals to supply.
“If you order a tube of paint and I send you a brush, you get very mad at us,” says John Polillo, executive vice president of operations. Dick Blick fixed it.
Lesson learned: Supply chain excellence gives you happy customers. Happy customers give you more sales. More sales leads to more customers.
Another strategy for boosting sales growth involves promotions. Victoria’s Secret, for example, does a stellar job coordinating product promotions and supply chain excellence – crafted to serve demand that is quickly driven up by marketing activities. The mission is to create additional demand and make sure product is there to support it.
Similarly, fast-food retailers in some segments ensure they don’t have demand falloff by boosting marketing efforts, pitching special promotions and new menu offerings to craving consumers.
Having control over and visibility into inventory gives restaurants such as Steak ‘n Shake and Arby’s the flexibility to plug limited-time offers (LTOs) into their supply chains, and scale supply to demand to grow market share through new offerings. It also ensures that once they have customers hungry for the promo, they have all the product they need to back it up.
Lesson learned: Advertising and promotion work, even in a down economy. But your promotion efforts better be tied tightly to your supply chain flow or you run the risk of boosting demand while leaving sales on the table.
Bottom line for retail value chain practitioners: customer pickings may be slim, but by checking some branches that are occasionally overlooked, you might find that all the low-hanging fruit have not yet been picked.