Perfecting the Last 100 Feet
Merchandising services deliver results in the last links of the supply chain.
September 2007 By Devendra Mishra| Chairman CE Supply Chain Academy
The battleground for the maximization of customer satisfaction depends to a large extent on execution between the receiving docks of a retail store and its checkout counters. The steps taken in that final lap of the consumer electronics supply chain are burdened by cost, inaccuracy and time spent tracking product flow and taking physical inventory. The problem is exacerbated by inadequate business processes, lack of synchronized information, quality of employees and the reality that information cannot be economically and accurately gathered at the necessary points in the process.
Mark Fisher, vice president of Strategic Initiatives for the Entertainment Merchants Association (EMA), estimates it is costing the home entertainment industry nearly $330 million in lost sales where the retailer bears 43 percent of the cost of out-of-stock DVDs and the supplier about 32 percent.
The often-quoted “Bull Whip Effect,” which magnifies the small kinks at retail to considerably larger magnification in the supply chain, epitomizes the fact that insufficient visibility of inventory and non-real-time information have a disproportionate impact on stock-outs, inventory turns and product returns. The problem is amplified for CE products that are promotionally driven and must hit the store shelves at exactly the same time as the ads hit the airwaves and weekend tabs.
According to management consulting firm VeriSign, nearly 70 percent of chain stores fall below compliance levels for key operational processes mandated by headquarters.
Out of stocks (OOS) are the result of inaccurate inventory and lack of visibility into product location, causing shelf outs and “can’t find” situations. The real shame is that the products are not really “out of stock.” They’re actually “out of sight.” Over 70 percent of out-of-stock scenarios are the result of the staff’s inability to locate items that are in the store. Furthermore, an inexperienced and uncommitted work force contributes to nearly 50 percent of the shrinkage issues that cost retailers 2 percent of sales on average.
Executives of major national merchandising companies that attended the recent Conference of the Entertainment Supply Chain Academy (ESCA) in Los Angeles provided unprecedented insights into the realities of the last 100 feet of the CE retail supply chain. Merchandisers, the unsung street warriors who touch and feel the weakest link of the physical delivery of goods, emphasized that in-store merchandising should not be treated as a cost center and a necessary evil. In reality, it has the potential to provide high ROI across a wide spectrum of industries, such as entertainment, apparel, consumer packaged goods, consumer electronics, financial services, technology and communication.
These merchandising companies—Mosaic, SPAR, Handelman and Anderson, for example—cover all product classifications and classes of trade, including mass market, drug store, electronic store, convenience store and grocery chains.
The broad array of services have come to include in-store merchandising, event management and staffing, promotion management, category management, auditing for VMI, fixture asset tracking, returns and recycling management, Web-enabled visibility, and RFID Technology solutions.
Jack Talley, vice president of sales and retail expansion at Sony Pictures Home Entertainment, enumerates the basic functional responsibilities of merchandisers. They include:
• Restock replenishment product
• Set all product on dedicated fixture according
to plan-o-gram
• Blitz all new and promotional products on street date
• Deploy new fixtures to the sales floor as
needed
• Locate back stock and excess product every visit
• Ensure fixtures are dust-free, working and check for fixture parts that need to be ordered
• Execute revisions/change-outs and
promotions
• Send out-of-stock reporting after every visit
• Provide cycle counts and quarterly physical inventory counts
• Verify pricing updates
• Process all returns and pull-downs, and put product to be returned in an easy-to-find location, and
• Perform fixture audits when necessary
Responding to the challenges of the final 100 feet, Mark Heidel, vice president of business development at the Home Entertainment Merchandising division of the $1.2 billion Handleman Company, which serves 4,000 stores, explained how the company has expanded supply chain services while extending field service operations.
Expanded supply chain services
1. Monitoring Suspicious Sales
• Software program studies sales patterns and identifies irregular selling patterns at title level
• Deploys field call visits to verify and reset specific inventory as needed
2. Promotions Management
• Support Client with visibility along promotional life cycle, “beginning to floor”
• Field deployment timed with promotional
delivery
• Promotion placement secured, verified and reported
• Customized, drillable portal for in-store merchandise information to client
3. Out of Stock Reporting and Retail Adjustments
• Electronic OOS capture with UPC with upload to customized portal
• Reset item discrepancies with retailers
4. Forward and Reverse Logistics
• Electronic returns process
• On-site returns invoice generated to eliminate discrepancies
• On-site product disposal documented
• Fulfillment for marketing and promotional items
5. Expanded field services
• Marketing Services
• Execution of key marketing tasks
• Support client and customer with consumer buying patterns, promotional tools and display and product feedback
• Provide market analysis on sales trends, high OOS stores and ASN opportunities
• Monitor and track in-store fixtures and semi-permanent displays
• Report overstock conditions, and
• Provide asset compliance regarding discrepancies categories such as in-line department
6. Department layout design
• Sales analysis for space and capacity optimization
• Involvement in department resets to maximize customer shopping traffic and experience
• Sales analysis of end caps and out of department fixtures to optimize promotional space
Dealing with the critical requirement of communication with clients, Vic Hernandez, executive vice president of Mosaic, with nearly 12,000 associates checking the retail aisles on behalf of their manufacturer customers, reinforced process priorities
to be:
1. Clarification of instructions
2. Deployment and education of the field representatives
3. Coordination with partners in the Supply Line, and
4. Capture of the compliance and exceptions.
Hernandez described how the merchandiser effectiveness and efficiency is captured though handheld, PC, cell phone or paper. The compliance is measured for:
1. Scheduled visits
2. Management of plan-o-gram—new rrelease, catalog and promotional titles
3. Branded display/corrugate usage and placement
4. Point of purchase usage and placement
5. Shelf or display price signage
6. Activity validation using digital store signature or photo, to provide real time visibility for all stakeholders.
Kori Belzer, president and COO of SPAR, a leading, international in-store merchandising company, summed it up, saying that “with over 4,500 merchandising specialists in the U.S. alone making millions of store visits a year, we’re the eyes, ears, arms and legs of the manufacturer, responsible for implementing programs on their behalf at store level. We insure that products are in the right locations at the right times.”
Technology enhancing service
The old notion of merchandising, with its quaint connotations of stocking and straightening and dusting of products, has been transformed into a world of hand-held, Web-enabled scanners where employees carry RFID badges, and operations that can follow a product introduction as it rolls out from the East Coast to the West Coast on Super Tuesday and provide all of the related sell-thru and on-hand inventory data.
Belzer emphasizes that as a group we can benefit from RFID technology, which is the subject of a current pilot study where corrugate displays are being manually tagged and then tracked once they leave the back room and make their way onto the selling floor.
The system software provides data for how long the display is up and where it has been placed, and whether or not it stays there. Customers can view an online “execution map” and watch store locations turn from red dots to green nationwide on their computer screens as the promotions hit the store floors.” Merchandising staffers wear badges that are individually tagged with RFID to provide remote monitoring of their in-store movements.
Final thought
In today’s CE Supply Chain, business excellence is no longer about the performance of individual players; it is about the effortless coordination and orchestration across the supply chain. Merchandisers play an essential role in this process and, at least today, they are the best defense a manufacturer and retailer has to overcome the serious deficiencies of product and information flow from the dock to the checkout counter.
Professor Mishra is the Conference Chairman of the second annual Consumer Electronics Supply Chain Academy, which will be held January 9 at CES in Las Vegas. For more information, visit www.cesupplychain.com
Mark Fisher, vice president of Strategic Initiatives for the Entertainment Merchants Association (EMA), estimates it is costing the home entertainment industry nearly $330 million in lost sales where the retailer bears 43 percent of the cost of out-of-stock DVDs and the supplier about 32 percent.
The often-quoted “Bull Whip Effect,” which magnifies the small kinks at retail to considerably larger magnification in the supply chain, epitomizes the fact that insufficient visibility of inventory and non-real-time information have a disproportionate impact on stock-outs, inventory turns and product returns. The problem is amplified for CE products that are promotionally driven and must hit the store shelves at exactly the same time as the ads hit the airwaves and weekend tabs.
According to management consulting firm VeriSign, nearly 70 percent of chain stores fall below compliance levels for key operational processes mandated by headquarters.
Out of stocks (OOS) are the result of inaccurate inventory and lack of visibility into product location, causing shelf outs and “can’t find” situations. The real shame is that the products are not really “out of stock.” They’re actually “out of sight.” Over 70 percent of out-of-stock scenarios are the result of the staff’s inability to locate items that are in the store. Furthermore, an inexperienced and uncommitted work force contributes to nearly 50 percent of the shrinkage issues that cost retailers 2 percent of sales on average.
Executives of major national merchandising companies that attended the recent Conference of the Entertainment Supply Chain Academy (ESCA) in Los Angeles provided unprecedented insights into the realities of the last 100 feet of the CE retail supply chain. Merchandisers, the unsung street warriors who touch and feel the weakest link of the physical delivery of goods, emphasized that in-store merchandising should not be treated as a cost center and a necessary evil. In reality, it has the potential to provide high ROI across a wide spectrum of industries, such as entertainment, apparel, consumer packaged goods, consumer electronics, financial services, technology and communication.
These merchandising companies—Mosaic, SPAR, Handelman and Anderson, for example—cover all product classifications and classes of trade, including mass market, drug store, electronic store, convenience store and grocery chains.
The broad array of services have come to include in-store merchandising, event management and staffing, promotion management, category management, auditing for VMI, fixture asset tracking, returns and recycling management, Web-enabled visibility, and RFID Technology solutions.
Jack Talley, vice president of sales and retail expansion at Sony Pictures Home Entertainment, enumerates the basic functional responsibilities of merchandisers. They include:
• Restock replenishment product
• Set all product on dedicated fixture according
to plan-o-gram
• Blitz all new and promotional products on street date
• Deploy new fixtures to the sales floor as
needed
• Locate back stock and excess product every visit
• Ensure fixtures are dust-free, working and check for fixture parts that need to be ordered
• Execute revisions/change-outs and
promotions
• Send out-of-stock reporting after every visit
• Provide cycle counts and quarterly physical inventory counts
• Verify pricing updates
• Process all returns and pull-downs, and put product to be returned in an easy-to-find location, and
• Perform fixture audits when necessary
Responding to the challenges of the final 100 feet, Mark Heidel, vice president of business development at the Home Entertainment Merchandising division of the $1.2 billion Handleman Company, which serves 4,000 stores, explained how the company has expanded supply chain services while extending field service operations.
Expanded supply chain services
1. Monitoring Suspicious Sales
• Software program studies sales patterns and identifies irregular selling patterns at title level
• Deploys field call visits to verify and reset specific inventory as needed
2. Promotions Management
• Support Client with visibility along promotional life cycle, “beginning to floor”
• Field deployment timed with promotional
delivery
• Promotion placement secured, verified and reported
• Customized, drillable portal for in-store merchandise information to client
3. Out of Stock Reporting and Retail Adjustments
• Electronic OOS capture with UPC with upload to customized portal
• Reset item discrepancies with retailers
4. Forward and Reverse Logistics
• Electronic returns process
• On-site returns invoice generated to eliminate discrepancies
• On-site product disposal documented
• Fulfillment for marketing and promotional items
5. Expanded field services
• Marketing Services
• Execution of key marketing tasks
• Support client and customer with consumer buying patterns, promotional tools and display and product feedback
• Provide market analysis on sales trends, high OOS stores and ASN opportunities
• Monitor and track in-store fixtures and semi-permanent displays
• Report overstock conditions, and
• Provide asset compliance regarding discrepancies categories such as in-line department
6. Department layout design
• Sales analysis for space and capacity optimization
• Involvement in department resets to maximize customer shopping traffic and experience
• Sales analysis of end caps and out of department fixtures to optimize promotional space
Dealing with the critical requirement of communication with clients, Vic Hernandez, executive vice president of Mosaic, with nearly 12,000 associates checking the retail aisles on behalf of their manufacturer customers, reinforced process priorities
to be:
1. Clarification of instructions
2. Deployment and education of the field representatives
3. Coordination with partners in the Supply Line, and
4. Capture of the compliance and exceptions.
Hernandez described how the merchandiser effectiveness and efficiency is captured though handheld, PC, cell phone or paper. The compliance is measured for:
1. Scheduled visits
2. Management of plan-o-gram—new rrelease, catalog and promotional titles
3. Branded display/corrugate usage and placement
4. Point of purchase usage and placement
5. Shelf or display price signage
6. Activity validation using digital store signature or photo, to provide real time visibility for all stakeholders.
Kori Belzer, president and COO of SPAR, a leading, international in-store merchandising company, summed it up, saying that “with over 4,500 merchandising specialists in the U.S. alone making millions of store visits a year, we’re the eyes, ears, arms and legs of the manufacturer, responsible for implementing programs on their behalf at store level. We insure that products are in the right locations at the right times.”
Technology enhancing service
The old notion of merchandising, with its quaint connotations of stocking and straightening and dusting of products, has been transformed into a world of hand-held, Web-enabled scanners where employees carry RFID badges, and operations that can follow a product introduction as it rolls out from the East Coast to the West Coast on Super Tuesday and provide all of the related sell-thru and on-hand inventory data.
Belzer emphasizes that as a group we can benefit from RFID technology, which is the subject of a current pilot study where corrugate displays are being manually tagged and then tracked once they leave the back room and make their way onto the selling floor.
The system software provides data for how long the display is up and where it has been placed, and whether or not it stays there. Customers can view an online “execution map” and watch store locations turn from red dots to green nationwide on their computer screens as the promotions hit the store floors.” Merchandising staffers wear badges that are individually tagged with RFID to provide remote monitoring of their in-store movements.
Final thought
In today’s CE Supply Chain, business excellence is no longer about the performance of individual players; it is about the effortless coordination and orchestration across the supply chain. Merchandisers play an essential role in this process and, at least today, they are the best defense a manufacturer and retailer has to overcome the serious deficiencies of product and information flow from the dock to the checkout counter.
Professor Mishra is the Conference Chairman of the second annual Consumer Electronics Supply Chain Academy, which will be held January 9 at CES in Las Vegas. For more information, visit www.cesupplychain.com
The Out-of-Stock Problem is Huge!
• DVD and video game industry total $33 billion in annual sales
• Average out of-stock rate for promoted items are 8.3 percent to 17.1 percent, and 7.4 percent for non-promoted items
• That means that more than one in 10 times a consumer goes to buy a new release or promoted title, it’s out of stock
• Retailers absorb about 42 percent of the impact of an out-of-stock. Based on an OSS level of 10 percent, retailers are losing about 4 percent in sales.
• Suppliers absorb about 33 percent of the impact of an out-of-stock. Based on an OSS level of 10 percent, they are losing about 3 percent in sales.
• If 10 percent of out-of-stocks result in no DVD or game sale, then the industry is losing 1 percent of sales or $330 million in sales.
• DVD and video game industry total $33 billion in annual sales
• Average out of-stock rate for promoted items are 8.3 percent to 17.1 percent, and 7.4 percent for non-promoted items
• That means that more than one in 10 times a consumer goes to buy a new release or promoted title, it’s out of stock
• Retailers absorb about 42 percent of the impact of an out-of-stock. Based on an OSS level of 10 percent, retailers are losing about 4 percent in sales.
• Suppliers absorb about 33 percent of the impact of an out-of-stock. Based on an OSS level of 10 percent, they are losing about 3 percent in sales.
• If 10 percent of out-of-stocks result in no DVD or game sale, then the industry is losing 1 percent of sales or $330 million in sales.
Companies Mentioned:
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