Strong business growth is great, but the growing pains that result can cut into your profits, snarl your operations, and even stop that growth in its tracks.
As your company grows, so does operational complexity. You want to be sure your team is equipped to deal with it—along with the teams downstream who must plan and execute a merchandise strategy to get your goods out the door. Not all retailers finesse this change. A recent supply chain benchmark survey¹ tells us that 46 percent of North American retailers use static spreadsheets to manage their supply chain planning. That manual process doesn’t allow for the agility you need to keep your stock at optimal levels. It’s not just a downstream problem; it starts with merchandising.
The fact is, the more brands you offer and the more SKUs you stock, the more likely you are to experience errors in the quality and timing of products, signage and information in stores. You may see reduced profit margins from missed forecasts, or see your stores suffering from too much or too little inventory.
Point B's Perspective
Your downstream partners are trying to execute your vision—they want the organization to succeed as much as you do. To make your vision a reality, it’s critical to identify your organization’s role in creating any issues, so you can stop them before they become issues down the line. We suggest a three-tiered approach:
- Incorporate downstream needs when planning.
- Optimize work processes.
- Use one or two key performance metrics across all divisions.
Take downstream teams into consideration
Merchandising decisions affect teams downstream who are responsible for space planning, visual merchandising, supply chain and store operations. When they struggle with an unpredictable flow of work under significant time pressure that introduces delays and errors in the system. Stores must dedicate an increasing number of labor hours managing stock-outs or product overages, and handling signage and pricing errors. It all results in costs driving profits down. Prioritizing and sequencing merchant initiatives before you order the inventory can alleviate those pressures.
When you’re prioritizing a roll-out of goods, don’t introduce them all at once. Instead, finesse it so that you’re bringing out new products regularly throughout the buying season. For example, if you’re a sporting goods store and you introduce all your new hiking and camping equipment the first week of fall, you won’t have anything new to draw customers over the next 11 weeks of the season.
When you’re planning, consider the downstream effects of the roll-out. How does it affect space planning? Signage and marketing materials? And how does that wave of product impact workflows in your retail outlets and your distribution center? Taking a more measured approach to product roll-out can ease staging and smooth out the peaks and valleys in staffing your stores.
Optimize work processes
As your organization grows, it’s important that your standard operating procedures (SOPs) and work processes grow with you. Each innovation or period of growth creates pressures downstream, particularly with highly manual processes. Watch for symptoms that you’ve outgrown your SOP, including increased error rates and productivity inefficiencies.
Including downstream partners earlier in the merchandising campaign development cycles can help, as can parallel processing. You should also take a close look at your processes to make sure they’re up to date and transparent, with adequate training and documentation. You may also want to check into system automation, such as setting up automatic notifications to your distribution center when a piece of stock drops below a certain level.
Key metrics: working toward a common goal
It’s imperative to measure your efforts consistently across all departments, so that everyone’s working toward a common goal. Instead, what we often see is that in retail, one group is measured against sales margin while another is measured against the accuracy of in-store signage. In the end, managers aren’t getting the kinds of consistent insights that can help them make strategic business decisions. They’re flooded with data, but lack information. Siloed performance metrics lead to siloed work streams.
Merchandising, space planning, marketing, visual merchandising, supply chain and retail operations are all links in one value chain. By instilling one or two performance metrics that are used across all teams, you can incentivize value-added activities that benefit everyone.
The Bottom Line
Stabilizing and smoothing out the flow of work through early-stage prioritization and sequencing of merchandising initiatives, coupled with commonly shared performance metrics to incentivize decision-making, will reduce the number of errors and delays during large spikes of work scheduled on the annual planning calendar.
¹ 2014 Supply Chain Benchmark Survey from Boston Retail Partners