In the pressured atmosphere of the competitive climate in food/grocery retailing, meeting sales and profit targets is more elusive than ever. Management's ability to respond to an ever-increasing rate-of-change in the competitive landscape is largely constrained to attacking costs; whether through store closures, personnel headcount reductions, and/or supplier renegotiations. Everything else depends on changing both existing IT systems and processes, which is where the challenges lay. But why should that be such a challenge?
Over the past decade, for often very valid reasons, retail IT has restructured around the progressive expansion of centrally deployed information technologies controlling all aspects of stores and supplier operations. While intended to realize efficiencies, the unintended consequence has created large, centrally deployed, systems, whose development and deployment cycles are almost all multi-year initiatives, whentoday's retail environment poses challenges needing to be addressed in weeks, if not days, or even hours.
The reality within the food/grocery sector is that of 95% of problems going unresolved; simply being absorbed in shrink, markdowns to avoid shrink, and write-downs of inventory assets unsold. The outcomes of such problem absorption are evident in the financial performance of the sector, where an operating profit >2% is considered a positive.
If we want to move to mechanisms that shift the problem resolution challenge to one where more are resolved than unresolved, there is a logical place to start; with the stores and how best to equip managers and personnel with the tools enabling them to react to, and correct, problems as they are exposed. While the stores are where most losses are realized, they are not necessarily the sole source of the problems causing these losses. They are, however, the optimal weapon for addressing and resolving those operational challenges needing a truly "immediate and corrective" response.
Regardless of its participation within a larger organization, each store should be considered as an independent business, where that store's management and personnel are engaged in the pursuit of optimal return-on-inventory performance, across whatever product assortments are assigned, effectively accommodating the dynamics of that store's customer demographic. Deliver mechanisms optimizing each store's performance, and the chain performance is automatically elevated.
So where should we focus when considering stores' performance? Start with in-store inventory management, while recognizing the "supply" chain is a continuum starting with a sale in the store.
The pressures of running a store within a larger chain are considerable, with challenges as illustrated below:
- Receiving deliveries and assigning stock into store
- Trusting supply in some way balances with customer demand
- Whether good-faith-receiving really works
- Assuring shelf replenished to maximum facing counts at start-of-day
- Checking shelves for gaps or low stock throughout the trading day
- Refilling shelves to ensure shelf availability throughout the trading day
- Checking perishable products nearing their sell-by date
- Deciding when, and by what amount, to markdown those products at risk of shrink
- Assessing store over and under stock positions
- Working the supply variances with the distribution center, or supplier
- Determining what markdown to apply to accelerate sale of overstocks
- Planning staff assignment and utilization to cover all aspects of store operations
- Budgeting for staff, while under constant pressure to keep costs down