5 Scary Changes to Your Inventory Replenishment ---Which Do You Make?

You are scared of change, so are most people. It is a basic human emotion that we all fear change. When faced with the need for change, reality sets in and you’re reminded that the world changes constantly. A business that doesn’t change is doomed to fail. This sounds harsh but history teaches us that life is all about change. You either change, adapt (like a 1/2 change), or die. The irony in that statement is that often companies will change people but fail to change processes or systems, expecting things to improve. How long did your foot stay stuck in the mud? Until you pulled it out, you didn’t go get a different person’s leg. The same with supply chains, until business and people are willing to make changes, expect the same results.

Changes to Inventory Replenishment Are Needed

Change is a scary thing, in fact most people will go to great lengths to avoid change. The reality is two things cause people to react: pain and pleasure. Whichever of these is associated with the change will drive the behavior of people in the group. Tony Robbins makes a great argument: It is all about the questions people ask. If you ask the right questions, your brain will always work to find a suited response. So close to Halloween, we thought it might be fun to highlight some of the changes occurring or that will occur based on new technologies and market changes. While based on our customer research and experiences, we hope you will enjoy the dry wit provided as you search for new opportunities to ‘Tighten the Links in Your Chain. ™’

Change before you are forced too. Jack Welch
You must unlearn what you have learned. Yoda

Inventory Replenishment Ideas for Change

1. Change how you think of Plan and Demand Forecast

They are two separate items that can be in competition.
Is your re-order frequency based on plan and calendar? Why not service and demand forecast? – No, a system cannot do both, see 2b.
Are your vendor lead times based on performance or a nice little story your vendor rep shared one day 2 years ago?
Making the forecast equal to the plan always works. Of course, how often is a plan wrong really?
Did you run out of stock in basics because your open to buy was closed? Maybe one bad ‘ad’ buy matters?

2. Change your 7+ year old software, it’s losing a fortune in profits

It is old technology – remember Moore’s law – capability doubles every 18 months.
Just because the legacy software sales guy says it – doesn’t make it true.
Legacy apps Saying ‘We are now Cloud based’ probably doesn’t mean a thing – remember if it walks like a duck…
The market is creating the need for fast response – does your legacy provide a portal for collaboration? – Do you honestly believe ‘We collaborate with vendors, we bill them when they are late’ is collaboration?
How many spreadsheets did you look at this month? What?!?! You didn’t realize that Excel is not a program???

3. Change to GMROI as a measure for bonus and drop Gross margin.

Holding cost will drive out profit for everyone but the people whose bonus is based on gross margin.
Allocation top down always works, product doesn’t sit on some shelves for years…
Because changing an end cap from 200 pieces to 500 pieces will always grow sales.
Forward Buy sounds nice when we talk margin, but did you maximize the profits or maximize the days’ supply?

4. Change requirements for who you hire as an inventory replenishment manager.

The inventory manager has a $X million dollar checkbook so hire someone who has the training to manage your $1-20-50 million dollar check book.
How many times did you need to expedite an order? (see #2 also)
How many extra dollars did you spend on freight for service?
Can you tell me exactly what happened that resulted in our being out of stock and why?
Can you explain the difference between plan and forecast? Can you tell me why it matters?

5. Change roles, responsibilities, and bonus programs for your buyers, planners and inventory managers.

Admit the skill set for selecting products and the skill set for managing inventory of products is totally different. In fact, studies show that one is right brain and the other is left brain based; very few people manage both right and left brain functions together.
Why do you have an inventory manager answering to a buyer- see 5a
Who should attend a vendor rep or ad meeting?
Just because a product is out of stock on the shelf at the store today doesn’t mean we need to buy inventory. It could mean we didn’t merchandise it correctly or there is stock in the back room or …

You either Lead, Follow or Get Out of The Way – Lee Iacocca

Plan Now for Your Future Inventory Replenishment

Moving into the year-end, many companies are planning and budgeting for next year now. It is a great time to review your current systems and processes. There are probably some significant opportunities to improve the business – if you plan for it now. Review your forecasting, is it demand or sales based? What technologies can improve your supply chain? Are there parts of your supply chain that are managed by the wrong user group…why? Is it because you always did it that way?…or maybe because that’s how everyone you know manages the business?

I’ll close with two quotes from Jack Welch to inspire you:

Change before you have to

Control your own destiny or someone else will…

Happy Halloween

Are your ready to ‘Tighten the Links in Your Supply Chain?™’

Want some help getting started contact Data Profits for a free consultation to help you learn what you have and where you have opportunity in systems and process. You can also request a demo and see how things can start to improve in your Inventory Replenishment Processes and Inventory turns with our 30 day install and 90 day ROI.

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Stuart D

Stuart Dunkin is a strategic visionary who leads by calling on his broad range of experience as a former retail executive as well as a consultant for top retailers and for the E3/JDA software company. He founded Data Profits to solve a real-world problem plaguing retailers today – the disjointed relationship between supply chain data, people and business goals. He has experienced first-hand the challenges and frustrations that occur when decisions are made based on wrong data, which often leads to the wrong actions being taken with crippling results like overstock, out-of-stock, and increased working capital.
Stuart graduated from Auburn University, with bachelor of science in business administration.