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

You are scared of change, and 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 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? You didn’t get a different person’s leg until you pulled it out. The same goes for supply chains; until businesses and people are willing to make changes, they expect the same results.

Changes to Inventory Replenishment Are Needed

Change is scary; most people will go to great lengths to avoid change. The reality is that 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 suitable response. So close to Halloween, we thought it might be fun to highlight some of the changes that will occur based on new technologies and market changes. 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

1. They are two separate items that can be in direct competition.
2. Is your re-order frequency based on the plan and calendar? Why not use service and demand forecast? No, a system cannot do both.
3. Are your vendor lead times based on performance or a nice little story your vendor rep shared one day 2 years ago?
4. Making the forecast equal to the plan always works. Of course, how often is a plan wrong, really?
5. 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

1. It is old technology – remember Moore’s law – capability doubles every 18 months.
2. Just because the legacy software sales guy says it – doesn’t make it true.
3. Legacy apps That Say ‘We are now cloud-based’ probably don’t mean a thing—remember, if it walks like a duck…
4. The market is creating the need for fast responses. Does your legacy provide a portal for collaboration? Do you honestly believe that ‘We collaborate with vendors; we bill them when they are late’ is a collaboration?
5. 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 of bonus and drop gross margin.

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

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

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

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

1. Admit it: The skill set for selecting products and the skill set for managing product inventory are totally different. In fact, studies show that one is right-brain based and the other is left-brain based; very few people manage both right- and left-brain functions together.
2. Why do you have an inventory manager answering to a buyer?
3. Who should attend a vendor rep or ad meeting?
4. 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, 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. If you prepare for it now, there are significant opportunities to improve the business. Review your forecasting. Is it demand or sales-based? What technologies can improve your supply chain? Are there parts of your supply chain that the wrong user group manages…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?™’

If you want some help getting started, contact Data Profits for a free consultation to learn what you have and where you have opportunities in systems and processes. 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.

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