Maldistribution leads to lost sales and increased mark down spend…

I’ve had a couple of conversations in the past few weeks which have ultimately all come back to the importance of optimisation of stock flow through the retail supply chain. It is of course a balancing act – trading off the benefit of reduced logistics and transport overheads of in return for the risk of infrequent replenishment orders of higher quantities vs. high cost of distribution but the benefit of accurate, frequent replenishment. Of course the answer is potentially different for every SKU-store combination in a retail business!

Trade off: Mark down to clear OR rebalance stock, avoiding maldistribution, increase full price sell through and reduce lost sales?

I think it is pretty reasonable to assume that no matter what effort you put into your forecasting and replenishment your customers won’t buy to plan!! This means than towards the end of a season / before a range refresh not all SKUs will have an ideal distribution of stock across all stores ranged. If you’ve already allocated out remaining stock from DC then there are only 2 things you can do, both dependent on first undertaking analysis of the SKU-store stock levels vs. SKU-store forecast sale rates to understand the likely cost implications of either action:

  1. Mark the item down across the chain to encourage sell through of pockets of stock BUT acknowledging you will be losing margin due to mark down spend and impacting availability in some stores where there are no overstocks.
  2. Rebalance stock (taking from overstocked stores and replenishing those who would sell out), mindful of the operational overhead of physically moving the stock to locations where it will sell at full price.

Don’t under estimate the value of knowing more about your business… detailed data insights deliver increased profitability

The above actions both depend on someone undertaking analysis of the SKU-store stock levels vs. SKU-store forecast sale rates in order to give you appropriate information upon which to base the decision as to which action is most profitable.

To be honest this is usually an onerous exercise that no one really has time for. Of course then without this information retailers will implement action 1 (the only action you could do without the SKU-store detail) – potentially losing a massive amount of margin unnecessarily.

Supply chain optimisation data analytics, insights and actions that increase availability and improve margin!

If you don’t have the time but want some help with getting into the data and the detail, (and here comes the shameless plug… :-)) my team at Retail Acumen can support you.

Lately we’ve been building client specific data models, reports and analytics to enable clients to not only have 1-off insights for a specific supply chain project but also to allow them to call on us whenever they need to repeat a process e.g. end of season stock rebalancing.

In our experience using a backhaul approach to uplifting of surplus stock from a handful of stores, returning that to DC and redistributing it out again on the next replenishment run adds only a very marginal increase in logistics and supply chain costs compared to a considerable reduction in mark down spend.

If you’d like to find out more, give me a call, I’m proud that the team have been recently called “data junkies” and I know that they’ll really enjoy delving into the detail to find some great benefits for you too!

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About Retail Acumen

Clare Rayner is one of the most well-known and respected retail consultants in the UK. A child born into a family of retailers and entrepreneurs, she is passionate about retail and business: it is in her blood. Clare started out as a fast-track graduate store management trainee for McDonalds and went on to work with leading retailers such as M&S, Dixons and Argos. She moved swiftly into management roles before being headhunted into senior consulting roles with global software giant SAP, and international management consulting brand, Accenture. Known as The Retail Champion, Clare is engaged by clients as a consultant, professional speaker and business mentor, and is regularly called upon by BBC News (TV and Radio) and trade press to comment as a retail expert. Her retail business book will be available in July 2012. In addition to providing 1-2-1 support to business owners and professional speaking services through The Retail Champion, Clare is founder and managing director of specialist retail analysis / retail consulting brand Retail Acumen and The Retail Conference. Founded in 2006, Retail Acumen deliver deep, detailed analysis and insights into business performance for retail multiples. The specialist team leverage their love of detailed data analytics, combined with a deep understanding of the retail sector, to uncover practical, easily implementable, optimisation opportunities. Clients benefit from recommendations that identify simple business change that will achieve maximum performance improvement, fast. Retail Acumen focus is on 4 key retail business objectives to: Increase Sales Intensify Assortment Improve Return on Space Optimise Supply Chain
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