I cut my academic teeth doing work on supply chain contracting. I consequently found a BBC report on pay-to-stay payments interesting (Premier Foods accused over ‘pay and stay’ practice, Dec 5). The subject of the report is Premier Foods, a large UK manufacturer with several food brands. Premier had the chutzpah to effectively ask its suppliers for bags of cash. Here is what the firm’s CEO wrote.
[Chief Executive Gavin Darby] wrote: “We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas.”
He added: “We will now require you to make an investment payment to support our growth.
“I understand that this approach may lead to some questions.
“However, it is important that we take the right steps now to support our future growth.”
But when a supplier raised questions in an email about the annual payments, another member of Premier’s staff replied.
“We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list.”
You can contemplate the lovely Britishness of “nominated for de-list” while watching this video on the subject.
I should note that Premier Foods has since backed off its demand after the negative press following this report (see here).
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So what should be more profitable for a retailer, selling from physical stores or selling over the web? That’s the question that a recent Wall Street Journal article considers (How the Web Drags on Some Retailers, Dec 1). At first glance, the answer seems straightforward. Web sellers don’t need to rent stores or have staff cooling their heels waiting for customers. However, the reality isn’t necessarily so clear,
While conventional wisdom holds that online sales should be more profitable, because websites don’t need the pricey real estate and labor necessary to maintain a store network, many retailers actually earn less or even lose money online after factoring in the cost of shipping, handling and higher rates of returns.
For retailers that outsource their Web and fulfillment operations, costs can run as high as 25% of sales, industry analysts said.
Kohl’s Corp. says its profitability online is less than half what it reaps in its store. Wal-Mart Stores Inc. says it expects to lose money online at least through early 2016 as it invests to build its technology, infrastructure and fulfillment networks. Target Corp. says its margins will shrink as its online sales grow. Best Buy Co. said faster growth on its website will weigh on its profitability at the end of the year.
Click here for a video of the reporter discussing her findings.
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Radio frequency identification (RFID) chips are small chips that can convey information to a reader even if the reader does not have a direct line of sight to the chip. If a veterinarian ever convinced you to put a chip in your dog just in case Fido wandered off, you have in your house. In the retail industry, RFID chips have long been held up as a godsend — the fast track to more accurate inventory records updated in real time. Or at least they were ten years or so ago. But since then there have been challenges with costs as well as the underlying technology. Now, however, it appears a major retailer, Zara, is taking the plunge into RFID in a big way (Zara Builds Its Business Around RFID, Wall Street Journal, Sep 16).
By the end of this year, more than 1,000 of the 2,000 Zara stores will have the technology, with the rollout completed by 2016, Mr. Isla said.
The scale and speed of the project is drawing notice in the industry. The Spanish retailer says it bought 500 million RFID chips ahead of the rollout, or one of every six that apparel makers are expected to use globally this year, according to U.K.-based research firm IDtechEX. …
One benefit was on display on a recent morning, when store manager Graciela Martín supervised inventory-taking at one of Zara’s biggest outlets in Madrid. The task previously tied up a team of 40 employees for five hours, she said. That morning she and nine other workers sailed through the job in half the time, moving from floor to floor and waving pistol-shaped scanning devices that beeped almost continuously while detecting radio signals from each rack of clothing.
Before the chips were introduced, employees had to scan barcodes one at a time, Ms. Martín said, and these storewide inventories were performed once every six months. Because the chips save time, Zara carries out the inventories every six weeks, getting a more accurate picture of what fashions are selling well and any styles that are languishing.
This all raises the question of whether there is any reason to believe that it will be different this time. That is, is there any reason to believe that Zara’s implementation of RFID will be more successful than other big retailers who have gone done this road? (more…)
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Wal-Mart has had a tough go over the last few years. Sure, they are still a huge force in retailing but they have run into a variety of operational problems largely related to in-store execution. (See. for example, this post.) Now the Wall Street Journal reports that Wal-Mart is gearing up for the holidays by trying to address some customer service pain points (Returning to Wal-Mart: Human Cashiers, Aug 15).
In an attempt to lure more customers this holiday season, Wal-Mart Stores Inc. is promising to staff each of its cash register from the day after Thanksgiving through the days just before Christmas during peak shopping times.
The move, called the “checkout promise,” is aimed at addressing one of the retailer’s biggest customer complaints: long waits in checkout lines, which can cause even more frustration when positions aren’t fully staffed. The pledge will cover hours typically on weekend afternoons but which can vary by store.
“We feel good about price and having the top gifts of the season, so the next priority is about getting customers in and out of the stores quickly,” Duncan Mac Naughton, Wal-Mart’s chief merchandising officer, said in an interview. “Taking the possibility of waiting in long lines off the table will attract more people into stores.” …
On Thursday the retail giant said it allocated more hours to the front end of the store, to overnight stocking, and to deli and bakery to improve customer service during the most recent quarter.
Here are two questions that are worth thinking about. (more…)
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I have never really given T.J. Maxx much thought. I can’t recall the last time I was in one of their stores, and going to T.J. Maxx has not been an obvious choice to me since I was in high school (and that tells you more about the shopping options in Manchester, NH, in the early 80’s than anything else). But now Fortune has an article singing the praises of T.J. Maxx — or more accurate its parent company TJX, which also owns Marshalls among other retail chains (Is T.J. Maxx the best retail store in the land?, Jul 24). The article is full of all sorts of interesting nuggets (TJX is basically the successor company of Zayre, another retailer from my childhood, who knew?!) as well as laying out seven “secrets” from the company playbook. Some of these are about positioning in the eyes of the customer (e.g., Put real treasure in the treasure hunt) or management talent (Find a CEO who gets retail). But many of their points go right to the stores operations and how it manages its supply chain.
The off-price business is a volume game: selling a ton of goods and selling them fast. The measure of speed here is how quickly a company turns over its inventory: TJX does that every 55 days, vs. 85 for its peer group, according to Morningstar. Indeed, the company is structured to whisk items through its distribution centers and stores—and a lot of items they are: TJX shipped some 2 billion units to its stores in its 2014 fiscal year (which ended on Feb. 1), up from 1.6 billion in fiscal 2010.
Former employees say that the stuff moves so rapidly that merchandise is often sold before TJX has paid its vendors for it. The busiest stores can take daily delivery of product, which employees put out on the floor right away—a “door to floor” approach that cuts down on the amount of space needed for backroom storage. Sources say items typically go on markdown if the turn rate is slower than about seven weeks, which also contributes to the rapid flow.
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Posted in Apparel, eCommerce, Operations Strategy, Retail, Supply Chain, tagged Apparel, eCommerce, Inventory, Operations Strategy, Retailing on April 10, 2014 |
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One of my favorite topics to teach is the newsvendor problem, an inventory model for very short-lived products like newspapers and fashion goods. One of the points that gets made in that class is that variability is costly. Having to commit resources before knowing what will sell means risk and risk may be a reason not to be in the business. But that risk also suggests an opportunity: If one can find a way to reverse the order of things and commit resources only after knowing what will be demanded, then an otherwise unprofitable business can be a profitable one.
That is essentially the idea behind Gustin, a maker of high-end jeans. It initially sold its jeans trough boutiques, which bought jeans at a wholesale price near $80 but then marked them up to around $200. Gustin had to front all the cost of production and then wait for stuff to sell. Now, they have reversed the order of things and take orders directly from customers ahead of production. As the founders tell it on Marketplace, they have positioned themselves as a totally crowdsourced fashion company (Burning down the house that Levi’s built, Apr 8). You can hear the story here:
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I have become increasingly taken with the question of what constitutes a good job. Various parts of operations in many industries have become automated over time and that trend will continue. But firms will still need people. Some production steps will be sufficiently nuanced or require too much dexterity that using a robot is (at least for now) impossible. Other setting like retail will favor resources who can move more or less seamlessly between restocking shelves to checking out customers. So what do these jobs look like? Unfortunately, the answer can be fairly grim.
The Atlantic has an article written by an ex-Politico reporter who lost his job and ended up (mostly out of desperation) working at sporting goods store (My Life as a Retail Worker: Nasty, Brutish, and Poor, Mar 11) and found the experience rather dehumanizing.
Of course, I had no idea what a modern retail job demanded. I didn’t realize the stamina that would be necessary, the extra, unpaid duties that would be tacked on, or the required disregard for one’s own self-esteem. I had landed in an alien environment obsessed with theft, where sitting down is all but forbidden, and loyalty is a one-sided proposition. For a paycheck that barely covered my expenses, I’d relinquish my privacy, making myself subject to constant searches.
“If you go outside or leave the store on your break, me or another manager have to look in your backpack and see the bottom,” Stretch explained. “And winter’s coming—if you’re wearing a hoodie or a big jacket, we’ll just have to pat you down. It’s pretty simple.”
When he outlined that particular requirement, my civil-rights brain—the one that was outraged at New York Mayor Michael Bloomberg’s stop-and-frisk policy and wounded from being stopped by police because of my skin color—was furious. …
I’m not sure why—perhaps out of middle-class disbelief or maybe a reporter’s curiosity—I pressed the issue. Seriously: I have to get searched? Even if I’m just going across the street for a soda, with no more than lint in my pockets? Even if you don’t think I stole anything?
Stretch shrugged, unconcerned. Clearly he’d been living with this one for a while.
“Yeah, it’s pretty simple. Just get me or one of the other managers to pat you down before you leave.” (more…)
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