This year, Slimstock took part in the Pimp My Tuk-Tuk (PMTT) Charity ride to raise money for the Foundation of Goodness (FOG). 54 drivers participated in the 8-day drive through Sri Lanka in Tuk-Tuks. Slimstock Operations Director South East Asia, Erik de Witte, shares his experience with us.
Trip of my life
Before starting the trip via PMTT, we had already raised $250,000. With this and funding from previous years, FOG has done some amazing work to improve the livelihood of rural communities.
Starting in Colombo on the 15th of September, we headed via Mihintale to Trincomalee then on to the East coast to Arugambay. In addition to visiting the villages, schools and hospitals, driving in a Tuk-Tuk gave us all the opportunity to capture the beautiful scenery Sri Lanka beholds. From Arugambay, we travelled to Monaragala then down the south coast to Galle, traveling a total distance of 1245 kilometres
During the trip, we stopped off in several different villages to see the water purification plants which had been installed at a cost of $20,000 each. These plants provide clean water as opposed to the heavily contaminated water that the villagers used to consume. They provide clean water to 350 families (1,500 people) in each village. We also visited some of the schools where the children were excited to show us their new bikes they had received to ride to school. Now the children don't have to walk long distances to school anymore.
A closer look at the Foundation of Goodness projects
On the 6th day, we made a stop at the Meth Sewa Home for Special Needs which was an eye-opener. One morning, Niroshan and his wife found a homeless disabled baby on their doorstep. In rural Sri Lanka, taking care of a disabled child can be very challenging and sadly, there is a social stigma attached to these children. Niroshan and his wife took the child in and cared for it with no outside help. Today, they care for 85 children with a variety of special needs. PMTT has taken on the challenge to provide these children with solar powered electricity in order to reduce or even eliminate some of the bills for them.
Centre of Excellence
Another unforgettable part of the trip was our visit at Seenigama, home of FOG’s Centre of Excellence. Here, we met Kushil Gunasekera, who is yet another inspirational Sri Lankan. He founded FOG and gifted the charity the land it stands on. He guided us and brought home the reality of the Tsunami which hit Sri Lanka on the 26th of December 2004. FOG’s Centre of Excellence is a unique rural development initiative delivering 30+ programs including Pre-School, Women’s Enterprise & Empowerment, IT Centre and a Dental & Medical Health Clinic.
Slimstock has been very grateful to be able to sponsor this great initiative. If you would like to find out more information, please feel free to contact Erik de Witte or have a look at PMTT and Foundation of Goodness.
Different times call for different inventory strategies. However, when the function of stock is not clear, changing the inventory approach can often prove problematic. Many retailers lack synergy between the inventory strategy and the overall strategy of the business. As a consequence, many retailers struggle to align the inventory strategy with the strategic focuses of the various divisions that exist within the organisation.
For DIY stores, this is a very real issues: for instance, in recent times, the popularity for younger people to perform basic maintenance tasks on their homes has decreased dramatically. Whereas parents and even grandparents may have been keen home decorators, this trend has drastically reduced. In essence consumers are now spending less time on household chores. As a consequence of this, many people, in particular, young people, do not even own a hammer let alone a toolbox: a trend which would have been unthinkable to older generations. Given the impact this trend will have on demand, how should retailers respond?
The inventory turnover in DIY stores has been declining for a number of years. Today, stock is typically only renewed, two to three times per year meaning that, typically, around 4 to 6 months' worth of stock is held at each location. If you take a rough average, this slow stock rotation means that around a quarter of the stock is not sold.
Furthermore, slow moving stock also causes a number of other operational issue. For example, innovation in planograms can also be stifled as shelf space is taken up with products that customers do not want to buy: a problem only exacerbated further by products with poorly negotiated unit sizes. In addition, if you keep slow moving items available in stores, it is highly likely that you end up marking down a sizable proportion of your starting inventory at the end of the product lifecycle. Given that all of these issues are likely to have an adverse effect on profitability, retailers cannot allow this to happen.
A good omni channel strategy may provide the solution: through offering specific slow movers via the webshop, these articles do not necessarily need to be available in all stores. With this in mind, retailers should differentiate their offering in each store in order to ensure that the range satisfy the local demand and thus the stock position remains healthy.
For many retailers, changing the inventory strategy can prove a tricky and convoluted exercise. The key problem is that each department has its own strategy that is often not well aligned with that of other departments.
For example, the finance team typically want to achieve the lowest possible level of stock in order to limit the amount of working capital tied up in inventory. At the other end of the spectrum, the sales team will gladly extend the range and increase availability in order to reduce the number of missed sales. As a consequence, the supply chain manager is left stuck between a 'rock and a hard place' as they attempt to balance stock levels with service levels.
With this in mind, businesses should revisit the boardroom and formulate a sharper strategy. Based on the overall company strategy, the respective divisions (sales, marketing, and supply chain) all need to develop their own departmental strategy; therefore the supply chain should determine the basis for a strong purchasing and inventory strategy.
A good strategy will prevent supply chain managers form being faced with unrealistic or irrelevant KPIs. For example, if there is a sudden downturn in sales, the finance department will typically demand that stock must be reduced by X percent. However, is this the optimal approach? In reality, the only advantage of this approach is that it is simple and, on the face of it, seems logical.
What makes this puzzle even more complex however, is that the pieces are constantly changing. Consumer behaviour and supply chains are constantly evolving and as a consequence, the retail environment is extremely volatile. Take for instance, Black Friday: not so long ago, this term was largely unheard of outside of the USA. However, today this is a major event for retailers across Europe. Given the speed at which retail landscapes change, retailers need to constantly adapt their inventory and procurement strategy in order to keep up with the demands of the market.
Each sector has its own characteristics which can have a major an influence on the strategic requirements e.g. in the fashion industry, speed and responsiveness are the most important factors. As a results, the first delivery of a new collection (into a store) must be determined through a fair and appropriate allocation which encompasses a size curve that fits the demographics of the respective stores. Thereafter, it is important that stock is replenished in as efficiently as possible e.g. do you send the last XXXL coat size to a store? If it is a 'long-shot' that it will be sold at an individual store; it would probably be better to leave that XXXL coat within the DC in order for it to be ordered via the online channel.
Omni-channel retailing, in reality, means that the online channel supports the retail sales; subsequently life cycle strategies are extremely important and should be automated as much as is possible. If there is only 4 weeks of stock remaining within the DC, replenishment into certain stores should be 'dampened' down.
Through developing a clear and coordinated strategy, retailers can regain control of their operation. Regardless of how the retail environment evolves, this strategic focus will enable retailers to operate as effectively as possible. Furthermore, with clear synergy between the corporate strategy and the supply chain team, retailers can ensure that their inventory strategy keeps up with the pace of the market.
From a major supermarket shortage to why it pays to invest time in your new products introductions, supply chain bloggers, Sam Phipps and Jessie Cooper, explore the hottest topics from the last 7 days.
Customer satisfaction takes a dip amid houmous crisis
As the latest food crisis hit British retailers this week, frustrated shoppers took to social media to complain about the sudden disappearance of houmous. As supermarket shelves lay bare, notices appeared in some stores informing customers that their entire ranges of houmous had been withdrawn due to manufacturing issues. Given that the price of houmous has already gone up by 6% this year alone, the current availability issues have only made matters worse. But what can retailers do to prevent such supply chain disruptions from impacting customer satisfaction?
One potential solution could be to establish more collaborative relationships with suppliers. Through sharing supply chain information, both retailers and suppliers could benefit. For example, retailers may be able to provide suppliers with greater insight into likely customer demand. This, in turn, could enable suppliers to align their operations, ensuring they have enough capacity to satisfy the retailer’s inventory requirement while simultaneously preventing costly waste.
Equally, if suppliers have the means to inform retailers of any potential shortages well in advance, steps can be taken to maximise the value of the stock that is available. Whether this means re-allocating the stock that is available to where it is required most or cutting short a promotion which would only further inflate demand, such actions can help minimise any potential disruption.
On the other hand, it may be beneficial for retailers to have alternative suppliers in place. After all, if the usual supplier is unable to deliver, perhaps another supplier can meet your inventory requirements. However, in practice, this is rarely this simple. For instance: how do the minimum order quantities, lead times and unit costs compare to your usual supplier?
Supply chain shortages are a constant battle for retailers. What has your business done to try and minimise the impact that stock-outs have on customers?
Cashing in on the product lifecycle
As the deadline to spend your paper £5 notes looms, it seems some 150 million old style notes still remain within the public domain. Thus, now is the time to rummage down the back of the sofa!
When you consider how many ATMs’, parking meters & self-service checkouts (just to name a few) are affected by the introduction of a new form of currency, preparing for this switch requires careful planning. Yet, when the new £1 coin was released at the end of March many businesses were simply not ready for the 12-sided replacement. Given that the introduction of a new coin or bank note is the ultimate example of a major product launch, what can we learn from the HM Treasury’s shortcomings?
While a new product development typically marks the start of a product lifecycle for one item, it can often mean the end of the cycle for another. While failing to understand the relationship between predecessor and successor products could prove costly for your business, producing too much or too little new currency could destabilise the entire economy!
Furthermore, in order to achieve a successful product launch, this requires effective communication with customers to ensure they are well prepared to manage any changes. While businesses were given several months’ notice of the new coin design, given the difficulties in gearing up for the changes, was this enough? With this in mind, in advance of any major product launch, there could be real value in enabling key customers the opportunity to voice any concerns and plan the product introduction accordingly.
As events go, things don’t get much bigger than the infamous Glastonbury Festival. Given that over 200,000 people attended this year alone, Glastonbury is a real success story. However, the popularity of Worthy Farm and lucky artists that get to play there is no happy accident: this event takes years of diligent planning!
From the beer sold in the vast variety of pop-up bars to the nuts & bolts that hold together the stages on which artists entertain their audience, music festivals are a meeting point where literally thousands of supply chains collide. In order to ensure that everyone enjoys a truly magical time, every element has to come together. After all, imagine how a shortage of beer or burgers would affect your festival experience: you would certainly think twice about going again!
When it comes to meeting customer expectations, businesses are no different: everything has to be in the right place at the right time. However, unlike festivals such as Glastonbury which occur only once every year (unless it’s a fallow year of course), businesses must be able to consistently meet customer demand on a day to day basis. So, what can you do to ensure that your organisation is able to provide customers with a Glastonbury standard of service?
Customer experience is all about service levels
In a perfect world, you would be able to satisfy the demand of your customers 100% of the time. However, in reality, this simply is not achievable. After all, there are always financial constraints in place which mean that a decision has to be made as for where the resources that are available should be focused.
In the same way that the organisers of Glastonbury may prioritise the availability of beer over the availability of gin & tonic, businesses too must determine an appropriate service level strategy.
Sounding out suitable services levels
When trying to adopt appropriate service levels, the criteria required to make this decision can often be unclear. Consequently, service level targets are often set as a given figure based on little more than a quick and vague analysis. To add further difficulty, service levels are difficult to measure as the impact can only be realised after a certain amount of time.
In many cases, it is only when an inappropriate service level has an adverse effect on the business, such as excessively inflating safety stock or leaving the business with insufficient inventory levels to satisfy a big customer order, that these are reviewed and adjusted. Put simply, in many organisations, service levels are often wrongly adopted in the first place and then not reviewed regularly enough.
Margin Boost: Music to everyone’s ears
When describing a service level in its purest form, you are describing your company’s goal. It is a translation of your business strategy to your inventory strategy: you are deciding to what extent you want to satisfy your customer’s needs based on your stock capacity.
Although overall availability is seen as one of the key performance indicators when it comes to inventory management, supply chain managers have to draw a line somewhere. Through finding the balance between investment in inventory and service levels, businesses can adopt a more proactive approach to managing every element of their operation. This, in turn, can help businesses maximise sales opportunities, minimise supply chain costs and thus, boost margins.
Put on your dancing shoes
While there is no questioning the benefit of establishing a solid service level strategy, in practice, this is often easier said than done. To help you optimise your approach to inventory management, download our simple 5 step guide today:
Establishing the right criteria to determine suitable product classifications
Determining the right stock levels
Making informed assortment decisions
Monitoring, reporting and reviewing the performance of your service levels