Pleasance House Consulting - Seasonal
Stock Manager
This product is the result of a major project that was carried out in Wm Low & Co PLC many years ago. William Low was a regional food retailer, based in Dundee with about 100 supermarkets and frozen food centres throughout Scotland and spreading into the north of England. Only fresh merchandise was delivered to stores directly from suppliers. All longer-life dairy products, hard groceries, non-food items, liquor, tobacco etc. were distributed through a few major specialist distribution centres. There were therefore three links in the supply chain that had to be optimised - the flow of product from suppliers into central warehouses and into stores directly, plus the flow from distribution centres to stores. The last of these was the easiest to manage as it was internal to the company, the stock levels at each end were known and, usually, the expected demand was also known. In normal operation all three links in the supply chain ran very efficiently. William Low operated on average stock holdings of about three weeks, giving about eighteen stock turns per year.
Except at Christmas! Hundreds of lines in the normal range were treated as special seasonal items, being removed from normal stock reorder procedures and dealt with by a wide variety of manual forecasting/call-off type systems. Hundreds of other lines were introduced specially for the season and had their orders generated after some manual forecasting. The forecasting was always based on the sale of similar product the previous year and was never able to take into account the effect of changes in the range this year. There might be more/better/comparatively cheaper products in the Wm Low range than existed last year. That was just the part of the problem within the store range - the effect of competitors ranging and pricing policies could drastically increase the complexity of the forecasting requirement. Obviously, mistakes were made and the usual manifestations abounded:
- Best sellers selling out too quickly (or too cheaply?)
- Some stores or areas overstocked, others understocked - an expensive problem to fix
- Poor sellers not being recognised quickly enough to have any positive action taken
- Prices being dropped dramatically after the event instead of being adjusted slightly early in the event
- Negative issues from warehouses to stores in the first week of January
- Disruption even to the flow of product which was not seasonal
A major project was commissioned. It was scheduled to run for two years. The aim was simply to take the "sting" out of Christmas. The first year was purely for analysis and a huge fact-gathering exercise was undertaken. Every store in the company recruited a student specially to record the stock and sales of each seasonal product around its potential delivery days. After lengthy analysis of the data, a new system was devised for the following year. Obviously it was based on the data collected the previous year, but it also incorporated a couple of extremely intuitive statistical assumptions. They proved to be remarkably accurate, because the new methodology was extremely successful:
- The company beat target Christmas sales for the first time in six years
- The flow of seasonal merchandise was easier to manage (and pay for) as it was more timely
- There was very little stock returned in the first week of the new year
- There was much less disruption to the flow of non-seasonal merchandise
The new system continued to be enhanced and used successfully until the demise of Wm Low at the hands of Tesco. It is available now from Pleasance House Consulting. It is tried and tested with merchandise ranging from baking needs, liquor, toys, seasonal clothing, gifts, decorations etc. Please contact PHC if you are interested in taking the "sting" out of your peak seasonal trading periods.
