Inventory issues are a win when handled properly
Out of stocks are never a good thing but…
We have been talking about proactive opportunities for suppliers to build relationships with retailers. This is great, but reality is not every interaction is one you can plan and share positive news. We are going to focus on a few problems that can actually lead to a better relationship, when you take care of them effectively.
Out of stocks or inventory issues are major problems for retailers. If they do not have inventory, when they want it, where they want it there is a real chance they will be very upset. This can hurt all of the good work you have been doing to build a relationship. Sometimes you cannot avoid the issue so you have to manage the customer and make the best out of a bad situation.
Why inventory issues are so important to retailers
A hole on the shelf or product being short shipped during a promotion are two very frustrating things for retailers. A good in stock position is critical to their success and when you walk stores anywhere it is often the difference between the really good retailers and the stores with product in them.
When a retailer makes the decision to put your product in their store, they see it as a business relationship where they are providing you with valuable space and your commitment is to keep it full so they can meet their sales targets. I am sure some of you are thinking, ‘I paid for that space with listing fees, it is mine’. That is not how your customer sees it. That is their store and they need to keep their customers happy. So first thing that comes to their mind is that you let them down and you are not fulfilling your part of the relationship.
The second issue, is a retailer will have a much harder time meeting or exceeding their sales targets when they have inventory issues. Consumers do not always trade to a different SKU within the category. They just might not buy at all and the retailer loses the sale.
The third issue is the consumer might go across the street to find what they are looking for. If they really want your product and it is available across the street or perhaps even your competitor is over there, your customer loses a lot. It is hard work to get people into stores. Now they might have lost that shopper for weeks.
Overall, short shipped orders, out of stocks on the shelf or any other inventory issues are a big problem that you cannot ignore. You have to deal with it, which is where you can help your relationship. To be clear a 100% service level all year is the best option. If reality gets in the way and you have some issues you need to be proactive.
Do everything you can to determine what they will need
Yes, it is their store and they do not always communicate as well as they should. Good suppliers have their own methods of forecasting demand to be ready for what might come at them.
Use some form of demand planning or forecasting to be one step ahead of your customers. You know what they bought last year and how things are trending this year. You should have a good idea of what they will require.
You should also be aware of changes in the market or within the category. Factor these issues into your forecasting.
Be proactive with your communication. Do not wait for them to call or email. They are managing thousands of SKUS. For example, if you see one of your competitors struggling with in stock position, chances are you might see your sales increase. You need to react. Talk to your customer and see if you should increase production to fulfill a void.
Communicate with buyers
If your product goes through the warehouse watch orders carefully and communicate with buyers. If you were expecting an order for 1,000 and they order 2,500 ask they why? Perhaps you were not aware of an ad or they might have just made a mistake. Before you short cases, ask if you can get some switched to a different purchase order. This will ensure you get them the product and it does not show as a hit to your service level. Sometimes a delivery 2-3 days later is not a major issue. Buyers do not make the decision as to where they buy from but they do make the decision about how much. A good relationship will help you here. This is something you can do once in a while. If there are issues every week there is a bigger problem.
When you really do have an issue
Be proactive.
Respect the problem and gravity for the retailer. Nothing would make me more frustrated when I was there than a supplier telling me ‘it isn’t that bad’. For them it a big issue.
Try to talk to them before someone else does. If you see a purchase order for 1,000 and you know reality will be 500, pick up the phone and call them. If you are doing direct stores delivery (DSD) and you know you will short stores pick up the phone. If you are working with a distributor and you know they do not have enough inventory for an ad, pick up the phone.
I am sure you see the trend here. You want them to hear from you before they hear it from someone else.
Do not procrastinate and hope someone has a bigger issue that you do.
It is best if you call with a plan to get them back in stock. If you do not have a plan, call and tell then you will be back to them with a plan within a certain time frame.
Deep down they do understand equipment breaks or packaging gets held up at the border. They do not have to like it but they have heard it before and it softens the blow when you have a plan to give them a comfort level you will have them back in stock.
When you have a plan
Keep them updated on the progress of the solution. Do not bug them but give them the assurances through the resolution that you have it under control and they will be in stock when you said they would be.
When you call, ask if you can email them updates. That avoids re-hashing the issue every time you call.
A good solid plan is an indication you respect the gravity of the issue and you are working as hard as you can to get it fixed. Ultimately this is what you want. For them to be disappointed initially but give you credit for getting it fixed and getting their stores back in stock as soon as possible.
Turing a negative into a positive
Be proactive about the issue.
Let them know what you are doing to get back in stock and when it will happen. They do not need all of the details.
Updates as to how the plan is going.
Confirmation everything is on track again.
Report on service level (cases delivered/cases ordered) for a while.
When you do these things, you will have the best chance to turn a bad situation into a good one. This will also help you the next time you have a problem. They will have confidence in you to get it fixed. They will hear about it one way or the other so best to deal with it up front. Not always enjoyable but it can lead to a better relationship in the end.
Peter
SKUFood Recipes for Success Podcast
The response to our SKUFood Recipe for Success podcast has been great. We want to thank everyone who has been with us as a guest. So many interesting conversations about our industry.
In this episode of Recipes for Success, we sit down with Karl Wirtz, President of WG Corporate, to explore the vital but often misunderstood world of co-packing in the food industry. With decades of experience helping brands find packaging solutions from concept to shelf, Karl shares invaluable insights into what makes a successful co-packing partnership and why more food businesses are turning to experts like WG Corporate to bring their visions to market efficiently and effectively.Listen and subscribe wherever you get your podcasts.
If you would like to be a guest send us a note. We are always working on the upcoming episodes.
Big Canadian Facts
It was great to see some facts reported in Canadian Grocer this week regarding the Buy Canadian trend. Overall the growth in SKUS produced or made in Canada is not as high as we would have predicted. The drop in U.S. produced SKUS is pronounced. The 10 point gap is the most important consideration and one for Canadian producers and processors to notice. There is an opportunity out there right now.
The other interesting figure in this report is that in Canada 50% of items are on temporary price reduction and in the U.S. that number is 25%. Big difference.
Private label vs national brand packaging
We have all seen private label packaging that is designed to remind the consumer of a leading national brand. I remember President’s Choice liquid laundry jugs that were almost the same colour as an orange leading national brand.
These cookie packages in the U.S. market are close, no doubt about that. It will be interesting to see how this is decided. In Canada we see private label that has more of a consistent look. For example, Compliments or President’s Choice has their own branding. Some might come close in a category, but these cookies look more like the national brand than a consistent private label brand.
For companies in Atlantic Canada, Food & Beverage Atlantic, with the support of ACOA, is proud to launch a new program designed to help processors and manufacturers across Atlantic Canada overcome critical operational challenges- fast during this challenging time.
Where is Peter speaking?
I do have travel coming up to Toronto, Saskatoon and Calgary so if you want to connect or have an event in any of these locations give me a call or send me an email.
