By Bill Scott, President, StoreReport LLC
The low fuel costs of late have been a godsend for many suppliers, but it’s only a temporary respite, which will end as soon as fuel prices start rising again. While the experts keep touting the tremendous savings to be received from the supply chain, they mostly ignore the possibility of a reduction in transportation costs for suppliers.
If suppliers had the information they needed to bring just the items a retailer could move between delivery cycles, not only would it put working capital back into their retailers’ bank accounts, it would save them a fortune in delivery expense, including not only fuel costs, but driver’s salaries and the associated payroll expense, insurance costs and maintenance fees.
If suppliers started taking a sincere interest in what their retailers are selling, instead of merely what they can sell to their retailers, they could increase their own profits by 40%, maybe even more.
You see, suppliers, taking no responsibility for store sales themselves, are really costing themselves big money. Retailers are merely conduits to move inventory from their suppliers into the hands of consumers, and when that conduit gets plugged with items that do not sell, everybody suffers, especially suppliers.
Not knowing what retailers are moving, and how often they are moving it, limits a supplier’s ability to manage their own warehouse inventory effectively. Retailers suffer from overstock on some items, while they are plagued with “out of stocks” on others, and unneeded stock rots in supplier warehouses and on retailers’ shelves.
When a supplier sells a new client inventory that doesn’t sell, they not only make themselves non-competitive, they are certain to lose that client somewhere down the line.
By selling retailers 100% more than they need to meet their customers’ service levels, they limit the number of new customers they can sign up, set the stage for a bookkeeping nightmare and create a situation in their retailers’ stores that all but guarantees certain failure.
Granted, the initial sale might look good on the supplier’s books, but they are trading a single event of sales for a lifetime of mediocre retailers.