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WE NEED BETTER PLANNING FOR ‘THE NEW NORMAL’

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Here are questions retailers and manufacturers need to ask themselves if they want to thrive in the tough times ahead.

Well, like many of you, I have been seeing (and paying) more at the grocery store. Much of this can be attributed to the ongoing pandemic and disruption in the supply chain. More than a year ago, the major run on grocery stores cleaned out not only shelves, but warehouses as well. Getting back to the “good old days” hasn’t been easy — especially for companies with high SKU counts or dependence on a specific crop such as wheat or corn.

INSULT TO INJURY

Adding insult to injury, Mother Nature has blessed us with extreme weather patterns across the country and globe, affecting yields and costs. And now, unfortunately, we can add the “peace action” (yeah, right!) in Ukraine that will put even more pressure on crops such as wheat in the months ahead.

So what can be done, or, more to the point, what is being done? Many retailers are tired of empty shelves and have put manufacturers on notice that this is unacceptable. They also made it crystal clear that price increases will be challenged throughout the process. Some of today’s problems may be beyond the control of manufacturers and retailers. After all, they don’t have a magic wand to fix the shortage of labor, lack of transportation and an inconsistent supply chain.

Still, I’m not alone in thinking that some of these problems may be at least somewhat in our control. Perhaps now is a good time for both sides to do a deep dive into SKU counts. SKU counts affect everything from the production to the point-of-sale cost. Perhaps now quality versus quantity needs to be considered?

First, any increase needs to be based on the specific ingredient(s) and not on the gross amount.

We definitely need to revisit product shelf life and “best by” time frames that are too short. We’re wasting products! And while we’re on that topic, now would also be a good time to look at sizes and duplications in a category.

That doesn’t happen often enough, but here’s something else important that happens hardly at all — Having manufacturing teams be a part of the marketing, new item and sales discussions. That way they can produce items in a timely and cost-effective manner.

So how do we move forward? Well, there needs to be more honest discussion going on between retailers and suppliers. First, any increase needs to be based on the specific ingredient(s) and not on the gross amount. How can we all keep costs down on both sides? How about sharing in the cost increases, and rescinding those increases when things improve?

Manufacturers must tell retailers what they can and can’t do and live up to what they say, even if it means cutting SKUs on both sides and keeping with the 80/20 rule. Hopefully retailers can better plan and give manufacturers better forecasts for basic inventory levels and promotions than in the past.

I’d like to see more CPG companies quit promoting new flavors and creating line proliferation — especially in the boxed dinner category. I remember one CPG company whose marketing department wasted money on FSIs on new items not yet available, while the company’s flagship SKU was out of stock for weeks.

Hopefully retailers can give manufacturers better forecasts for basic inventory levels and promotions.

During the pandemic the last couple of years, we’ve been playing Whack-a-Mole on new problems cropping up every two seconds. We were caught off guard by the need to convert production lines to different products practically overnight. Out. We’ve learned, of course, but there’s more to go to school about.

For starters, let’s look at pack sizes — not only from the standpoint of the individual SKU, but on the total case as well. Do we really need all the SKUs that manufacturers produce and retailers stock? Was it smart to reduce warehouse space and figure that just-in-time and cross-docking would solve everything?

I remember David Glass once telling me, “Don’t do things in the good times you wouldn’t in the bad.” Inflation is not new to the food industry — we deal with it daily. Something I always preached was finding ways to take the “stupid” out of cost all through the supply chain — from the crop field to the shopping cart.

As an industry, we need to wake up and understand that global warming is not “fake news.” Starting right now, we must deal with what is coming and plan for the effects on supply and cost. Recent news should have opened the eyes of everyone in the food industry to the shortcomings in their areas of their responsibility. How are each of us going to address these?

NO ‘BUSINESS AS USUAL’

“Business as usual” isn’t going to cut it from a shareholder or customer perspective anymore. As we approach the “new normal“ (whatever that is), we must plan for and address these changes and shortcomings, or we’ll come up short.

Just sayin’. n

 

Bob Anderson is the retired vice president/general merchandise manager at Walmart, where he worked for 17 years. He can be reached at bob.sue@sbcglobal.com.

Bob Anderson

Bob Anderson

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