Gloomy forecasts mean eking out profits through the supply chain is more important than ever
The ghosts of Christmas present and future have been rolled into one with Deloitte playing the part of Scrooge by predicting no growth in retail sales over this festive period - or indeed until 2013. Meanwhile, the Chancellor’s autumn statement further depresses spending.
However, all is not lost. Retailers should look at margin improvement strategies in their supply chains to shore up flagging or flat-lining high street sales and support the growing online channels, predicted to be up 15% this year.
Most retailers allow for margins of error, but they could do more to avoid errors in their margins. There are fantastic opportunities to ‘get it right’ in terms of product, place and price. So, having the ‘must have’ offering this Christmas means retailers can maximise margins. But if these offerings are outstripped by demand too soon, those riches can be eroded.
Forecasting and carrying the optimum stock levels can be margin-enhancing. But if additional stock has to be expedited, costs can be sky-high. Too often, transport is part of the buying department’s remit, rather than the logistics director’s. Yet the latter can identify opportunities to consolidate shipments and pick up return stock.
‘Tis the season to be wasteful with more food being ordered than can ever be sold and consumed. This wastage adds to the overall shrinkage caused by increased pilfering, damage, non-compliance and process failures, all of which represent the systemic margin-erosion challenge - the prevention of a profitable sale due to an item no longer being available to sell or having to be marked down.
Providing value-added services, including source tagging of high value merchandise, is normally cheaper within the supply chain than in store. Overall, greater visibility, improved service levels and streamlined processes lead to higher on-shelf availability.
It is only by taking this view that companies such as ours learn that many margin-reducing practices simply evolve out of traditional practices, rather than how things need to work today.
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