Digitizing vs. Synchronizing August 19, 2008
Posted by Jonathan Gatrell in Inovis Solutions.Tags: ASN, PO, supply chain
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It’s been an odd summer with almost constant rain and not too much excessive heat but one of the hot stretches coincided with a visit from friends that generated a need for an air conditioner in one of the bedrooms that did not already have one. The local store was out so went to one of the “big box” stores who swore they had what I needed but were unable to locate the small aircon needed. They had lovely models that would cool the average arena but that seemed somewhat excessive for a 12X15 room, so moved on to the other big-box store about a mile up the road.
As being in this industry tends to do, it got me to thinking about the REAL cost of not having your supply chain under control and the difference between DIGITIZING the supply chain and SYNCHRONIZING the supply chain. We all know how much effort has been put into standardizing and automating trading communities and that this has resulted in a profound improvement in efficiency both within the supply chain and, more importantly, in customer service. There is, however, still a critical failure around the synchronization of documents and the processes with which they’re associated. The first store I visited assured me that their system showed multiple air conditioners of the size needed were still in the store, but the empty shelves and pallets had far more reality than the information on the screen and I wondered how many other customers for both this and other products also went that mile up the road. To paraphrase a famous quip, “an PO and ASN are not the inventory” – unless these are synchronized with the received-to-sold flow of the product, they’re just characters in cyberspace and customers like myself will spend their dollars elsewhere for that item and probably start with the alternative the next time something is needed.
All of the big box stores, (I see the same problems in clothing, electronics, as well as hardware) must find a way to gather experiential inventory information from all of their employees on the floor and put that to use in managing the digital inventory.
Without that input the digital will never be synchronized with reality, no matter how well “these are synchronized with the received-to-sold flow of the product”.
My brother works for one of the Big Box chains that you probably went to, I hope the second one. He is working in the paint department as he has worked as a painter for some years.
His problem is that there is a serious disconnect between the real inventory and the digitized version, which seems to be a better measure of shrinkage than stock.
When the Real Quantity Available is 0 and the Quantity Received – Quantity Sold is > 0, the Quantity in the digital inventory is measuring shrinkage not availability.
Shrinkage happens because not everything leaving the store gets scanned at the register, and not everything they use gets sold. Cans of spray paint might be used for a project in another department and not get scanned, etc. Paint mixed to the wrong color might not be sold. Sadly, there is always at least some shop lifting and employee theft going on as well.
In going over this with him, he seems to see several points where they have skipped a necessary step in inventory tracking.
When a shipment arrives it is on wrapped pallets by department and the shipment is assumed to be correct. The contents of the pallets go to the top shelves in the departments for storage. I can see this working; since the DC checked this pallet twice (picking then packing), there is no need to have the store do it again.
Later, when the stock down below in the customer shelves goes low they do a take down. This step is triggered by a visual inspection of the shelves, and is not recorded in the digital record, which to me is an important skipped step.
If there are 24 units being brought down (because the shelf is nearly empty), but the computer says you have 36 in the store (24 above and 12 below, which shouldn’t have triggered a take down), that should trigger a cycle count of that item leading to an update of the digital inventory.
Further, when there is no stock left, but the computer says you have 24 (not low enough to trigger a restock), there is no way for the associate to tell the computer that they can’t find the 24 anywhere. This should again trigger a cycle count that would lead to an updated inventory.
In your case the associate helped you look for the missing inventory, but what did he do next? All he could do is scratch his head and wonder; there isn’t a place for him to report the situation. Maybe he should have a ‘Quantity Missing’ field on the inventory lookup screen to fill in?
Apparently, someone in your area has figured out how to leave with a small air conditioner without having it scanned, or a shipment to the store ‘fell off of the truck’, but was still received. If the shipment arrival was certain, then either a customer or an employee has started a very profitable AC business.
I have never walked into a big box hardware store with a list, where I didn’t find at least one thing I wanted missing. It doesn’t matter if it is in electrical, plumbing, paint, or hardware. If that missing item was a high priority on my list I, like you, leave and go to the competition with my entire list.
Shrinkage is much more variable than anyone seems to be prepared to understand, and when you have “an odd summer”, you’ll have a greater shrinkage of AC units since they didn’t all sell out the first day, but waited for “a visit from friends” to initiate a sale.
Perhaps, we have strengthened the Supply Chain from Vendor to Store so well, that the weakest link is now the last link in the chain. It is time for our Reatail Trading Partners to take a look in house.
Mike,
Thanks for the comment or perhaps I should say guest blog post! Great insights which are definately consistent with the type of experiences I’ve seen over time as a consumer and within retail supply chains.
Thanks again!
Jon
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