Tenser'sTirades

Tenser Presents Webinar on MPM

May 31, 2022December 15, 2009 by James Tenser

NARMS Webinar Merchandising Performance Management

IMPLEMENTATION means to carry out; to give practical effect to and ensure of actual fulfillment by concrete measures. In this NARMS Webinar, James Tenser takes a look at new considerations in the ever important issue of implementing marketing plans at retail. The hour-long session is another event in the NARMS-U educational platform titled – What is Merchandising Performance Management? The webinar, sponsored by Natural Insight, will take place Thursday, December 17, 2009 at 1:00 P.M. CST and is brought to you through the technology of ReadyTalk.

“Plan Through Impact”: Dialog with Dawson

May 31, 2022August 14, 2009 by James Tenser

Tenser’s Tirades recently sat down with Warren Dawson, President of consultancy Dawson Thoughtware, for a conversation about his vision for a comprehensive framework for what he calls Merchandising Resource Management, designed to support superior store-level compliance and effective measurement methods, from initial plans to their ultimate impact on business. The MRM process allows retailers and suppliers to set objectives, measure performance at each process stage, and gauge the impact these have on the overall business.

Dawson was instrumental in organizing the In-Store Implementation Sharegroup and a contributor to its 2008 working paper. He is preparing a new paper, “Plan Through Impact,” that outlines his point of view regarding the next wave of innovation in supermarket store operations, one he believes opens up great opportunities to improve both shopper experience and financial performance.

TT: Warren, you’ve earned a long-standing reputation as one of the visionaries in supermarket merchandising, especially space and assortment management. What’s driving you to speak out again about merchandising compliance?

WD: It’s no secret that I’ve been an advocate along these lines for many years. I started working on the core issues of store-level item distribution in the 1980s. I’ve had the opportunity to help many supermarket and CPG companies tackle space and assortment issues since then. The idea behind the ISI group was to bring together a credible group of companies and industry people to debunk the myth that all is well with In-Store Implementation.

While we’ve seen improvement in supply chain methods, category planning and demand-based insights, the in-store opportunity remains vast – tens of billions of dollars in missed sales, billions in profits. As the ISI Sharegroup working paper showed in 2008, we have barely budged in 20 years on core issues like item availability, promotion compliance, speed to shelf and planogram integrity. I think we have the means to fix those things today.

TT: What do you mean by “Plan Through Impact”?

WD: Well, besides persistent irritants like out-of-stocks and poor promotion compliance, two areas of change in merchandising planning in the grocery industry have brought this need to a higher urgency: The first is Shopper Marketing, which has led to a much greater degree of segmentation and targeting around in-store merchandising and messaging. The second is the adoption of planogram automation tools, which permit retailers to vary merchandising plans down to the store level, if justified by shopper insights.

TT: Those sound like positive developments. Are you skeptical about their value?

WD: Not at all. It’s great, must-do stuff. The challenge is that they introduce an enormous amount of additional intricacy that the industry is not well-prepared to manage. Retailers and CPGs are getting a lot better at formulating subtle and insightful plans, but they lack the know-how and every-day practices to carry those plans out effectively in the stores. There’s a huge risk of wasted spending.

TT: Isn’t that what Workforce Management and Store Execution Management software is supposed to address?

WD: Yes in theory. And these types of tools are likely to be parts of the Merchandising Resource Management solution I envision. They let us formulate a compliance plan and push it out to people in the field. But organizing and communicating tasks is just the first step in the process. There has to be a process for confirming that the tasks get done, measuring them and comparing them to expectation. And you have to be able to share the results to all participants in the process, so they can manage their own performance.

TT: Sounds a lot like the “Plan-Do-Measure” concept advanced by the ISI Network.

WD: Exactly right, although MRM goes further. You need an embedded feedback loop to monitor compliance. Regularity in the information will ultimately help trading partners make better, more realistic merchandising and promotion plans. It’s foolish and costly to plan work that doesn’t get done, and yet that’s what we do every day, because without measurement tools we can’t visualize how our unrealistic plans damage our business outcomes.

TT: So how does “Plan Through Impact” extend this thought process?

WD: By adding three more levels of measurement. Its core is what I call a Compliance Index that synthesizes several store-level metrics into a score that can be rolled up from the item level all the way to the category, cluster or account level. Then compliance must be linked to what we all care about – sales performance results. Finally, we need to connect the dots to measures of business impact – customer experience and loyalty, competitive position, and shareholder value. I sometimes like to call this “Plan-Do-Measure-Measure-Measure-Measure.”

TT: Are you suggesting that we establish a chain of causality connecting a company’s shareholder value all the way back to its merchandising competency?

WD: I believe it’s an achievable goal. Merely tracking merchandising outcomes doesn’t provide a reliable proxy for business performance. We feel intuitively that compliance must have an impact, but we can’t use it to support strategic decisions unless we establish a Plan Through Impact framework.

TT: Sounds challenging. Aren’t you asking for too much?

WD: At one time this might have seemed beyond us, or at least prohibitively costly, but today we have all the elements within our grasp. There’s no shortage of tools to support store level measurement and communications. In fact, many merchandising field organizations are already heavily invested in portable technology with verifiable self-reporting that would support a viable compliance index. Then there are the point solutions for digital image analysis, out-of-stock detection, spot audits, and demand signal analysis to name a few.

TT: If those software and hardware tools are already available, why isn’t the industry already enjoying greater success?

WD: Because they are being put into use ad hoc, and in the absence of a crucial thoughtware layer. Merchandising Resource Management is a business process, not a technology. It requires some changes in business practices at the store level, as well as for decision-makers and administrators. Also, because it creates greater transparency of compliance performance, it has potential to change the way trading partners collaborate for success. Most companies are going to need a little help putting this into practice.

TT: How can companies educate themselves further about this?

WD: Interested parties are welcome to email me at WarrenDawson@gmail.com for a copy of the paper or to discuss a consultation. A good place to begin reading is the In-Store Implementation Network site. Many downloads are available with free registration.

Curing Performance Anxiety

May 31, 2022July 7, 2009 by James Tenser

Sure, you can plan alright, but how well can you implement?

I imagine this question keeps truly conscious merchants and consumer product marketers awake nights with what amounts to performance anxiety.

Those of you who follow the work of the In-Store Implementation Network may be well aware that members regard the pursuit of retail compliance as nothing less than an industry imperative. Our latest work on Merchandising Performance Management drives the point further. Our not-so-hidden agenda: Shift the dialog from hand-wringing about our challenges to identifying and implementing practical solutions.

You see, we are standing at the threshold of the next (maybe the last) great opportunity for retail financial performance gains – the stores themselves.

The past two decades of industry consolidation, supply chain advances and category management have failed to move the needle on basic merchandising performance indicators such as out-of-stock rates, promotion compliance and planogram compliance and decay. The numbers remain so disheartening that we routinely plan not to measure them. This despite their obvious causal link to GMROII and profits.

Here is evidence of what I call “dis-economies of scale.” It should be a source of more than a little vexation across the retail consumer products industry. Top executives know with certainty that buying clout and elimination of redundant processes are competitive necessities, but they prefer not to call attention to the fact that larger strings of larger stores are also much harder to steer.

Today’s fast-moving consumer goods chains teeter along the precipice of the “big middle” – the cold, dark place of persistent merchandising mediocrity ruled by a mythical, but non-existent, average shopper. Never fear – we’ve got Shopper Marketing to keep us from the abyss. We segment and target our customer base, and we study our targets, so we derive insights about our shoppers and make plans to reach them on their terms.

Those shopper insights let us design offers tailored to specific shopper groups. They are also inputs for automated planogram tools that let us design tailored merchandising plans for each category in each store. We can layer on store-specific pricing, using the latest optimization technologies, and before long we’ve defined thousands of store-specific matrices of space, mix, price points and deals.

Yes we have some impressively intricate plans, but can we implement them? Well, there’s a dizzying amount of detail to cover, but realistic solutions may finally be at hand.

Retailers, manufacturers, brokers and merchandising services organizations have recognized for some time that they need a systematic way to parcel out the tasks to their minions in the field. That has led to a proliferation of home-grown and commercial Work Force Management (WFM) software solutions that permit headquarters to push instructions out to the individuals tasked with performing them.

WFM solutions are generally one-way (HQ to the field) and intra-organizational with an emphasis on employee management. That is, they permit managers to send instructions to their own people in the field without provision for feedback. Often those instructions arrive in the form of an email or memo.

Expanding the WFM principles more specifically to the retail environment has led to shift in focus from managing people to managing activities. Solutions of this type are called Store Execution Management (SEM), and they are oriented toward field force automation and task or process efficiency. A number of third-party MSOs and direct store delivery organizations deploy SEM solutions today. As a rule these too are intra-organizational, with limited feedback possible for the host retailer.

Now we are seeing a new class of solutions reach the market, of a type I like to call Merchandising Performance Management (MPM). They are distinct from legacy WFM and SEM solutions in several important ways. First, they are engineered to manage outcomes, not just tasks or people. Because they incorporate a two-way platform for feedback and reporting, they support capture of performance metrics in real time.

Second, they are inter-organizational by design. That is, they support interaction from all the parties who plan merchandising and who touch the merchandise in stores – retailers, manufacturers, MSOs, brokers. This is most commonly accomplished through establishment of a secure, Web-based portal that is accessible as an online service. As a result, all parties in the merchandising ecosystem view relevant performance data and contribute required feedback to the greater information flow.

Presently there are at least eight solution providers who offer MPM software and services to the retail market. Several are early-stage companies and relatively untested. None are perfect. All hold out the promise of a practical, every-day, plan-do-measure store compliance discipline that can find hidden profit in the stores – where it all started.

Intricacy is the enemy. Most of what we try to do is not that hard. But there is so much detail to cover and those details are so … relentless. Performance anxiety must inevitably follow.

Unless… We adopt sound Merchandising Performance Management practices. ISI Network has assembled a report that outlines some tools and options for senior executives. I encourage you to take a look. It’s good for what ails us.

Watching The Wheels

May 31, 2022April 27, 2009 by James Tenser

ELEVEN DAYS AGO I was a passenger in a van traveling south on Rte. 15 toward Hermosillo, Sonora, Mexico, when we came upon a sight that turned our heads and quieted our voices.

About 100 kilometers south of the border city of Nogales, Arizona, near the town of Benjamin Hill, Sonora, we spied a line of 18-wheelers stopped in the northbound lanes. They were waiting for inspectors in military uniforms to clear them for the trip further north.

The line of tractor-trailers stretched impressively into the distance, over the next rise. Several drivers lolled on the highway median waiting their turn. It had evidently been a long wait.

As we crested the hill, it became apparent that the line-up went much further. In fact, it took about 10 minutes at highway speed to pass all the idling trucks, each rise delivering another surprise; until finally we passed the last pair of truckers, standing in the weeds, checking their watches.

“That’s a lot of money sitting still,” I said to the man sitting next to me, who returned a serious nod.

We pressed on to our destination, the Sonora Spring Grape Summit, where it would turn out, that line of trucks would be a topic of some serious conversation for the growers, packers, importers, retailers and officials present.

Marco Antonio Camou, undersecretary of agriculture for Sonora’s state department of agriculture, who addressed the group, said the backup we had witnessed stretched for “16 or 17 kilometers,” causing delays of approximately 10 hours duration. (The satellite photo above shows the front of the queue on a recent day.)

Camou showed some photos of a just-completed security inspection facility on the highway designed to process 180 trucks per hour, using sophisticated x-ray machines and other gear. It was scheduled to open before the end of April, with a full-time complement of up to 180 Mexican military personnel barracked on the premises. Their primary mission: Find and stop contraband, especially drugs.

On our return trip north the next day, we passed a similar lineup and got a better view of the impressive-looking inspection station on the east side of the highway. Watching all those big wheels standing still made the little wheels in my head turn furiously. After my return to Tucson, I did some fact-checking and quick math:

An average 18-wheeler is 60 feet long; so about 85 trucks, parked end to end, cover a mile.
16 kilometers is almost exactly 10 miles; so the line we witnessed encompassed about 850 trucks.

If we assume each truck carries legitimate cargo valued at an average of $50,000, then we saw $43 million worth of goods sitting idle, for an average of 10 hours, adding a full day to the time of transport.

Cost of capital? $43,000,000 x 5% per year /365 days = about $6,000 per day
Cost of loss of product freshness? Assuming an average of 0.1% per day = $43,000/day
Cost of driver down time? At $50/driver/day = $50 x 850 = $43,000/day
Cost of diesel fuel burned by idling trucks? Assuming 30 gallons/truck/day x $3.00/gal. x 850 trucks = $77,000/day

In other words, the line-up we witnessed added nearly $180,000 to the cost of goods moving through that inspection point. In one day.

Not to mention the unreported cost to Mexican taxpayers for construction and maintenance of the inspection facility, equipment and troops to man it.

Mind you, these internal security checkpoints (they are located on most major highways in northern Mexico) are in addition to the U.S. Customs inspection points the same trucks must pass at the border. The Mariposa station between Nogales, Sonora and Nogales, Arizona, reportedly handles almost 300,000 trucks crossing into the United States annually. All of them wait in line too. To try to improve this bottleneck on the U.S. side, a new facility expansion has been authorized here, at a cost of $200 million over the next 3-4 years.

For my new friends in Hermosillo who grow, pack and ship more than 10 million boxes of table grapes to American markets each spring, the improved inspection facilities should save time, money and product freshness. Sadly, the cost and complexity introduced by realistic security measures on both sides of the border is unavoidable and shared by all of us.