Watching The Wheels

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.

© Copyright 2009 James Tenser

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ISI Network Podcast on NARMS.com

Earlier this month, I had the privilege of delivering a talk about In-Store Implementation at the Annual Spring Conference of NARMS, the National Association for Retail Marketing Services, in Colorado Springs.

NARMS is an organization of more than 400 companies who perform value-added services in retail stores, including merchandising, measurement and event marketing. Its members have a strong vested interest in the professionalization of In-Store Implementation.

A PDF version of my presentation deck is available for download on the ISI Network site. See the item, “Illuminating the Black Hole,” at the top of the right-hand column on the home page. (Free registration is required.)

Subsequent to my talk, I was interviewed about the latest activities of the In-Store Implementation Network. That conversation was captured in a brief podcast that may be played with any common audio player.

Listen To the Podcast (about 5 min).

As always, your feedback is invited.

© Copyright 2009 James Tenser

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RFID’s Widening Gyre

TWO RECENT NEWS ITEMS about retail giants, radio-frequency ID tags and promotional displays have pundits punning and some market vultures vultching:

When Procter & Gamble declared it would no longer apply EPC/RFID tags to promotional displays built for Walmart stores, it triggered critiques of the technology and its underlying economics. Observers circling above the decaying carcass of the program sniffed that just maybe, Walmart wasn’t delivering a measurable benefit from the solution.

Within days Walgreen Drug Stores delivered a more positive spin, stating that the very same sort of radio-frequency tags had helped it improve its in‐store execution in the past year “to nearly double the industry average.”

Never mind that the industry average stinks like carrion.

David Van Howe, vice president of purchasing for Walgreens, called the information captured from the tagged displays a “game changer” for the chain, and at least one partner, Revlon, said the program delivered “unprecedented insight into what works and what doesn’t with consumers.”

So what are we to take away from all this? The vultures in our midst keep trying to declare retail RFID dead on arrival. The tech pundits claim they have seen a glorious future in those tiny transponders. I say the misdirected focus on RFID technology threatens to derail an important initiative.

It’s not the tech, it’s the practice! RFID has been ascribed with magical status by some, but I’m here to tell you – it’s no tri-corder, not even a silver bullet.

When it comes to at-retail compliance – potentially the largest business improvement opportunity presently facing the retail consumer products industry – point solutions are pointless. The system of practices is everything.

P&G’s decision exemplifies the frustration held by many manufacturers with In-Store Implementation of promotions. There is no routine, repeatable, measured and collaborative practice to execute planned promotions in stores. Data on compliance, if available at all, arrives weeks or months after the fact and it reveals that roughly half the spending is ineffective.

Even the mighty Walmart, it seems, has so far been unable to master this challenge on behalf of its trading partners. It means that billions of dollars in trade and promotional funds are badly spent while we debate which brand of ID code to attach to the display headers.

When it comes to optimizing In-Store Implementation, grease pencils and clipboards may be plenty of tech if the process is right. The retailer that formulates a compliance plan, enables it with appropriate solutions, and measures its outcome relentlessly will always achieve better performance on in-store programs. This is equally true for off-shelf display compliance, resets, planogram maintenance, new-product cut-ins, sampling programs, or floor polishing.

Of course large chains like the two Wals require some tools to help manage scale and stabilize best practices. For fixtures and displays, RFID may in fact be a useful input to the process. But it works at Walgreens because it has also instituted the in-store practices to make it work.

For the past two years, the In-Store Implementation Network has advocated establishment of a fully collaborative “plan-do-measure” retail compliance discipline that would ensure real-time visibility and accountability. We cannot improve what we do not measure. Retailers – and that includes even the likes of Walmart and Walgreens – must step forward on this issue if we are to see real progress on retail effectiveness and shopper experience.

© Copyright 2009 James Tenser

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Six Dimensions of Shopping Time

When retailers seek to optimize the shopping experience and understand channel choice, much consideration is given to aspects of convenience. The literature generally breaks this down into two core elements: effort and time. For brick and mortar stores, the goal is to make shopping as easy as possible, and attractively quick, but not so fast that sales opportunities are missed during the shopping trip. In a multichannel environment, the puzzle gets more intricate.
Shopping time covers multiple factors, including hours of operation, travel time, search time, time to check out, delivery time, and time to return. So time-saving convenience is highly conditional:

  • A mother will drive across town to a 24-hour drug store at midnight when she has a sick child, but she may leave a convenience store when faced with a long checkout line during the morning coffee rush.
  • An electronics shopper may spend hours researching flat screen TV prices online but grow impatient when forced to wait 10 minutes for sales help at the local electronics superstore.
  • A discount store shopper may watch TV at home four hours a day, but will attend to an in-store digital screen for exactly eight seconds before moving on to the next purchase task.
  • An online shopper will gladly wait three days for free delivery of a purchase from a multi-channel retailer, but grow agitated waiting five minutes to return the same item at a local branch store.

These examples are illustrations of what I observe to be six dimensions of shopping time. The academic literature generally identifies four of these:

1) Time to access (i.e. to reach the store or shopping site)
2) Time to search (i.e. to identify and select product to buy)
3) Time to transact (i.e. to complete the purchase transaction)
4) Time to possess (i.e. to physically obtain the purchased merchandise)

This classification may not reflect a complete picture of the influence of time on consumers’ retail channel choices however. I would add two additional time elements to the list:

5) Time of operation (i.e. days and hours that the retailer may be patronized)
6) Time of return (i.e. to return an item for refund or credit).

Considering these time factors is especially important as we reason about the choices shoppers make between options in a multichannel environment. It takes minutes to find and order a book on Amazon.com – even at midnight – versus an hour or more to stop by Borders during business hours and search the shelves, but the Borders shopper may leave with the book in hand, while the Amazon.com shopper waits days for delivery. Which is more convenient? Well, it depends…what did the shopper need most at that moment?

Leading multichannel retailers give deep thought to understanding this complex of time-saving behaviors. The best evidence that I’ve seen is the growth of “order online, pick up in store” service offerings at some consumer electronics retailers. Instant gratification is still a motivation, but shoppers like the protection from stress that comes with pre-shopping on line in the calm safety of the family den.

Shoppers’ time-related behaviors, I think, are relatively independent of current economic conditions. In general they will choose the options that suit their need states of the moment. At the same time, we may observe that some shoppers will devote more time and effort to planned shopping trips by clipping coupons, preparing lists, and advance online price comparisons, especially as retailers continue to make these activities as time-efficient and easy as possible.

But the general rule (and its inverse) still applies in retailing: Time is more valuable than money for shoppers who have more money than time.

© Copyright 2009 James Tenser