Contemplating A Water Bottle
On vacation last week, I was sitting on the shoreline of Maine, kind of daydreaming and drinking a bottle of water. I noticed that the Poland Spring bottle seemed somehow different. It was thinner plastic, and had a few more ridges to hold on to it with. On the label I found:
Eco-Shape Bottle
Poland Spring
Our bottle looks and feels different because it is
purposely designed with an average of 30% less plastic
to be easier on the environment.
We can all make a difference, please recycle.
On August 12th I wrote on our blog about the need for the catalog industry to “Trumpet Your Green Efforts.†Now I thought to myself, here is a product that I’m sure has a major carbon footprint, but Poland Spring has taken a big practical step to help the environment and diffuse some of the environmental objections. On the Poland Spring website, I later found that the bottle also:
Is made with 30% less plastic than the average half-liter bottle
Features a new label that’s 30% smaller
Is 100% recyclable
Is flexible so it’s easier to crush for recycling
Easy to Carry
A few days later I was looking through the AAA (auto club) magazine and spotted that same recycling symbol, with this statement:
All trees used to manufacture paper for our magazine were harvested from sustainably managed forests. Recycling old magazines and catalogs is one of the easiest ways to help the environment. We urge our readers to support recycling efforts in their communities.
This begs the question, how much more are you planning to do with your business whether it’s recycling office waste, using lighter paper weights, using soy-based inks or supporting environmental issues? Not to mention, are you selling recycled cartons and wastes from your distribution center at a profit?
Through publishing and mailing millions of catalogs, you are in control of a major outlet for communicating your own environmental efforts, and for advocating that consumers do the same. Without the consumer taking action and doing their part in recycling, little will be achieved. The “Green Movement†is gaining momentum; are you doing what you can to make sure you are a participant, and not a target?
(Poland Spring Eco-Shape Bottle is a trademark of Nestlé Waters North America Inc.)
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How Are You Spending Your IT Dollar?
Even in today’s tough business climate, we still see companies making investments in IT systems, especially in the e-commerce area. In many direct businesses, more than 50% of sales are e-commerce based, though those sales may have been spurred by receipt of a catalog.
Long before the current economic slowdown, many companies had become more conservative with their IT spending because of the amount of capital needed for those investments. In the past two years, we have seen management require an 18 to 24 month return on investment (ROI). However, we also see companies with aging order management legacy technology replacing an order management system if they find it inhibits their ability to adapt new technologies, for new back office and Web applications. The bottom line is, no management team wants to go out and spend money on technology without getting both short and long term benefits.
Our purpose in this article is to identify what direct companies are typically spending on IT systems, and give you a blueprint for applications with the highest return on investment. The data presented here comes from F. Curtis Barry & Company’s IT consulting experience with our clients.
Read complete article, How Are You Spending Your IT Dollar?
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How Well Are You Managing Your Inventory?
Inventory is most likely the largest balance sheet asset in your company. How well you plan, purchase, and manage your inventory largely determines your level of customer service and profits.But selling goods in multiple channels means dealing with channel-specific planning and inventory needs.
Based on our consulting work with clients and observations from conducting the F. Curtis Barry & Company’s Forecasting & Inventory Management ShareGroups, we’ve come up with some strategies to consider with multichannel inventory management.
Planning and inventory systems
In most companies, the systems for merchandise planning and inventory control remain highly fragmented by channel.
For promotional planning, many multichannel companies need to be more diligent and use a single promotional calendar rather than channel-specific schedules on which merchandise planning is based. These should include in-store promotions, catalogs, and e-mail campaigns.
Detailed channel-level inventory systems cater more to individual channel planning and inventory needs. In retail, assortment planning is performed by merchandise division, department, class, and product/SKU, with another view by region, store level, and product/SKU plans. Large retailers also have store replenishment systems to recommend restocking orders for retail locations.
For most direct companies, assortment planning differs from retail; it’s by catalog season, drop, department, class, and product/SKU. The data elements — though similar to retail — have some major differences, using demand, cancellations, returns, space used by category (pages, square inches, depictions), and other direct metrics. Most direct companies have not invested in formalized systems and are using internally developed systems or, more likely, spreadsheets.
Emerging direct businesses with stores don’t have comprehensive retail planning systems. Often they can’t justify the investment and use spreadsheets or other elementary systems more effectively. But there is a huge potential for sales and profit improvement through better planning.
To get results to flow through corporate planning, inventory and accounting systems, large retail companies identify top level plans, sales and inventory results and display as a store: “catalog store,†“Internet store,†or maybe the direct business combined as a store.
Many companies have tried to use channel-oriented planning and inventory systems (i.e., retail designed or direct designed) for other channels. But these have been less than successful due to the differences in views of the data (e.g., region and store) and the types of detailed data mentioned above.
Internet inventory management philosophies are slowly evolving in most companies. Traditional catalogers now average more than 50% of sales from the Internet, although much of that business is generated by receipt of the catalog.
Products may be active and available longer if there is stock. What sells online is heavily influenced by placement on landing pages and organization and ranking within category product searches.
The online product assortment can be more extensive than that in a single catalog. Internet may have a total chain assortment different from any one store or region. The Website may have a clearance or liquidation aspect. These principles of planning and managing inventory are not industry established best practices, but are being hammered out in the trenches every day.
From a purchasing perspective, companies are rolling multiple channel plans and forecasts together into a single purchase order management system to write Pos.
The eventual multichannel inventory system that evolves will be a new animal. It will need to be a blend of channel-specific function (such as store replenishment logic for reorderable product) and direct (such as promotional and time-based elements more like catalog).
It will also have a single inventory system that can be displayed by product/SKU and allow you to see the plan by channel and promotion, vendor on-order and on-hand by store, and warehouse location. The planning modules will remain channel specific.
When will there be true integrated systems for planning and inventory systems? For most companies, not any time soon. Retail and direct channels have different data needs and processes. It will probably be a few years before commercial software companies that cater to retail and direct have the most basic of systems in place. MICROS Retail, Direct Tech, and Manhattan Associates all have development projects to bring channels together in terms of planning and inventory systems.
Read complete article, How Well Are You Managing Your Inventory?
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Balancing Your Budget and Investment: When is the Right Time to Outsource?
Many multichannel merchants focus on how they can lower operating costs when they consider outsourcing certain tasks. But when you outsource operations, you also outsource the investment. Sounds obvious, but maybe the magnitude isn’t all that clear until you’re faced with replacing an order-management system, moving into a new fulfillment space or upgrading your website.
When outsourcing your investment, you don’t have to invest in those upgrades as your business grows and changes. Let’s look at some examples that show the size of these investments.
* Order-management systems. Software as a service (SaaS) can free up a potential investment of $25,000 for an emerging company. If you’re a $500 million company — with several hundred users adopting a SaaS model — it eliminates an $8 million to $10 million investment. For a $20 million cataloger, the spend runs $280,000 to $400,000 to license and buy hardware. Then you implement an order management system with call center and warehousing functions.
* Specialized forecasting and inventory management system (working in conjunction with your fulfillment system). Here, investment and implementation costs for a 10-user system will cost, on the low end, $150,000. Larger companies invest several million dollars.
* Replacing an e-commerce site. SaaS business models can eliminate an investment of $750,000 to $1.2 million for a multichannel cataloger with sales in excess of $100 million. With the e-commerce that growing companies experience, there’s also often a need for an e-mail management or chat-system investment.
* Call-center operations. Outsourcing eliminates investment in the required space, telecom terminals, headsets, ACD, scheduling software, call-monitoring hardware and software, e-mail management, chat systems, etc.
* Fulfillment center. You avoid investing in the construction and/or build-out costs, as well as the racking, conveyors, material handling, warehouse management systems, shipping systems, furniture and fixtures. Plus, you avoid a long-term lease.
It should be pointed out that when looking at these investments on a five- to seven-year basis, many would have been amortized and depreciated over that time. But many companies are struggling to make the initial and ongoing investments because of the competition for financial resources.
Here are some of the questions you need to answer as you look at outsourcing and the business investment:
- Are you keeping pace with investment in the infrastructure required?
- What alternatives for capital use does your business have rather than investing in physical assets?
- Does the outsource provider have the finances to grow and expand? What’s its track record of doing this for clients?
- How will those costs be passed onto your business as it grows and changes?
- Can a major activity be outsourced and not result in a total loss of control (e.g., call-center overflow, peaks and weekends)?
- Which provider best understands your category of product (e.g., apparel with its high SKU storage needs, returns, etc.) and mode of operation (e.g., e-commerce, catalog management systems, etc.)?
- Which provider will be the best long-term partner?
- How vulnerable will this leave you if the provider’s performance isn’t up to par?
- If you wish to sell your business and don’t own major assets, does this help you (the prospective owners aren’t paying for assets) or hurt you (you may need to remain operationally independent of the other businesses a prospective owner has invested in)?
The Issue of Control
So why isn’t outsourcing more commonplace? Most managers want to control their own destiny. Outsourcing means giving up some control.
Also in certain cases, the outsource industry providers have a less than stellar record of long-term, reliable and cost-effective service. Many, including myself, believe that SaaS business models will change much of this. I’ve also seen many companies successfully use both domestic and offshore call-center facilities. We’ve had one client outsource all call-center and fulfillment operations for its $25 million apparel catalog and e-commerce business since 1988.
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How You Treat Customer Returns May Determine Whether Your Customer Returns
With a soft economy, many retailers are trying to significantly reduce returns in order to boost profits. Some companies are putting more restrictions and conditions on returns. Frankly, I think this will cause further erosion of sales. Who wants to buy a product that can’t be returned, or that carries so many conditions for return?However, others are doing what I call “save the saleâ€â€”that is, work with customers to help them understand the product and how to install or use it. Electronics, software and technical products are far and away the biggest problem areas that could benefit from this approach. As a case in point, in the last two weeks our firm had lengthy, painful experiences with two of the major U.S. software companies. One of our people spent five hours on the phone with an Indian call center while trying to install a new version on a laptop. If we had any choice we would have asked for our money back.
Bill Crutchfield, founder and president of the car and truck stereo direct marketer Crutchfield, learned early on in his business about customer returns. He told me at one of our Benchmarking ShareGroups a while back that he almost quit the business over 20 years ago because returns were so high. Luckily, before he did so, he decided to call many of the customers who were returning products to find out why. What he learned was that the customers were frustrated by not being able to install the product in their vehicle; there were no instructions provided by the vendors! He realized that he would have to invest in documenting how to install those products in each and every vehicle.
Now, Crutchfield has a database of thousands of models that their technicians can use to talk customers through the installation. Crutchfield also developed product mountings to hold the products to the car dashboard and interior, and they produce customer vehicle-specific instructions with pictures. In the end, Bill Crutchfield’s lesson resulted in one of America’s largest, most innovative and customer responsive multichannel marketers.
I have no doubt that how you treat customers with regard to return privileges will greatly affect your future sales. I’d follow the leadership example of companies like Lands’ End and L.L.Bean, with a “no quibble†guarantee. In the case of L.L.Bean, a true story goes that all of their original Maine hunting boots had product problems and most were returned. Leon Leonwood Bean stayed true to his word and refunded the purchase price. But he also stuck with it, correcting the problems and posting a sign in the store: “I do not consider a sale complete until goods are worn out and the customer still satisfied. –L.L. Bean 1916.†If you go to Bean’s Web site, www.llbean.com and look under Company Information, you’ll see many other sterling things they have to say about customer satisfaction.
Drawing upon the Crutchfield and L.L.Bean examples and our own experiences, here are some action points to consider regarding returns:
- Dig into the reasons for returns through return correspondence, Web and chat messages, and most importantly, call center dialogue.
- Merchants should buy net of planned returns rather than gross demand to lesson effects on inventory levels.
- Returns cost more than orders to process. Streamline the processes and the systems to accommodate returns.
- Credit customer accounts quickly. Customers are at their credit limits. Lagging credits and refunds add to customer dissatisfaction.
Remember: How direct marketers treat their customers helps them differentiate the customer shopping experience from that of the mass retailer.
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10 Tips to Manage Labor More Effectively in Your DC
Most fulfillment processes are largely manual in nature; only the very largest companies can justify advanced automation. When you look at the total cost of back end order fulfillment—as we did by studying our proprietary F. Curtis Barry & Company Benchmarking ShareGroup data—you’ll find that out of costs that include direct and indirect labor, occupancy, and shipping supplies, total labor generally makes up 60%-65%. (We have excluded shipping costs because it distorts comparisons.)Typically, labor rates were in the $7.00/hour range five years ago. In many direct businesses today they have reached $12.00 to $13.00, plus a 20% benefit rate added on. But overall productivity in DCs has remained flat over a 5- to 10-year period. So, after factoring in the increasing labor rates, productivity has actually declined. Then consider employee turnover. Industry experience is that employee turnover in many centers is 15%-25% or higher. Turnover costs range from $3,000 to $10,000 in people time, training, testing and the ramp-up to full production. This does not include expenses for agencies, ads, etc., which must be added on.
Given the current economic climate, most businesses are mandated to get more out of the resources they have. Here are 10 ways to improve productivity by managing DC labor more effectively.
Read complete article, 10 Tips to Manage Labor More Effectively in Your DC
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Controlling and Reducing Your Fulfillment Costs
We all know we’re in a tough business climate. With many companies coming out of less than perfect fall and holiday seasons, there is an urgent need to increase productivity and reduce costs without having to make major capital purchases to do so. Here are five major areas and 25 ways to reduce your cost per order, increase capacity without expansion, and improve service levels in warehouse and fulfillment. The source of this information is experience gained in our consulting work with multichannel companies, as well as from the F. Curtis Barry & Company Benchmarking and Best Practice ShareGroups for Fulfillment.
Read complete article, Controlling and Reducing Your Fulfillment Costs
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How To Avoid IT Project Waste
Management often bemoans the fact that IT projects fail to be delivered on time and within budget. And the truth is, the IT spending waste that occurs in our industry is at times mind-boggling. At F. Curtis Barry & Company, we currently have four clients -ranging in size from $7 million to $650 million in sales ”all struggling with the same schedule and budget problems as they attempt to implement new order management and warehouse management systems. Another client invested $350,000 with one of the industry’s leading OMS companies, but after a failed implementation, backed off the project.
What’s at the root of this waste? It’s the lack of project management on both the client and the vendor side. Here are some tips based on the lessons we’ve learned that could help you avoid the same fate with your IT implementations.
Read complete article, How To Avoid IT Project Waste
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Trumpet Your Green Efforts
Do your customers know what you’re doing for the environment? A few weeks ago we wrote about how floored many of us who attended the ACMA Forum in Washington, D.C. were when we realized how little we had done to communicate our efforts. The message came to us from none other than the Postmaster General himself, who asked for a show of hands from those who had taken a variety of “green†initiatives, such as decreasing paper weight, using soy inks, etc., and most hands in the room went up. But when he asked who had actually used their catalogs to communicate that fact with their customers, only a few hands went up. Clearly, the catalog industry needs to do more to trumpet what it’s doing for the environment.
This isn’t just a “feel good†idea. Our industry continues to be targeted by critics who are very good at publicity and lobbying campaigns of their own, manifested in things like pushing for a “Do Not Mail†list, and efforts to severely limit the catalog industry in its use of paper. This could have dire consequences for our industry, yet we are doing very little to counter it by generating positive publicity.
One forum participant who did speak up was Jim Feinson, president of Gardener’s Supply, who talked a bit about being “green.†Gardener’s Supply is a great example of a company that is not only making a positive effort, but is letting everybody know about it. The catalog features a large box on the back page promoting the company’s “8% for Gardening†campaign. Here’s what it looks like:
It also prominently features the recycling logo, with an accompanying “Printed on Recycled Paper†statement. That’s all it really takes to get the message out there, yet very few of us are doing it.
Of course, Gardener’s Supply does much more. Customers who follow the reference to “Learn more at www.gardeners.com†discover that the company has a long history of promoting earth-friendly practices, beginning with the statement:
At Gardener’s Supply, we believe that gardening can bring about positive change in people’s lives, in our communities and in the environment. We donate 8% of our company profits to programs and organizations that are using gardening to improve the world. It’s a commitment we’ve adhered to since our first day of business back in 1983.
The site goes on to describe a wide variety of efforts, including a “Garden Crusader Awards†program, and efforts to make the company’s facilities energy-efficient and to be environmentally responsible in the sourcing and use of materials and supplies, and to sell products that are environmentally friendly. The company is also involved in its local Vermont community, as well as in initiatives nationwide:
Gardener’s Supply also provides major gifts to many non-profit organizations throughout the country that are working on gardening, sustainable agriculture, the environment and hunger-related causes.
No matter what form our green initiatives take, we all need to follow this example and use our catalogs to get the message out there. It comes down to this: You are doing things. Why don’t you tell people?
– Curt Barry