The Supply Chain

English: An illustration of a company's supply chain Deutsch: Darstellung der Lieferkette eines Unternehmens (Photo credit: Wikipedia)

In today's retail environment, it is more critical than ever that your supply chain functions properly to insure that your stores have the proper mix of merchandise available both in the store and available for delivery to your customer.

However, even in the best of companies problems can occur in the supply chain whether there is one store or many. It is vital that the supply chain functions properly but problems do occur.

Here are some examples of supply chain failures that I have observed recently:

1. Over the last few years a major chain has created a new format of stores that are smaller than their tradition store. However, the people who were in charge of the program have moved on  leaving the small stores to be treated the same as large stores which means they are getting the same amount of merchandise as the large stores despite their lack of space both for merchandise and back stock. 
2. Stores in one company are once a week receiving a large amount of seasonal product after the season has ended but not a random selection of items but a large amount of one item. In some cases the stores receive a seven or eight year supply of product. 
3. In another store I scanned product to see how many weeks of a slow selling product a store has on stock and their inventory system calculated that there was a 4300 WEEK supply of the product on the shelf. No that is not a typo, the store was sent an 82 year supply of a product that will expire in less than a year. 
4. Stores that are over stock on merchandise for a certain season but have many empty shelves in their everyday aisles. 

While these are some extreme examples you could probably find these type of problems at almost any retail business. What is most distressing is the amount of money that this is costing stores and affecting their customer service. 

Here are some places to look when you evaluate the performance of your supply chain: 

• How are the sales matching the amount of product being ordered. Are the buyers ramping up on seasonal merchandise while ignoring the important basic items that your customers are going to be looking for? In addition are the buyers purchasing the right mix of merchandise on a consistent basis? Even the best buyers have hits and misses when it comes to purchasing merchandise but if there is too many misses and not enough hits then there is a problem. 
• Are you receiving the product from your suppliers in a timely matter and if problems do occur how well do your suppliers take care of the problem or do they pass the buck? 
• Is the warehouse whether run by the company or by a 3PL logistics company dumping product into stores that should not be receiving it in order to make their operation look better? How well does the product being shipped out match with sales history and with the up coming promotions that are being run? 
• If your operations has multiple styles of stores does your supply chain calculate properly the proper amount of type and amount of merchandise that should be shipped to each store depending on their sales and size? 
• Are the stores that receive to much merchandise or the wrong products for their format taking care of the product in a timely matter either by shipping it to a store that needs the product or finding room in their own store to merchandise it or is it sitting on some backroom shelf until it becomes a clearance item? 

These are just a few examples of things that should be looked at to solve supply chain issues. In today's connected marketplace customers are expecting more than ever to find the product they are looking for quickly and easily or they will go somewhere else so it is vitally important to insure your supply chain is function properly and the stores are being stocked with the right products. 

How well is your supply chain functioning? 

Fiat Changes Chrysler's Direction.

Chrysler New Yorker photographed in College Park, Maryland, USA. Category:Chrysler New Yorker Fifth Avenue (Y-Body) Category:White Chrysler sedans (Photo credit: Wikipedia)

Dodge Intrepid photographed in College Park, Maryland, USA. Category:Dodge Intrepid (first generation) Category:White Dodge sedans (Photo credit: Wikipedia)

1993-1997 Chrysler Concorde photographed in USA. (Photo credit: Wikipedia)

In previous postings I talked about your marketing niche and your place in the marketplace and how difficult it can be to change that niche or marketing group. Today I am going to look at one of the major players in the auto industry Chrysler whose parent company announced a couple of months ago what their product direction is going to be and see if they are making the right or wrong decision in the long run.

Chrysler has been down a very rocky road over the last 35 years. After almost going bankrupt in the 1980's it came back with vengeance only to fall back into mediocrity again.

It was then acquired by Daimler the owner of Mercedes which produced mixed results with some award winning products but misdirection elsewhere. Then came the disastrous sale to Cerberus which Mercedes sold ownership but had control over the products offered by Chrysler and finally the government bailout and sale to Fiat.

Recently Fiat has announced how it intends to move forward with its Chrysler Division and re-image the nameplate that has suffered for several years. Fiat plans to change the marketing direction of the division to increase sales.

For those not familiar with the brands, Chrysler was supposed to be the luxury brand, Plymouth the volume and lower end brand, and finally Dodge was originally the middle brand between Plymouth and Chrysler (there was a fourth brand Desoto that was slotted between Plymouth and Dodge before that brand was discontinued in 1960). Shortly after Chrysler was acquired by Daimler, the Plymouth brand was dropped then in 2009 Dodge trucks became the Ram brand. The Dodge Viper which was the performance superstar of the Chrysler lineup was to be the star of a new brand called SRT which were the sport trim levels on several Dodge cars but they have since been put back under the Dodge umbrella.

The first major change will be that Chrysler brand will become the volume nameplate of the division. Car buffs are howling over the decision that turns what was once the luxury brand of Chrysler Division in the volume leader. However, any thoughts of Chrysler being a true luxury brand went out the window years ago and especially after the 90's when cars such as the Chrysler New Yorker was built on the same LH platform as the Dodge Intrepid with little to tell them apart other than the front grill of the car. It appeared that Chrysler was following the bad example of General Motors of the 80's and 90's instead of other companies who were more successful at creating unique luxury cars that stood apart from their more common brethren.

At this point in time there is few car buyers out there that think of Chrysler as a luxury brand beyond some that do like the one shining star in the Chrysler lineup and that is the 300. Now Fiat does not intend to completely abandoned the luxury market, instead it is bring back Alfa Romeo to the United States to sell the upscale cars. Analyst are questing whether the Alfa Romeo brand will be able to take a bite out of the luxury car market from other better known brands.

Next Fiat intends to make Dodge the performance brand which has been off and on for years. The new Challenger Hellcat is an example of the future of the division. The Dodge Caravan will be eliminated in favor of the Chrysler Town and Country. Once again there is little difference these days between the two vehicles as both are the work horses of the rental car fleets. As mentioned above the Dodge Viper is back and the Dodge lineup will see more performance oriented cars.

Some of the most aggressive plans Fiat has involves the Jeep nameplate that Chrysler acquired more than 20 years ago and has been one of the bright spots for Chrysler. While the Patriot and Compass vehicles have not won over car enthusiasts or buyers, the new Jeep Cherokee seems to be a winner giving the every day drive what they are looking for in a vehicle but still offering its core enthusiast a model that makes them happy in the Trailhawk edition. Fiat also intends to take Jeeps unique niche globally by expanding its reach in Europe and Asia. They also intend to build a new large sport utility vehicle and reintroducing the Grand Wagoner name to go head to head in the larger SUV market.

There is also smaller plans for the RAM division. The new ProMaster which is a full size front wheel drive cargo van has already arrived and plans are for a smaller cargo van called the ProMaster City to compete with the likes of the Ford Transit Connect. Beyond that their bread and butter pick up trucks that have taken a big bite out of General Motor's market share over the last few years will get updates and then new models over the next few years.

It will be interesting to see how Fiat's plans will work out. As I have mentioned numerous times it can be extremely dangerous to radically change your core market too quickly as both Nordstrom and Wal-Mart found out a few years ago. However, in this case the Chrysler brands with the exception of Jeep the brands have been so marginalized over the last 35 years the change in direction will most likely not hurt Fiat in the long run. With that being said, what Fiat needs to do now is produce cars that excite the marketplace and bring buyers into the showrooms and that is going to be a tough sell.

Just a note of disclosure: I worked for a division of Chrysler for 5 years and have previously been a shareholder of Ford.

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Promote or Hire?

Image via Wikipedia
I hope that you are finding these what if human resources scenarios helpful. Here is the next one that is very common today:

You need a new person in management.

The first candidate already works for your company. This person is extremely hard working, has the respect of the other employees and is considered a leader. People already come to him to find out how to do a project and look to him to solve the problems.

The second person is straight out of college and just got a degree. However, this person does not have any real work experience. The only job this person has held is working for his father.

In many big companies today, the second person would actually have a better chance at the job and would be offered a higher rate of pay that the first one. Many companies look to get people fresh out of school so they can be trained the company way.

The problem of course is this second person has no work history. You cannot tell if this person will have a good work ethic. You cannot tell if this person is book smart but has no common since. In addition you will have to spend more money training the person.

The problem with many large companies these days is that they will hire from outside the company and pay that person more than someone being promoted from within. That creates a cycle in many industries such as retail where people will leave company A to move to company B because they will be paid better than getting promoted by company A.

In the long run you have a drain of talent and higher training cost because you are loosing good people that should be promoted and hiring unknowns from the outside world. Of course many people will look at this scenerio and go that makes no sense and it doesn't.

Once again this is where smaller and small businesses have an advantage. You do not have the archaic hr systems that make this illogical situation common place. If you have someone in your business that shows the talent for the position then you should promote that person and give them the pay that encourages that person to stay long term.

There will be times when you have no one qualified for the position, then you look to hire from outside. The most important aspect of this situation is to get the best person for the job. The person that will benefit your company and help take you to the next level.

LinkedIN and your business

Image by M. Keefe via Flickr
Over at the smallbiztechnology blog they have great starter information for someone looking to build their business by getting involved in social networking and specifically LinkedIn.

LinkedIn is a social networking site that focuses on business relations and is good way for small business owners to get their name out and make contacts that could increase your business.

One thing to keep in mind when it comes to social networking is that there is paradox when it comes to them. If you are looking to help your business you need to study the network and find out the best places to sign up for and get involved.

However, too many people end up spending too much time on the social networking sights and it comes at a cost to both personal and business. Therefore you need to walk a fine line between using the networking sight enough to bring attention to your business but not too much time that you are actually wasting time.

One of the suggestions that the blog makes is to get involved in groups after thoroughly researching them. Groups are a good way to gain information but you must thoroughly research the groups so you are not wasting time on a group that is not going to benefit you. One possibility would be to join some groups and see what you get out of them.

There is a lot to be gained by getting involved in social networking. However, you must make sure the time being spent is paying off for you in the long run and not just wasting time.

Making Your Store More Appealing

Image by lumierefl via Flickr
Having a pleasing appearance to your store is very important to attract new customers and to keep existing ones. I have stated in the past that even a coat of paint on a regular basis will help make your store more appealing.

Here is a article from a New York newspaper that has even more ideas on making your store look more appealing to increase your customer base:

For retail stores, decor can seal the sale

How are you laying off your employees?

Image by Getty Images via @daylife
Sadly during these economic times, small and big business owners alike must make the difficult decision to lay someone off. The smaller the company, the more difficult the decision can be. How you handle the situation says a lot about you and your company and could affect how people view you in the future.

There is a right way and a wrong way to deal these situations. Too often businesses will try to avoid paying higher unemployment taxes by avoiding the layoff and using other less ethical means to get rid of employees. I am going to give you some sad examples and one good example of how to deal with the situation. The first couple of situations are just acts of poor management. The other examples are worst as the just tend to be down right unethical.

Some of these examples happened to me personally and others are ones that I am aware of.

The first example happened to me shortly after I was out of college. I was working for a company out of Charlotte, North Carolina that was allied with one of the major automobile manufacturers. The economy was in recession so layoffs were necessary. The main manager of the business was the son of the owner and his wife was the human resources manager. No conflicts of interest there but then again it was a smaller business.

However, as I said the son did not have many leadership skills and was in the position because of his father. When the time came to lay off employees he did not have the guts to actually face the employees and tell them. Instead he made one the employees who was not being laid off and not in a real position of management to do the dirty work while he and his wife watch from a corner office. If you need to lay off an employee have the decency to do it yourself and do not make someone else do your dirty work.

The other incident actually made headlines when a major retailer laid off a large number of employees a few years back. However, the company got plenty of bad publicity in the way they handled the situation. Instead of telling the employees directly that they were being laid off the company sent them all email notices that they not longer had jobs and were to leave the building immediately. At the same time police officers came into the building to escort them out. Not a good way to handle a lay off.

While the first two examples is nothing but cowardliness and poor management, the rest of the examples are just outright unethical.

At a Oregon photography store, a person is hired to be a manager when the company opens the new store. However, what this person does not know is that he is only being hired until the owners son's best friend can take over the store and run it. After about a month the person walks into the store to buy some stuff on the persons day off to see the friend in the store. The son's girlfriend sends him to the backroom while the employee is told he no longer has a job. To top it all off they are late getting the last check to them and refuse to return some important contact information.

In another situation two locally owned security companies located in the inland northwest region of Washington & Idaho were merging. The company taking over the other promised to bring on a couple of long time employees of the other company which meant that they had to get rid of one of their employees. To avoid paying higher unemployment taxes the company spent several weeks trying to make this employee leave by making this employee feel as though the employee could not do the job. In the end they called the person and told him he was fired because of a customer complained that he followed company procedures on dealing with an alarm situation. It just happened the employees from the other company started that day.

Finally there was a employee working for a retailer and he was transferred to another state with a written agreement that if this person stayed for one year the company would move him to another location. However, new management was brought in and when the company was about to close down the stores in that region, they fired the employee in an attempt not to pay for his move to another area.

On the other hand I have to give credit to Gateway Computers. When they were suffering from the affects of the Y2K sales slump, they gave the employees the option of either being transferred to another division or getting and severance package. This way the employee had the choice of what they wanted to do.

As I said many of these examples are down right unethical. There is a right way and a wrong way to handle these kinds of situations and the better you handle them, the better your surviving employees will feel about you and your company. The last thing you want your employees that are staying to see is you mistreat the employees you let go.

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Are you too Dependent on Assessment Tests?

Image by Holtsman via Flickr
It seems that many company these days are doing assessment test to check the quality of not only candidates applying for jobs in the company but also to see how well a potential employee would be when being promoted. However, it appears that some companies are almost becoming too dependent on them and in some cases taking them as the be all, do all system for evaluating employees. The problem is, like anything assessment tests are not foolproof and if not taken in with other factors could cost the company in the long run.

Let me give you an example I recently dealt with. Two people at a company have applied to be promoted.

Person A is currently a department manager, has a desire to achieve, has good results, is the leader in sales in the store and works with other employees to improve their numbers. This person also has the respect of the staff and this person is one of the first people they come to in the management staff. Not only does this person have the respect of the fellow employees, everyone above this person through the district manager wants to see this person promoted.

Person B on the other hand had to loose their department management position because they could not perform the duties of the job. In addition this person has show no initiative to improve themselves and has no respect among coworkers. In addition this person caused a $1200 loss to the company because of not paying attention to what they were doing. The only reason this person wants to promoted is to make more money. In addition store leadership does not consider this person to be reliable.

Who would you promote in this situation?

Well the assessment test shows that person B should be interviewed by the company for promotion and not person A. Because this is a big corporation that has the habit of running like a dinosaur at times, the company will interview person B but cannot go beyond the assessment tests and promote person A despite the fact they are the better candidate.

Of course the ultimate result will be that there is a good chance that person A will ultimately leave the company by finding a better position with another company possibly a competitor. On the other hand if the company actually promotes person B just because of results from the assessment test, most likely that person will fail at the position and either way, the company loses.

So while assessment tests may give you a look into an employee, you need to have a system sets up that lets you go beyond the results of an assessment test to insure that the right person gets promoted.

Who Needs Venture Capital?

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The New York Times Small Business Edition has a great article about Elizabeth Charnock who is running a start up company in the Silicon Valley area but is doing it without venture capital.

Bootstrapping a Start-Up in Silicon Valley

There is some great lessons to be learned from this article.

Don't Battle over Price

Image by TheTruthAbout... via Flickr
Thanks to the influx of discount store, it seems like everyone has reduced themselves to trying win customers over price. How many times do you see that someone has the lowest prices, guarantees the lowest price or will match any price.

The Small Business Branding Blog points out that if you try to fight on price, then you reduce yourself to a commodity and as a small business you will loose against the big boys.

Lowest Price Guaranteed – All The Way To The Bottom

As the blog points out, instead of battling on price find ways to create value with your customers. Now there is always going to people who only look at price (but these are the same people who complain about a lack of service and the poor quality of products they buy). As a small business owner you want to concentrate on the customers that can see value in doing business with you.

As a small business owner the biggest advantage you have is to provide better service and better services than someone could receive in a big box store. What kind of services you can provide your customers will depend on what type of business you are in.

One way to find out what your customers would like to see is to ask them. They will be glad to tell you what additional services would make you stand apart. Also look at the business news and find out what the big retailers are dropping such as Layaway programs.

Once again it comes down to finding your niche and making sure you are setting yourself apart from the competitors, not on price but on service and services.

Checks and Balances

Image via Wikipedia
If you are a single person operation, you don't have to worry about checks and balances when it comes to finances and your business, but once you hire employees you need to ensure that you have checks and balances as a firewall to an employee robbing you blind.

A couple of weeks ago I talked about an employee that ended up steeling $10,000 from a company simply because they did not check peoples bags as they walked out the door.

Many small business owners do not want employees to think that they are not trusted so they do not put in necessary checks and balances to protect themselves against theft. You need to create a balance between protecting your employees and creating an environment of trust.

Here are some examples of creating checks and balances in your business.

If your company has credit cards (I recommend debit cards), either assign a card to a specific person. If you only have one card to go around, have employees sign the card in and out and if something shows up on the bill that you have no receipt for, you will know who had the card at that time and talk to that person.

Checks should require two signatures to be valid. Another alternative would be to put things such as utilities on EFT so there taken out of your account directly. This will require you to check the bill and make sure there is funds in the account to cover it, but then you are writing fewer checks and there is less chance that one will fall into the wrong hands.

Bag checks are another easy way to deter theft. If your employees know that their bags will be check when leaving the store, they are less likely to put something in there that does not belong. You will need to check the rules in your jurisdiction to see what rules you will have to abide by to avoid costly litigation.

Another big area that is becoming a concern is computer usage. Do you have employees spending more time surfing the web instead of performing important tasks? While this may not be direct theft the employee is still stealing from your business because you are paying them but they are doing personal things on the computer. Computer monitoring software could be a wise investment to insure your employees are doing what they should.

These are just some basic ideas to protect your business. It is not an all inclusive list but hopefully it will give you some ideas to keep money from walking out the door.

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