Good intentions can often lead to unintended consequences. – Tim Walberg
Retailers with brick and mortar operations are always trying to keep the checkout lines moving and get customers out the door as quickly as possible. Many collect time stamps on their sales transactions in order to measure and reward their cashiers based on how quickly they can scan.
Similarly, being able to receive quickly at the back of the store is seen as critical to customer service – product only sells off the shelf, not from the receiving bay or the back of a truck.
This focus on speed has led to many in-store transactional “efficiencies”:
- If a customer puts 12 cans of frozen concentrated juice on the belt, a cashier may scan the first one and use the multiplier key to add the other 11 to the bill all at once.
- If a product doesn't scan properly or is missing the UPC code, just ask the customer for the price and key the sale under a “miscellaneous” SKU or a similar item with the same price, rather than calling for a time consuming code check.
- If a shipment arrives in the receiving bay, just scan the waybill instead of each individual case and get the product to the floor.
These time saving measures can certainly delight “the customer of this moment”, but there can also be consequences.
In the “mult key” example, the 12 cans scanned could be across 6 different flavours of juice. The customer may not care since they're paying the same price, but the inventory records for 6 different SKUs have just been fouled up for the sake of saving a few seconds. To the extent that the system on hand balances are used to make automated replenishment decisions, this one action could be inconveniencing countless customers for several more days, weeks or even months before the lie is exposed.
The smile on a customer's face because you saved her 5 seconds at the checkout or the cashier speed rankings board in the break room might be tangible signs of “great customer service”, but the not-so-easy-to-see costs of stockouts and lost sales that arise from this practice over time is extremely costly.
Similarly with skipping code checks or “pencil whipping” back door receipts. Is sacrificing accuracy for the sake of speed really good customer service policy?
A recent article published in Canadian Grocer magazine begins with the following sentence:
“A lack of open checkouts and crowded aisles may be annoying to grocery shoppers, but their biggest frustration is finding a desired product is out of stock, according to new research from Field Agent.”
According to the article, out of stocks are costing Canadian grocers $63 billion per year in sales. While better store level planning and replenishment can drive system reported in-stocks close to 100%, the benefits are muted if the replenishment system thinks the store has 5 units when they actually have none.
Not only does this affect the experience of a walk-in customer looking at an empty shelf, but it's actually even more serious in an omnichannel world where the expectation is that retailers will publish store inventories on their public websites (gulp!). An empty shelf is one thing, but publishing an inaccurate on hand on your website is tantamount to lying right to your customers' faces.
We've seen firsthand that it's not uncommon for retailers to have a store on hand accuracy percentage in the low 60s (meaning that almost 40% of the time, the system on hand record differs from the counted quantity by more than 5% at item/location level). Furthermore, we've found that on the day of an inventory count, the actual in stock is several points lower than the reported in stock on average.
Suffice it to say that inaccurate on hand records are a big part of the out of stocks problem.
Nothing I've said above is particularly revolutionary or insightful. The real question is why has it been allowed to continue?
In my view, there are 3 key reasons:
- Most retailers conflate shrink with inventory accuracy and make the horribly, horribly mistaken assumption that if their financial shrink is below 1.5%, then their inventory management is under control. Shrink is a measure for accountants, not customers and the responsibility of store inventory management belongs in Store Operations, not Finance.
- Nobody measures the accuracy of their on hands. It's fine to measure the speed of transactions and the efficiency of store labour, but if you're taking shortcuts to achieve those efficiencies, you should also be measuring the consequence of those actions – especially when the consequence so profoundly impacts the customer experience.
- Retailers think that inaccurate store on hands is an intractable problem that's impossible to economically solve. That was true for every identified problem in human history at one point. However, I do agree that if no action is taken to solve the problem because it is “impossible to solve”, then it will never be solved.
It's true that overcoming inertia on this will not be easy.
Your customers' expectations will continue to rise regardless.