“A DART AT THE BOARD”

from Bicycle Retailer and Industry News Column

February 2012

I was in the middle of updating my 2012 budget the other day and it occurred to me that I was just kind of throwing a dart at the board to a large degree. Yes, I have historical numbers and trends to go off of, but in the end I am making a leap of faith on what is going to happen. I don’t think what I’m doing is any different than what countless sales managers and product managers are doing around our industry on a daily basis. So it begs the question “whose crystal ball is the clearest?”

As an industry it’s my opinion that we really do a terrible job of managing our inventory. From retail to supply there is a huge disconnection and as of today the problem hasn’t really been addressed. The solution of course to making better forecasting decisions is to know exactly what you are selling today so you can order more or less tomorrow. As a retailer, you can go to the shelf and see that you sold a product and order more on a daily basis from multiple suppliers in many cases. But as a supplier, it becomes much more complicated. You have 90 to 180 day lead times from date of order with your factories in many cases, you might have multiple warehouses to keep in stock, and because it’s a new product you may not have historical numbers to base your orders on. So how do you know what to order? 

Well you have a few options to choose from:

• you can look at similar products for comparison purposes
•  you can demand detailed pre-season orders from your dealers, which we all know how they love to do
•  you can access industry data that is available today, but is often slanted in its value based on the contributors and is usually too late to help you
• or lastly, you can trust your gut which we all know how well that can work out

None of these solutions are really ideal. As suppliers you are being asked to guess right for your retailers and over commit to inventory that may or may not flow through the way you have brought it in. To me, this is a fundamentally flawed model, which ultimately leads to overstock situations at retail and wholesale and significant margin erosion for both parties.

So what’s the long-term resolution? The right way to look at this in my opinion is sharing data between retail and supply. Retailers need to share what is happening at the cash register with their suppliers, so they can better plan the inventory needs. The fear of suppliers taking advantage of having this data just simply needs to be put aside and gotten over by retailers. If you don’t trust that supplier, get the assurances in writing that they won’t re-sell the data and if they do, then don’t do business with that supplier anymore. There are companies out there providing these services for suppliers and the information flow from retail POS to suppliers is seamless.

I know nobody wants to hear about our friends at Wal-Mart and Target, but we really should give it consideration as they seem to have figured it out quite some time ago. They demand 95% – 98% fulfillment rates with their suppliers and they get it. Why? Because they share their sell-through data by sku, by store, by the minute with their suppliers. It is a true partnership and a model that we as an industry could do well to imitate.

Pat Hus

Managing Director/Vice President

Interbike/Health and Fitness Business