Sunday, March 07, 2010

Flying Blind: How long before you know what your retail partner has done?

Sam Sellalot, is the head of sales at FoodUlove, the largest manufacturer of soups, sauces, and vegetable juices. He is responsible for all the sales through a large national retailer based in Arkansas. Sales has been going well in this tough environment for the last few quarters and with three weeks left till the end of the quarter, Sam is feeling very good of making the numbers this quarter. If only Sam knew what was cooking ...

The pricing team at the retailer has been looking at the price of products in the dry grocery department for the last three weeks. They have decided that they need to increase the price of the FoodULove soups in all the stores in the southwest and west.  That will decrease the revenue from FoodULove soups, but increase the sales of the retailer private label brand and also increase the margin across the soups category.  Looks like a winning strategy for the retailer and they started rolling this strategy out last week.

Sam Sellalot in the mean time has access to all the store sales data daily. Given all the priorities, he gets his analyst to look at the data only once a month. The analyst will download month worth of data, do a standard report, comparing last with last quarter data and year over year data. Sam liked the end of February report and he just finished sending out the report to headquarters telling them how well things are going at the large retailer. Headquarters is going to continue with their plan to build and stock inventory in anticipation of the usual order from the retailer. Let us not spoil Sam's mood by predicting what he is going to see at the end of the March report.

If only Sam had a simple system that helps him use the data to arrive at decisions! His organization could have monitored the daily retailer data, identified the price change, and calculated the impact of the price change on FoodULove shipments for the quarter he would have been aware of what is happening and reacted to it - either by setting the revenue expectation at Headquarters based on the impact or worked with the retailer to mitigate the impact.

Best of luck, Sam.

Karthik

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