Volume 26 No. 9
September 1993
Printed by permission of Shelby
Publishing Co., Inc.; Publishers of
Shelby Report of the Southeast,
Shelby Report of the Southwest,
and Sunbelt Foodservice.
SHELBY
REPORT
of the
SOUTHEAST & SOUTHWEST
HARVEY'S WEEDING OUT EXCESS INVENTORY
WITH MANAGEMENT PROGRAM
ECR IN ACTION...
by Angela Smith
The goal at first was to
weed out the excessive
inventory that typically
loads store shelves and
soaks
up
inventory
investment. J.H. Harvey
Co., a regional grocery
chain out of Nashville, Ga.,
accomplished that and
much more with a new
space
management
program.
J.H. Harvey, and the
company that assisted in
implementing the program
--Planogramming
Solutions
Inc.
of
Jacksonville, Fl. were
amazed when the results,
gathered from more than a
year's worth of business,
came in from the test store.
The results showed a
significant increase in
return on investment(ROI),
increased turns and higher
sales--with one-fourth less
inventory on the shelves.
"These
are
unprecedented accomplishments,"
noted
Danny
Becton,
president
of
Planogramming Solutions.
Until now, the implementation of most space
management programs has
brought about only singledigit improvements, he
pointed out.
But at J.H. Harvey
inventories were reduced
more than 25 percent, ROI
increased more than 35
percent, turns were up
more than 30 percent, and
sales
per
category
increased
percent.
about
four
A developing process
This didn't happen by
the press of a magic
button," Becton said. It's
taken a lot of hard work
and commitment to the
program--developing and
refining and refining some
more--to create a viable
storewide space management program. But it's
paying off. Becton said,
"These results (came) from
what we feel is the total
commitment to our total
store implementation."
And teamwork played a
starring role, too. The
program has very much
been a cooperative project
between Planogramming
Solutions and J.H. Harvey,
led by President Joe
Harvey III. Together, they
developed
a
viable
program
that
is
orchestrated by the retailer
and maintained by an
independent third party,
Planogramming Solutions.
And it's turned out to be
one of those win-win
situations. The retailer is
responsible for effectively
managing store real estate,
and
Planogramming
Solutions gives them the
technologies, information
and service support needed
to do that.
The project's success
has required a commitment
from J.H. Harvey to
support the project and
adjust to new practices and
procedures. And it has
September 1993
Shelby Report of the Southeast & Southwest
required a commitment from ordering and numerous other
the staff at Planogramming applications.
Solutions to apply their
ideas,
program
and
Building blocks
technologies in a manner
A lot of time and energy
that would work at store have gone into bringing the
level.
project to this point, and
Currently, J.H. Harvey along the way the two
has
all
its
companies have
Harvey's stores "This didn't encountered
set
by
typical
happen by
planograms, and
supermarket
nine have been the press of
"challenges," as
optimized,
or
Al Smith, grocery
a
magic
reset,
for
merchandiser for
button."
optimum
J.H.
Harvey,
performance.
refers to them.
Interactive
---Danny Becton "Really, I don't
communications
at
(the
Planogramming look
now
flow
glitches)
as
Solutions
regularly between
obstacles as much
Planogramming
Solutions as opportunities. Everything
and the J.H. Harvey we've done was something
merchandising
staff. new and was taken in that
Planogramming
Solutions context."
supplies Harvey's merchandIt started with a test store
isers with the movement in Brunswick, Georgia. It
data and reports needed to was one of the chain's
make informed merchand- biggest stores, containing
ising decisions, and J.H larger
merchandising
Harvey
staff
translate sections.
merchandising changes and
To begin with, Becton
new item information back and
his
partner
at
to Planogramming Solutions Planogramming Solutions,
so that necessary changes Bruce VanDerbeck went in
can
be
worked
into and "captured" the existing
planograms.
store set. That is, they
And that's just the recorded the current layout,
beginning. Becton refers to facings, stock, etc. From
the newly-developed system that, they tracked movement
as a foundation that can and gathered store sales
easily be built upon. "In data.
order to build a house,
They made sure all items
you've got to have a that were supposed to be in
foundation. Merchandising each section were accounted
at store level is that for and placed in the
foundation, in my opinion," planogram. Then it was time
he commented.
to begin reworking the
And J.H. Harvey has product mix.
established a solid one.
The standard rule of
Based on the comprehensive thumb that attributes 80
system they've implemented, percent of sales to the top 20
the retailer could now easily percent of items was applied
move
into
automatic and
shelf
space was
reallocated,
cutting
the
excess stock of slow-moving
items to allow additional
space for items that turn
rapidly.
"The goal is to have a
planogram that, if nothing
changes, will create the
greatest potential for sales,
turns and gross profit that it
possibly can for the longest
period of time," said Becton.
That's optimization.
A key factor to successful space management is
being able to always have on
the shelf those products that
are going to sell the most.
"We pinpoint which
items are moving and which
items are not," Becton said.
"The ones that are not
(moving), if you need them
for variety, you're going to
keep them, but you don't
have to keep 100 day's
supply on hand... We cut
that back to a more
reasonable amount," he
noted.
"In optimizing," Smith
continued, "we know what
we're going to move
between the busiest time
Page: 2
considerations
on
duplications and size variety.
But the "big guns" are given
their space first.
Does
that
cripple
supermarket variety? Not in
this case. "Harvey still has a
wide variety of grocery
items," Smith said. The goal
is to have the ideal product
mix for each section.
For J.H. Harvey, which
operates a wide range of
store sizes, sections are one
of four sizes. The largest
store may have a 12-foot
section for a specific
category, while others will
have an eight-foot, six-foot
or four-foot allocation for
that category.
The larger section is set
with 100 percent distribution, with the product
mix being scaled down to fit
the smaller sections. Again,
the top sellers go in first,
variety is incorporated, and
then based on available
space, decisions are made
about duplication and size
variety.
It doesn't make sense to
"These are unprecedented
accomplishments," noted Danny
Becton, president of Planogramming
Solutions.
period and (know) that we're
going to have that much
product on the shelf. That's
where the increase in sales is
coming from."
Where do they find
room? They make room.
The top 20 percent of items
are
worked
into
the
planogram first and given
adequate space to cover
average movement between
deliveries. Then comes
allocation for slower movers
and variety items, and then
try to force into a four-foot
section the same mix you
have set out for a 12-foot
section. The idea is to work
in what will work best. The
slowest moving size of one
brand may be deleted, or the
slowest brand in a certain
size may go. "We'll still
have
every
brand
represented, but we won't
carry every size of every
brand in that small store,"
explained Smith.
September 1993
Shelby Report of the Southeast & Southwest
a
typical
supermarket
challenge.
J.H. Harvey came up
with an innovative way to
keep excessive shelf stock
down to a minimum without
leaving holes along the aisle.
In places where the shelf
holds more than is needed,
the operators have filled
"...inventories were up the extra space with
foam packing to reduce
reduced more than
the depth of the shelf.
25 percent, ROI
''We had to develop
some
kind of straight
increased more than line back,''
Becton said.
35 percent, turns
''Harvey took solid
blocks of foam (spraywere up more than
painted to match the
30 percent, and sales shelving) and built a
false wall behind the
per category
product,
''explained
increased about four Becton. The shelf holds
appropriate,
not
percent."
excessive, supply, since
Supporting that idea, the the stock clerk cannot push
Food Marketing Institute stock past that wall. It was
(FMI) has published a study one of those ingeniously
showing that supermarkets simple solutions.
move less than a case a
month of 40 percent of all
No small task
items, and many move much
Once
a section is set for
more slowly. "Those are the
optimum
performance,
items that create so much
there's
the
challenge
of
stress on the category.
regularly
maintaining
the
They've got to be there for
variety, and the sales you get set. It's an ongoing process,
from them are important not a one-shot deal.
''One of the pitfalls that
sales. They attract different
causes
retailers to not
types of customers and they
succeed
in
(space
have big gross profits,''
management)
is
that
they
acknowledged Becton.
tremendously
underestimate
But enough is enough. If
you pack out a shelf with a the impact of changes
supermarket
slow mover, especially when (within
sections),
and
(they
usually
it's given two facings, you
lack)
the
resources
you
have
easily wind up storing a
to
have
to
keep
up
with
the
years' worth of inventory on
changes,''
Becton
said.
the shelf. "Tell me where the
Each day in the grocery
profitability is in that, "he
business
brings new items,
said.
deletions,
removals,
Grocers don't want stale
packaging
changes.
And
product supply, but neither
each
change
affects
the
do they want sparselyalignment
of
the
category.
stocked shelves. Therein lies
To illustrate the magnitude
Only what's needed
That can sometimes be a
hard pill for manufacturers
to swallow. But it's effective,
as Smith and Becton pointed
out. Forcing too much
product onto the shelves ties
up space and inventory
investment.
Page: 3
of the changes, Becton noted It happens on a monthly
that
grocers
process cycle, and the manufacturer
anywhere from 200-250 new knows that he has to get his
items each month, along item in before the cutoff.
with 100-150 items that are Otherwise, the change or
deleted or removed. The introduction will have to
numbers become even more wait for a month.
Merchandising decisions
astounding considering that
each
category
is
set are handled at the corporate
the
differently for each store level and it's
responsibility
of
the
format.
"Over 525 different manufacturer to negotiate
planograms have to be the space he's looking for .
items
and
maintained for the grocery, New
HBC
and
perishables merchandising changes are
departments. About 225 of worked into the planogram,
those change on average and the planograms are sent
each month within a chain to the stores for monthly set
like Harvey,'' Becton said. maintenance. That becomes
"Obviously, this is no small the plan for the next 30 days.
There are no planogram
task. But this is the
foundation
of
the changes made during store
sets, notes Smith, who heads
technology.''
J.H.
Harvey
Using its proprietary the
computer
system, merchandising team. The
Planogramming
Solutions planogram is set as outlined.
has established a program If a manufacturer's rep "has
that
incorporates
these a problem or disagrees with
changes
in
an
organized,
"The goal is to have a
manageable manner.
The
program
is planogram that, if
supported
by
nothing changes, will
interactive
communication with create the greatest
the
retailer
and
potential for sales,
tailored retail service.
Much more is turns and gross
involved than just
profits that it possibly
drawing
out
planogram pictures. can for the longest
Actually, it's more
period of time, said
like setting up a new
way
of
doing Becton. That's
business.
Structure has
Advantages
optimization."
J.H. Harvey has now
instituted a very disciplined
cycle for the merchandising
process. Manufacturers are
given a cutoff date for new
item
presentations
and
merchandising adjustments.
(the arrangement), they
come see me and we look
over it objectively. If they
have a good, valid reason
we'll change it. It'll go out in
the next set of planograms.
But we don't change
anything at store level,"
Smith stressed.
September 1993
Smith encourages input
and participation from all
manufacturer
sales
personnel, as they are the
experts on the particular
products they represent.
Smith wants them to come in
and share ideas so they can
together explore the best
merchandising plan for the
product. But the reps have to
work within the process or it
can throw a wrench into the
works.
Planograms
are
maintained to such precision
that J.H. Harvey is able to
print shelf tags in sequence
by the planogram. But to do
that, everything must be in
order. Order--a carefullydeveloped planogram-has a
number
of
benefits,
including
shorter
time
periods spent on store sets,
and immediate identification
of errors or variations from
the planogram after the
section is set.
Shelby Report of the Southeast & Southwest
In this manner, the
category
is
continually
evolving under an organized
plan. The store level set can
be monitored and analyzed
consistently.
One of the benefits that
had evolved from this
process is, surprisingly
enough, an ability to get new
items onto the shelves more
quickly than before. As soon
as a new item is approved,
space allocation is figured
into the monthly planogram
cycle. A spot on the shelf is
available and waiting when
the product is delivered to
the store. The new product
goes right onto the shelf,
rather than into a backroom
where it would sit until
space could be cleared.
Also, because the new
item is being incorporated
into
an
organized
planogram, it can be
positioned for the best
chance at success. ''The item
always goes where it
belongs and always gets its
facings... It's going to get a
fair test here, ''said Smith.
''New items really get a
chance to show what they'll
do. ''J.H. Harvey tracks new
Page: 4
Planogramming Solutions so
they can make better
merchandising
decisions;
controls that eliminate or
catch inefficiencies, etc. It's
definitely a big step forward
for J.H. Harvey.
"Based on the comprehensive system
they've implemented, the retailer
could now easily move into
automatic ordering and numerous
other applications."
items for six months.
A priority for J.H.
Harvey in developing this
program has been to get 100
percent distribution for new
items. That has been
accomplished.
There are many side
benefits that have evolved
from implementing this new
space management program,
too:
detailed
feedback
supplied to J.H. Harvey
merchandisers
from
For
Planogramming
Solutions,
the
space
management program with
J.H. Harvey has also had its
share of benefits. The
company recently signed a
contract with its second
account and is starting to
work a project with a
specialty grocer,
Fresh
Fields Markets, Rockville,
Md.
Shelby Report of the Southeast & Southwest
September 1993
Page: 5
PUBLISHER...
ECR MEANS GETTING BACK TO BASICS
FROM THE
E
CR. What
a concept. You buy the goods
that the people want and put
them on your store shelves. is
that not brilliant? You've got to
kick yourself around the office
for not thinking of it yourself.
Well, it seems people are
confused. We had a call the other
day from someone "hungry for
information" on ECR. He was
"looking for concrete information" on why and what the
retailer is supposed to be doing.
Efficient Consumer Response.
Think about what it means. You
respond to the shopper not the
manufacturer. You tell the
manufacturer, in essence, what
the people are buying, what you
need from him. He in turn
presents you with his consumer
studies, with alternative products
that may suit your shoppers'
needs, etc. The point is, you two
are discussing the consumer, not
what kind of deal you can make
on a couple of cases of pole
beans.
Forgetting how complicated
this discussion on ECR could
get, the main thing to do is
concentrate on how simple it is.
It is a reversal of a process that,
like many things American, has
gotten out of hand. The art of the
deal has replaced the essence of
the deal--dealing for the sake of
dealing. Dealing takes place in a
vacuum, far from the madding
crowd.
ECR is just a logical effort to
rein in a runaway truck full of
deals, to come back from la-la
land and get down to business.
Walmart is already doing it and
so are many others.
There is no set method for
streamlining the process of
buying and selling. The idea is to
get back to basics. Buying and
selling to customers. To say to
yourself, "We will make the
decisions on what is best for our
stores."
This is the approach taken by
regional chain J.H. Harvey,
based in south Georgia, whose
story you will find starting on
page one. This is one of many
companies whose leaders see the
logic of building back into the
system efficiencies they lave lost
over the years.
Not all retailers want to
assume
power
in
their
relationships with suppliers, said
Daniel A. Becton, who has
helped implement the new
program at J.H. Harvey. "Some
still leave the planogramming
process 100 percent in the hands
of the manufacturer."
That may be necessary or
even preferable for some, and we
can't
argue
with
their
circumstances. But for others it
is time to take the initiative and
implement some changes. That's
where the "response" comes in.
In our rugged competitive
environment, you've got to
respond efficiently to the
consumer.
It may be easier for regional
chains-- which have clout in
their areas but at the same time
flexibility
within
their
organizations -- to get the ball
rolling than for huge chains that
are spread all over the map or
small independents that have
minimal personnel and financial
backing. ECR means taking
control of store space, it means
working from the bottom level
(the store) towards the top (the
manufacturer) instead of the
other way around. Initially there
will be some sort of cost
involved, whether that means
hiring more people to manage
space or expanding jobs that
previously were isolated from
the process. It could mean losing
out on some deals.
But proponents say in the long
run everyone wins when you
start making decisions based on
what's selling. They say the
investment is worth it.
The rallying cry we're
hearing, for those who have ears
to hear, is "Learn to merchandise
your stores!" Truly a magnificent
concept.
-------Gary
G. Shelby