December 17, 2010
'Good, better, best' is dead!
What size proliferation had done to inventories
By: Wayne WIliams
Thirty years have brought a lot of changes, a lot of choices, a lot of complexity, and it’s moving towards chaos.
We’ve come a long way since 1980. It doesn’t seem that long ago, but I remember selling tires at the retail sales counter and it went something like this: “Mrs. Smith, I have three tires to choose from today. I have a 40,000-mile tire for $40, a 50,000-mile tire for $50, and our best tire is a 65,000-mile tire for $65!”
Usually, all of these tires came from a single supplier, either factory direct or from our local distributor. When we sold them, we reordered them; simple. Even if we were out of stock on the $40 tire, at least we had the $50 tire to sell. Back then many vehicle manufactures used the same size tires. Most cars were built in Detroit, the Big Three they were called; GM, Ford, and Chrysler. A 195/75R14 fit a lot of cars.
Sometimes our supplier was back-ordered on the $40 tire because they were updating the mold, or moving the mold, or fixing the mold, all to “improve” the supply at some “promised” later date. Sometimes the supplier would offer the $50 tire at a discount until supply improved on the $40 tire. Usually, the supply improved in a relatively reasonable amount of time, and we continued to sell tires in the “good, better, best” format.
In 1980, the “magic” number was 102. That 102 represented the number of SKUs required to have 80% coverage for the types of vehicles on the road. 1990 rolled around and the “magic” number more than doubled to 211. And finally, the new millennium hit, along with 140 more SKUs, bringing the total “magic” number to 352! Well, I don’t have to tell you that the changes and the choices have added complexity to SKU inventory management!
I’m a car guy. My dad worked for GM for 42 years. He started on the assembly line, fitting bumpers on ’54 Buicks, and retired a plant manager. Cars are in my blood. It used to be Chevys and Fords, but now brands are coming from every corner of the globe with names and numbers, like A4s and Z4s, with every conceivable size tire with special compounds, vehicle-unique sizes, vehicle-unique tread patterns, staggered fitments, run-flats, etc. These changes have added immensely to the complexity at the retail sales counter.
We can no longer say to Mrs. Smith, “I have three options to choose from in stock today.” Nor can we say, “Mrs. Smith, I have several options for your staggered fitment Mercedes SL Class, sizes 255/40R18F and 285/35R18R.” Instead, the sales staff utters these famous words that are becoming more and more common every day: “I don’t have your size, but I can get ‘em.” They say this with confidence, but in their minds they are not so sure! The question becomes: “Where and when?”
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