retail news in context, analysis with attitude

by Michael Sansolo

A crisis, the likes of which we are having now, is incredibly disruptive, awful and frightening. In a strange way, it is also a gift.

As even Psychology Today has written in the past, a crisis can be positive if it improves our focus on what’s most important and in how it creates the opportunity for dramatic improvement. Let’s hope that dramatic improvement is what will be coming whenever we emerge from the current situation. We need some positive thoughts after all.

For possibly the first time ever, consumers are becoming aware of the importance of supply chains. In the very recent past, it was simply assumed that supermarket shelves would be constantly teeming with goods whenever any shopper decided to visit. Out-of-stocks were always an issue, but frankly were incredibly rare.

No one gave much thought to all the incredible parts of the supply chain from truckers to warehouse workers to store clerkS dutifully refilling shelves. For good reason, those same workers (and others) are now seen as heroes.

But again, a crisis can give us the chance to innovate like never before.

There’s been interesting discussion here at MNB on the role the somewhat slimmed down supply chain played in product shortages in recent weeks. However, I find myself in agreement with FMI president Leslie Sarasin, who recently commented that the issue was more related to the sudden shocking increase in demand for specific products, rather than any fault in the supply chain.  (To be fair, several people interviewed here on MNB in recent weeks have argued the opposite - that the industry should have been better prepared to meet increased demand.)

Let’s remember that the industry supply chain is a constant work in progress. Twenty-five years ago, I had the good fortune to be working at FMI on the massive efficient consumer response (ECR) initiative, which frankly I wish had lasted a lot longer.

ECR started when the traditional industry questioned how then-upstart competitors (Costco and Walmart) were able to offer such incredibly low prices. An enormous industry study was produced with the expectation of finding favorable deals for the new players. What it found, instead, was the lower prices were largely the result of far greater efficiencies in the entire supply chain.

So ECR (an effort that involved hundreds of executives from all parts of the industry) set out to help improve efficiencies in replenishment, assortment, promotions and new item introductions in hope of eliminating bloated inventories and making companies more responsive to consumer demands.

In the face of incredible shopper patterns (or hoarding) in the past month, it might make some nostalgic for a less efficient supply chain. But we need remember that back in the mid-1990s, consumers voted with their shopping dollars to those companies who ran leaner. So a return to inefficiency is not an answer.

Instead, we have to hope that this crisis creates renewed focus in supply chain improvement, such as addressing SKU proliferation. And more.

In the past two weeks, MNB had a wonderful story about how H-E-B, one of retail’s best operators, managed to cope with the explosion of demand better than most. As the article from Texas Monthly outlined, H-E-B basically created an early warning system, alerting the company to coming shopper crunches and helping the company bulk up key inventory to meet expected demand.

No doubt, history with hurricanes and floods in Texas have helped H-E-B improve that system.  Likewise there are retailers in other parts of the country whose experiences with wildfires, earthquakes, tornadoes, snowstorms and more have created similar institutional knowledge and a playbook for an unforeseen crisis like the one we have today.

Nothing will make the current worries any less exhausting, but at least let’s have the hope that good things will come from it. As a Stanford economist Paul Romer once said, “A crisis is a terrible thing to waste.”

Let’s not waste this one.

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com.

His book, “THE BIG PICTURE:  Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available here.

And, his book "Business Rules!" is available from Amazon here.