Having been invited to speak on Day 3 of Retail Risk – Sydney, I thought it would be a good idea to watch Day 1 to see what our antipodean friends were up to…
I am glad that I did.
One speaker suggested that risk management in many Australian retailers was a bit like “whale watching.”
The inference was that risk managers in Oz were reacting to situations rather like tourists on a whale watching boat. Somebody shouts, “look over here” and everyone rushes to that side of the boat. Then another shout goes up, “look over here” and everyone rushes to the other side, to see what can be seen. The result is pandemonium and instability. And I have to say I think the analogy holds good for us here in Europe.
The fact of the matter is that, as we have been experiencing a constantly shifting retail landscape (or should that be “seascape!”) many risk managers simply spend their time rushing from one crisis to another…
For example, we have massive growth in the amount of sales to be fulfilled by our distribution centres. So the race is on to source and get product out of the door as fast as possible. Then three weeks later we have a tsunami of products being returned by customers and we need to receive, process, quarantine and book these back into stock.
The need to process returns creates a shortage of warehousing space and so the hunt is on for any way that we can radically expand our storage capacity at exactly the time when it transpires that we do not have enough people available to carry out the tasks that the business needs completed with our existing scale.
Then the expansion of storage leads to a massive recruitment drive and thence to inexperienced personnel and perhaps the infiltration into the organisation of undesirable employees. And that can created a multitude of problems including increased shrink and ORC penetrating the organisation.
And that got me thinking. How is any retailer to cope with the ebb and flow of demand, the shifting sands of LP where what was going to be forever true one day is a hopelessly out of date strategy the next?
All of the attention around LP On Demand has been about cost savings for retailers. The basic concept being that by cutting waste and avoiding built in obsolescence, which is a virtue of shared resources, we are able to significantly cut costs for retailers whilst at the same time improving service and demonstrably driving down shrink levels.
However, what if your problem is not all about costs? Of course no retailer wants to pay more than is necessary, but at a time when retailers are evolving at rapid rates caution is being thrown to the wind in the pursuit of sales. Just look at the rapidity of channel expansion…
Many retailers are sailing into uncharted waters with their multi-channel operations. Some are doing business over WhatsApp or WeChat. They have introduced virtual trading direct with consumers through live streaming and then subsequent kerbside delivery. None of this has been done before. And whilst risk management departments will doubtless have had some input, we do not know what the dangers are going to be, where the business could be under attack from mistakes or crimes. We will not know that until we have empirical data against which to assess the risks. And of course, everyone is learning from their own experiences because speed is of the essence and there is no time to discuss these things with peers through industry meetings, conferences and events.
Throwing an organisation into new channels of trading is a gamble. That may be a calculated risk but, depending on the need for speed, some risks are less well calculated than others! For some could the fallout spell disaster?
Which brings me back to my point. If some organisations are prepared to push the envelope in terms of new ways of trading with their concomitant losses, investing in an LP On Demand solution could mitigate those losses and afford them some degree of protection through knowledge sharing as well as resource sharing resources.
So whilst it is true that LP On Demand can cut the costs of retailers seeing to do more with less, it is also the natural ally of those needing to do more with more and to learn much faster!
Because the lack of a sound strategy at times of business expansion could ultimately cause the whole boat to capsize!