R&FF Retailer Cover Story: Do We Expect Too Much of Brokers?

Discussion
Jun 28, 2006
Warren Thayer

By Warren Thayer, Editor, Refrigerated & Frozen Foods Retailer, and Contributing Editor, Private Label Buyer


Everybody wants to get the right products on the right shelf at the right time, with the right merchandising support. It’s just that nobody wants to pay to get it done.


The net result is that everybody loses, says Mark Baum, partner and CPG practice lead at Chicago-based DiamondCluster International, the global management consulting firm, and
once head of the National Food Brokers Association.


The role of the broker (or sales agent, if you prefer) continues to expand, and some observers say agents are stretched so thin that store-level execution is being compromised,
which hurts the retailer, supplier, sales agent and consumer.


As Baum sees it, there simply aren’t enough resources available to do these jobs as well as they should be, particularly in supermarkets. This leads to out-of-stocks, missed
merchandising opportunities, and a diminished experience for the shopper.


But nobody can seem to agree upon specifically what type of in-store work should be a priority, and just how resources should be allocated fairly. Not that long ago, the manufacturer
and agency were able to deploy retail sales and merchandising teams as they saw fit. Their mission was to make sure that the plan presented at chain headquarters was executed
at store level.


That worked, Baum says, until retailers’ category management abilities grew and they began demanding more frequent category updates and resets. Rebannering caused by acquisitions
added fuel to this fire, along with more frequent store remodels and new store openings.


With the accelerating turnover of store employees — many of whom are part-time and lack experience — the pressure has increased on sales agents to take on more and more tasks.
The problem is, Baum says, that many of the store maintenance tasks are not high priority to the suppliers who pay the sales agents. Retailers are taking the available resources
from the manufacturers and using the sales agent as they see fit.


Some retailers are using third-party services, rather than sales agencies, to perform these functions. They then charge the manufacturer for the in-store work. Baum doesn’t see
this as the ideal solution, either.


“Problems with speed to shelf and out-of-stocks are worse today than ever,” he says. “It’s time for all the players to take a holistic look at the issue. Let’s make a comprehensive
list of activities to be performed, and determine who is best suited to perform them and how to best allocate those available resources. Also, let’s make private label suppliers
and DSD providers part of the discussion in order to make a complete wall-to-wall assessment of requirements and potential solutions.”


The next step, from a management standpoint, would be to develop standards for the programs and fix responsibility and accountability for all tasks, he notes. Under this scenario,
the retailer would have someone at the store level to work with suppliers and agents on agreed-upon programs.


Baum believes supermarket chains putting ever-increasing demands on sales agents are only hurting themselves. “They’re positioning themselves as a higher-cost channel to do business
with, when other channels are growing more quickly,” he points out.


Baum has 10 suggestions for improvement:



  1. Make efficient and effective resource allocation a priority at your chain.

  2. Recognize the costs, in out-of-stocks and missed merchandising opportunities, of poor allocation of resources.

  3. Create a comprehensive list of activities to be performed.

  4. Determine who is best suited to perform each activity.

  5. Allocate available resources effectively, efficiently and fairly.

  6. Include private label and DSD providers in the planning.

  7. Develop standards for programs, and fix accountability for all tasks.

  8. Have someone at store level work with suppliers and agents on agreed-upon programs.

  9. Communicate programs carefully and completely to store managers, so they know when promotions are coming, where POS materials are, etc.

  10. Negotiate rigorously, but in the spirit of collaboration.




Condensed from Refrigerated & Frozen Foods Retailer. For the full story,
click here
.




Moderator’s Comment: It’s a tough issue that’s not being faced squarely. Which of Baum’s suggestions will be the most difficult to implement, and why?


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14 Comments on "R&FF Retailer Cover Story: Do We Expect Too Much of Brokers?"


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Ron Margulis
Guest
14 years 7 months ago
I’ve re-arranged Mark’s list from easiest to implement to most difficult — 1. Create a comprehensive list of activities to be performed. 2. Determine who is best suited to perform each activity. 3. Develop standards for programs, and fix accountability for all tasks. 4. Recognize the costs, in out-of-stocks and missed merchandising opportunities, of poor allocation of resources. 5. Communicate programs carefully and completely to store managers, so they know when promotions are coming, where POS materials are, etc. 6. Make efficient and effective resource allocation a priority at your chain. 7. Allocate available resources effectively, efficiently and fairly. 8. Include private label and DSD providers in the planning. 9. Negotiate rigorously, but in the spirit of collaboration. 10. Have someone at store level work with suppliers and agents on agreed-upon programs. The first four are already deployed in most cases, and if they aren’t the retailer is probably losing a lot of money. Technology should be able to help the next three items. The last three are the toughest — how does a retailer… Read more »
Bill Bittner
Guest
Bill Bittner
14 years 7 months ago
This is an excellent article and a great way to begin the process of defining requirements. Warren’s outline is the first step in defining the expectations for the broker/store relationship. The challenge with this relationship is that it will be different in each encounter. By that I mean, each broker/store situation pairs the expertise of two unique organizations with their own strengths and weaknesses. This means there can be no standard answer for roles and responsibilities. Industry groups can come to agreement on what the steps are and what the appropriate measures of success should be, but the actual decision of who should do each task and what the final score should be will be different in each implementation. The challenge is that this will vary not only by organization but by broker team and retail location. The mix of personalities and the interaction of the people will be the most difficult thing to manage. Both organizations must concentrate on their own workforce to make sure that agreements reached at the category manager or broker… Read more »
Mark Lilien
Guest
14 years 7 months ago

Well-run retailers have to be self-reliant. They can’t depend on manufacturers or brokers to solve their problems. And “free” support always has a price. The underlying problem: poor margins lead to profit pressure which lead to staff compensation issues which lead to staff cuts and turnover which lead to retailer demands upon brokers and manufacturers. No one (brokers, manufacturers, retailers) can afford realistic labor costs if margins are inadequate.

Ben Ball
Guest
14 years 7 months ago
OK, solution recommendations are on the table and we collectively assert that most, if not all, of the tools and technology for implementation are available today. What’s the hold up? One possibility is the age-old bugaboo of vested interest. Who has the ownership and control of the value proposition? In the old days, it was pretty clear. Manufacturers owned brands. Retailers owned the stores to sell them in. And brokers owned the relationships with those very fragmented retailers at the regional — usually market — level. Now who owns what? Both retailers and manufacturers own brands. Retailers have consolidated to the point that managing a dozen headquarters relationships is all you need to reach 80%+ ACV distribution. So brokers own what? Local market knowledge? Specialized expertise? Smaller retailer or division level relationships? Labor? In a marketplace where the powerhouse assets are brand franchise and outlet franchise, the broker (like the copacker or “converter,” the logistics company, etc.) owns neither. So, like every third party participant in the market, they must add efficiency to have value.… Read more »
David Zahn
Guest
14 years 7 months ago

Much good discussion. I would like to expand on what Mark Hunter contributed and point out the corollary – no two manufacturers are alike either and don’t all value the same work equally.

This issue continues to haunt the industry and solutions are few and far between. Lots of good discussion fodder above!

Bill Bittner
Guest
Bill Bittner
14 years 7 months ago

I did not see the technology connection to this issue in my first response, but I have thought of one since. One of the big benefits from technology has been the advent of message based interfaces that provide continuous feedback from events occurring at store level and timely distribution of corrective action from headquarters. This has led to a reduction in “middle management” and may also lead to inconsistency across an organization for “how” things are done. Today’s technology captures the results of various events in the store but does not tell how the results were achieved. In some sense it is the same lesson the military has had to learn. There is no substitute for “feet on the ground,” with supervisory personnel from both organizations in the broker/store relationship assuring the planned “rules of engagement” are followed.

Camille P. Schuster, PhD.
Guest
14 years 7 months ago

What’s the most difficult? Having top management be convinced that people and jobs need to be dedicated to being responsible for their own analysis of consumers. Outsourcing the compilation and distillation of scan data is certainly a good idea. However, internal people need to really analyze what that data means AND do their own consumer research about most valuable consumers AND do their own research on what those valuable consumers want. Then comes the difficult task – implementing the list of activities.

Bill Bishop
Guest
Bill Bishop
14 years 7 months ago
I really like the way Ron has sequenced the task list from Mark Baum. It’s very helpful. Having worked extensively in this area, we find that one of the “missing links” in the process is an explicit understanding of the time and cost required to do certain work. While it certainly isn’t impossible to develop these numbers, the truth is, a number of parties would prefer not to know them because it tends to impact either their negotiating position or, it could change their behavior. Several years ago we created the Reset Analyzer tool that develops a very accurate estimate of the time required to do a reset, i.e., it considers the size of the product, the size of the category, and the extensiveness of the reset and the work related to that reset. It provides a very useful and accurate estimate the cost of doing the work, and most people are surprised that the cost is as high as it is. Recognizing that Mark has created a great list and tools like the Reset… Read more »
Gene Hoffman
Guest
Gene Hoffman
14 years 7 months ago
Do we expect too much from brokers? Yes, when bucks are few, it’s a matter of what and who. Warren Thayer and Mark Baum provide some excellent insights as to what could be done better. And Ron Margulis has crafted a possible sharper course of action. But as Mark Lilien points out, “Well-run retailers have to be self-reliant.” Thus, much like Federal government, we have an expanding pressure-packed universe that’s difficult to manage to everyone’s satisfaction despite most of us using of the ubiquitous term “Win-Win” for our particular plan or approach. Retailers have hundreds of important things that require their daily attention, many with conflicting goals and timetables, but just like everyone else, the retailer’s time is finite. So he/she must do their own prioritizing – right or wrong. If there aren’t enough dollars available to service all desires because of low margins, and more and more products keep getting pushed onto the scene, then maybe a new comprehensive over-all paradigm beyond the good approaches suggested here needs to be considered to achieve desired… Read more »
Mark Hunter
Guest
Mark Hunter
14 years 7 months ago

Yes, we expect too much from brokers simply because nobody has precisely defined what is expected of a broker; and that’s because there are no two retailers alike in terms of their expectations and needs. The role of the broker will continue to evolve and in the long-run, their importance will only continue to increase in line with the increasing strength of retailers. This will never decrease the cost containment pressure they’re under but this is no different than the pressure retailers and manufacturers are under due to the competitive marketplace called retail.

Paul Waldron
Guest
Paul Waldron
14 years 7 months ago

There are a lot of demands on the brokers in-store that consume time that could be devoted to merchandising at the shelf. These include reporting back to manufacturers and retailers on shelf conditions, display locations and promotion fulfillment. In addition, some brokers treat such activities as revenue sources for research houses as well as the aforementioned retailers and manufacturers.

Interestingly, few of these reporting requirements would be needed if the broker had the time, direction and tools to correctly merchandise the shelves in the first place.

Store level execution doesn’t have to be compromised so long as the crews responsible for implementation have the right tools to do their jobs quickly and accurately. Retailers, Brokers and Manufacturers have had a tremendous amount of success using Image Strips and Back Tags for new store set-ups, remodels and category resets…cutting the set time by more than half the time. These are the types of tools that will help in the future to make in-store execution more efficient for everyone.

James Tenser
Guest
14 years 7 months ago
I’d like to compliment Mark Baum for his insights, Warren Thayer for his story, and our fellow Brain Trusters on what is certainly one of RW’s most productive discussion threads in recent memory. Two important considerations deserve amplification here, IMHO: 1) As Bill Bittner suggests – better decision support systems can support superior implementation. I would expand on his point by suggesting that putting greater trust and authority in the hands of store managers using decision-support dashboards and automated alerts would be a step in the right direction. Category management has swung the needle too far toward centralization. All implementation is ultimately local. 2) As Bill Bishop observes, understanding what tasks cost is a crucial factor for decision support. I would take his premise a step further and suggest that it’s not just the cost, but the return on these activities that counts. Lacking that information, how else can priorities be properly set? Return is tricky to calculate. From what I can observe, comprehensive, demand-based modeling will be the best way to get a grip… Read more »
Dan Nelson
Guest
Dan Nelson
14 years 7 months ago

The answer to this continued issue may be something that’s been discussed for quite some time now — Activity Based Cost. Suppliers now have the means to effectively measure all costs in servicing retailers needs and expectations. The variable costs of serving retailers needs can be accommodated with adjusting cost of goods to support added services, including in store retail support.

George Andrews
Guest
George Andrews
14 years 7 months ago
Ron’s re-arrangement of the list, Point 10, “Have someone at store level work with suppliers and agents on agreed upon programs,” combined with Camille Shuster’s and Don Nelson’s review, highlights where the process most often breaks down: execution on my shelf, at my store. Camille points out that all implementation is ultimately at store level. It is. Don puts a focus on “ownership.” Ownership and implementation are often the issues. The easiest example is that stores and brokers can agree on who has responsibility, yet for the clerk or stocker on the floor, the last area they will front or stock is the one serviced by anyone else. They mentally assign that area as someone else’s. One possible solution is that stocking should be either a store or broker responsibility, but not both. At store level, shared responsibility can translate to no one is responsible. Either the retailer or the broker has to accept 100% responsibility for execution or all the great reports and data we have used to maximize our assortments won’t have the… Read more »
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