Inside Outdoor Magazine

Inside Outdoor | SPRING 2018 FLOOR SPACE 42 By Ritchie Sayner Culling inventory for better GMROI Manage the Bottom 30% Jack Welch, the former GE leader, was widely known for his 10 percent rule. He would insist that the workforce was culled by 10 percent every year as part of a continuous improvement pro- cess. The genius of the policy was not necessarily that you got rid of the dead weight, but that it forced his managers to make a decision about how to deal with underperforming personnel. A similar discipline should be adopted for inventory per- formance. I work with a store that is very diligent about this process, and the results speak for themselves with better margins, double-digit sales increases, sales per square foot numbers that are 2.5 times the NSRA average, and an improvement in inventory turn- over that is double the industry average. Their mantra is simple, they aggressively manage the bottom 30 per- cent of their invento- ry, along with vendor engagement. Here’s how it works. Every week the store’s buyers send vendor sales representatives reports detail- ing the activity (or lack thereof) of the styles being carried from their re- spective lines. If there isn’t acceptable sales performance within a 30-day period, the store requests that the vendor take action. This action might be a swap out for another style, increased advertising allowances, clinics and incen- tives for sales associates, or in extreme cases a total return of the product. Obviously, consideration is given to any number of circumstances that could possibly affect sales, including seasonality and mer- chandise received with terms, to name two. The vendors are asked to manage the bottom 30 percent of the styles pur- chased for that season. The store manages the remaining 70 percent. This retailer evaluates ven- dors based on historical criteria that include sales, margins, turn and GMROI. All vendors are reviewed in person every six months and are given a vendor report card. Vendors that meet and exceed the benchmarking numbers are rewarded with bigger orders. Vendors that fall short of ex- pectations are dealt with in the following manner: the first 10 percent below the cutoff are contacted to see what can be done to improve performance. The middle 10 percent are put on notice. This is like retail purgatory. Things could go one of two ways. Either noticeable improvement is made, or they could be the next to go. There are no surprises this way. The very bottom 10 percent are informed that the relationship has run its course and that they should move their success elsewhere. The management of the “bottom 30 percent” is