Where do we slot new items in a DC facility?

What is a new item?

Do we really need any new item? In our everyday life, as a consumer we are bombarded by commercials touting new products with ‘high quality’ and ‘how they add to our happiness’. Most of these new items are merely a ‘me-too’ or ‘new and improved’ versions. It is like getting a version 3.0 of the same software. (mostly fixes)

Every time, we are forced to introduce a new item in the supply chain, there must be an ‘equal and opposite reaction’ [Newton]. We must force ourselves to ‘delete an old and hopeless item’ from our DC.

When we slot new items with unknown attributes, it is like throwing a large stone in a pool of water. It creates lots of waves for 2 seconds and the waves die down or have reverse ripples. We have no idea where that large stone went.

Same ‘waves’ are created in a warehouse. In many WMS systems, if there is a delay in assigning a warehouse slot for the new items, these unloaded pallets in the receiving dock jam up the space and create a bottleneck.

What kinds of new items?  

• Brand new, never carried before;
• it is replacement item for an existing item
• a seasonal item, with limited duration

Study in the consumer goods sector

Almost 85% of the new items never survive after the initial promotion. For few weeks, they cause lots of ripples through the supply chain and die, leaving trails at different points on the supply chain. It would be nice to have a crystal ball and select the 15% of the new items which turn out to be winners.

“fill the pipeline”,  an ad-break item

Is that new item being promoted as part of a national or regional TV campaign? Does every customer/store need to merchandise this product, in time for a Weekend Circular? See a recent Best-Buy Sunday circular graphic. To support such campaigns, every customer/store needs few minimum case quantities. We call this as ‘filling the pipeline’

Consignment purchase with a return to vendor

These are also called nightmare items. Promptly few weeks after the conclusion of the promotion, you can see all these pallets with various labels, loosely packed, different sku’s bundled together. Since it was on consignment, we could not even charge the customer for these items. Yes, these items also need to be slotted in the warehouse, waiting for paper work [Authorization to return from the vendor]. You will see these pallets for at least another 3 months, or more.

Cost of a return case

Have you ever attempted to calculate the cost per case to make the round trip from the warehouse to the customer and back? Plus cost to send it back to the original vendor.

Slotting a new item

In many industries, we have slotted the ‘real’ new items in a separate area. We keep it there for 1 or 2 months, till we understand the true movement of that new item.  We slot these new items in a permanent way once this new item survives and we develop a history of its movement.

Keeping these new items in a separate area also provides 2 side benefits. To support the promotional push, we can pick these new items in a separate pallet or a tote based on quantities. When this new item tote arrives at the store, the store inventory clerk can identify this tote quickly and complete the promotional display of these new items.

In some product sectors like the Grocery chains, they have been practicing the concept called ‘slotting fees’.  For example, in order for the chain to carry a new item, they could charge a hefty fee; say $ 50,000 per each sku, more or less based on the amount of retail shelf space that chain commands.

Each of these BLOG content is fresh, not copy/pasted from somewhere. They are based on both past experience and current industry developments.

This Blog service by Google, will automatically send you an email, when there is a new content posted. To do that, please enter your email at the TOP Right Hand side - where it says "FOLLOW BY EMAIL"

Contact by email -click here

website:  Introduction to Karma Logistics