Lumberyard and hardware chain Johannes Fog has streamlined its product range to reflect the needs of its customers – the so-called ‘attractive range’. Ongoing monitoring and focus on customer behavior ensures that it remains ‘attractive’.
Johannes Fog A/S has taken a major strategic leap forward, bolstering its competitiveness in a cutthroat market. The chain consists of ten stores which previously managed their own stock, procurement and product range in excess of 25,000 products. The product range is now standardized so all the stores stock the same products, and it turns out that the attractive (and profitable) product range is less than 14,000 products.
Buying pattern insight
“We ran a double ABC analysis of our product flow using ABC Analyzer which gave us a detailed picture of our customers’ buying patterns. With it we mapped our high- and low-demand products. We discovered that we stocked lots of products with the same function, but maybe one had a red handle while another had a green one,” says purchasing manager Michael Jensen, who adds:
“We have now established a streamlined product range reflecting actual customer needs.”
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At the same time, it has made it a lot easier for us to streamline our delivery service, so that we now service our trade customers before 9.00 a.m. from four of our ten store warehouses. This means better use of our trucks and a downscaling of our truck fleet from 27 to 25 vehicles.
Centrally managed local warehouses
The chain continues to operate with local warehouses in all ten stores, all of which stock the same product range. However, the product flow is different in the ten stores. The customers buy different products, different quantities and with different frequency in the ten stores. With the help of ABC Analyzer, the company has therefore designed different inventory levels and composition to match the different needs of the stores.
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“Management of the individual warehouses and procurement is now based on data from ABC Analyzer which we manage centrally,” explains Michael Jensen. Using the ABC model, the company performs monthly analyzes of how much and how often the individual products are sold in the individual stores. This creates the basis for a store-specific procurement plan so the company comes as close as possible to achieving optimal inventory levels at its tens stores.
“In the past, procurement planning was decentralized, manual and based on a gut feeling. Gut feelings are all very well, but they are even better when backed up by reliable data,” says Michael Jensen.
Balancing supply and demand
Ongoing monitoring of the attractive product range ensures that customers never go away empty-handed when shopping for a specific product. Or put another way, Johannes Fog’s strategic use of ABC Analyzer ensures a continual balance between supply and demand.
“This is achieved without tying up more capital in stock, mind you. We’re just more accurate and in tune with customer requirements,” says Michael Jensen.
“The foundation of every business rests on customer demand for goods or services, and the ability to convert orders into specific deliveries should be a key focus area for all businesses. In the real world, however, many companies struggle to maintain the ‘attractive product range’. The attractive product range is characterized by being carefully planned to match customer demand. We live in a dynamic world where demand is constantly changing, which is why it’s important to keep a close eye on product flow and on how the attractive product range is developing so it stays that way,” says Søren Sofus Petersen, CEO of ABC Softwork. The reverse scenario is all too familiar: A bigger product range achieves a lower turnover rate, which in turn results in increased inventory levels. It is the same as an imbalance between supply and demand, which is never good for a business.
Brief facts about the ABC project at Johannes Fog
Challenge
Johannes Fog A/S wanted to establish a common basic product range throughout its ten stores. The aim was to ensure that customers did not leave empty-handed and that they would always find the desired product without the company having to tie up more capital in stock. A further goal was to streamline customer delivery and to deliver to trade customers before 9.00 a.m.
Solution
A thorough overhaul of the product range, which was reduced from over 25,000 to less than 14,000 product codes. The company then introduced a new process with ongoing product flow, profitability and automatic procurement planning analyzes for each of the ten store warehouses.
Results
The attractive product range ensures improved service, fewer returns, improved use of trucks, unchanged or reduced tied-up capital and better synchronization of customer supply and demand – resulting in improved competitiveness.