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Managing merchandising.

The number of merchandisers employed by the beer distributor is increasing every year. The reasons are three-fold. First, the retailer wants the distributor to do more in the store. Second, the supplier is increasing his merchandising demands on the distributor. Third, using merchandisers is often the least expensive method of satisfying these demands while adding more value to the products sold.

We define merchandising as account servicing activities such as building and maintaining displays, hanging P.O.S., shelf stocking and pull-up. As the size of the merchandising crews equals or surpasses the size of the sales force, the distributor is burdened with managing a relatively large group of laborers. The purpose of this article is to discuss how merchandising functions are typically managed, the basic strategic goals of merchandising functions, and organizational and system solutions that help solve these problems.

Goals of Merchandising

There are four main goals of merchandising. First, the merchandising function is designed to provide better service to the retailer. Better service means enhanced retailer relationships and improved execution and sales performance. Second, merchandising is intended to help protect the distributor's market share. Merchandising does this by ensuring adequate product is readily available for the consumer (shelf stocking, pull-up, and maintaining displays). Merchandising also protects the distributor's market share by executing P.O.S. tasks that encourage the consumer to reach for the distributor's products. The third goal of merchandising is to provide a method for the distributor to transfer labor functions to a lower-paid person. The merchandising function can be considered as a cost reduction or cost prevention strategy that frees up valuable sales and delivery time. This translates into improved sales performance. The fourth goal, which is a result of the first three goals, is to increase the "value added" to the retailer and supplier. Being effective at "value-added" services will be a key factor in determining whether a distributor survives.

Based on these goals, the use of merchandisers makes sense for most beer wholesalers. A problem merchandising presents is that management and supervisors in many distributorships are not trained or experienced in overseeing lower-skilled, lower-paid, task-oriented employees. Add that to the fact that the merchandiser position usually has a high turnover rate compared to sales and delivery, and it is easy to see why managing merchandising is often difficult. A mistake distributors make is accepting inefficiency in this area and justifying it with the argument that the low cost of the labor offsets the inefficiency. Or they contend that the inefficiency is due to erratic retailer requests. While these justifications are true, they are not the biggest contributor to poor merchandiser performance. Analysis often reveals that the control system and level of supervision in the merchandising areas is the largest contributor to inefficiency. The following sections discuss ways to successfully manage merchandisers.

Merchandising and Sales Teamwork

For merchandising to be effective in achieving its mission in the marketplace, there must be effective communication between merchandising and sales. This includes communicating what the merchandising assignment is and when it needs to be completed. Unfortunately, communication is often informal at best. Although systems and procedures exist to aid communication, they are usually loosely followed.

Teamwork, which is critical, also breaks down when merchandisers become the whipping boys for sales. All the tasks that the sales force does not want to do are passed down to the merchandisers. The keys to good teamwork include: clear communication, better definition of responsibilities, effective supervision and a formal work request system that is properly utilized.

Organization and Supervision

There are two common methods of organizing merchandisers. One method is to establish a separate merchandising department that reports to a merchandising supervisor. This department is usually under the sales department's control. Another alternative is to assign one or two merchandisers to each sales supervisor. We have seen both of these options succeed and fail. The success or failure is usually dependent on the quality of the supervisor and the internal control systems. When sales or delivery supervisors barely have enough time to supervise salespeople or delivery people, the merchandisers become the lowest priority. The sales supervisors schedule the merchandisers each day, but often this is where supervision ends. They seldom follow up the merchandisers on a regular basis or ride with merchandisers to make sure they receive adequate training.

Management must realize that merchandisers need training and their work must be regularly evaluated and monitored. If management neglects merchandising, they will usually be disappointed in merchandising performance.

Under either organizational structure, supervisors should ride with merchandisers and be held accountable for merchandiser's performance. As we all know, it is difficult to get supervisors to ride with salespeople; it is even more difficult getting them to ride with merchandisers. However, supervisor "ride-withs" is when most of the training and communication occurs. "Ride-withs" need to be scheduled and adhered to.

Productivity Standards

Merchandising is a very important component of the distributor's service mix. To effectively manage this service, the distributor needs productivity standards by which to plan work and evaluate performance. Common criteria for productivity standards include cases per hour, stops per day, or estimated time per stop (by type of stop, i.e., chain store, chain grocery, independent grocery).

The best method of developing effective merchandising standards is for management and supervisors to observe merchandisers at work. This doesn't have to be a "stop watch" environment or an exact science. Observing how long it takes to merchandise five or six grocery stores can give management a reasonable time standard that can be used to plan work. Observations should be carried out for each type of account that requires regular merchandising. A separate standard should be determined for each of the following: C-stores, chain grocery (large and small), independent grocery, on-premise, etc. Once management begins this process, they are likely to realize that 80% to 90% of the merchandising workload is generated from just a few different types of stores.

Using productivity standards as performance evaluation measurements is especially important given the nature of the merchandiser's work. Merchandisers are typically lower-paid, shorter-term employees who are out on a route where they are not under close supervision. Performance measurements allow management to single out the top performers and identify the low performers. They also allow management to evaluate the accuracy of the time standard and better plan daily merchandising schedules and crew size requirements.

An interesting side note to the merchandiser standard issue deals with non-alcoholic beverages (NAs). We studied the effect that NAs had on merchandising time requirements in grocery stores. NAs caused the merchandising time per store to double even though the NA volume only equalled 10% to 20% of the beer volume. This does not mean you shouldn't get into the NA business. The management issue here is that NAs will dramatically increase merchandiser or salesperson time per store, and this impact must be figured into the merchandising crew size daily routing and time evaluation. Failure to properly allow additional time for NAs will cause overtime or, worse yet, shortcutting of the desired level of merchandising in beer and NA areas.

Scheduling and Routing

After management has determined the time requirements and frequency of service time to merchandise certain stores, they will be able to schedule and route the merchandisers. There are numerous scheduling concepts in use by distributors. The most common methods are daily flexible routes and daily fixed routes. Flexible routes schedule merchandisers each day on the basis of merchandising requests from the sales department. In this scenario, the merchandisers do not run pre-set routes that repeat themselves weekly. The stops a merchandiser makes this Monday will be different from the stops made last Monday.

The advantages to the flexible routing method are that short notice customer demands are more easily met. The disadvantages of this system are numerous. The more reactionary the merchandisers' schedules are, the less effective they are from a time-use standpoint. More time is wasted on unessential tasks and drive time in the flexible method versus the fixed-route method. Also, it is difficult for sales or merchandising management to schedule on a daily basis. Preparing daily schedules can consume a lot of management time and is a common excuse for management not being in the trade or riding with salespeople.

Flexible routing also increased the chances that the merchandisers' time will be abused. Merchandisers may be required to perform service errands that are unrealistic, but are completed because someone is available to do them. An example of an inefficient service demand is running a tap handle to a one-keg-a-week account that is located 40 miles from the warehouse. Abused merchandising results in unmanageable performance, higher costs, high turnover, high levels of required supervisor time and unrealistic service demands from customers. While commitment to excellent service is good and necessary, providing service in an unreasonable manner is both ineffective and unprofitable.

Fixed merchandiser routes are effective if the need for merchandising (P.O.S., pull-up, display building) is fairly predictable. In a fixed routing scenario, the merchandiser visits the same stores each week. This method relinquishes some flexibility but eases the burden on supervisors to prepare daily scheduling and lessens the probability of abusing merchandisers. With fixed routes, performance can be easily measured and accountability established. This allows for better management and increased effectiveness.

If the wholesaler determines that there is a consistent quantity of short-notice merchandising requests from various customers, this needs to be built into the fixed routing. An example of how to structure this is to schedule six hours of fixed merchandising stops and leave two hours available for short-notice request. With only 25% of the merchandiser's day available for short-notice demands, the supervisor is forced to establish priorities and know when to say "no" to some retailers.

Position Potential

To improve employee retention, the distributor needs to determine the career path for merchandisers. For example, this position can provide relief support or can be a training ground for future salespeople. The career path for the position will provide direction in decisions regarding the caliber of the person hired, training, compensation and expectations.

The use of merchandisers and similar labor-intensive positions will continue to increase. The wholesalers must be equipped to plan, organize and control these activities. Effectiveness in this area will result in more volume, lower costs and more "value added" to the supplier and retailer.

Joseph J. Verno is a founder and managing partner of the Denver Management Group, Inc., of Englewood, CO, a nationally-recognized management consulting firm to the beer wholesaling industry. Verno has served as a consultant to brewers and wholesalers and is a speaker at seminars and workshops throughout the U.S.
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Title Annotation:brewing industry
Author:Verno, Joseph J.
Publication:Modern Brewery Age
Date:May 10, 1993
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