Who hasn’t seen the good old Praktiker advertisement: “20 percent off everything – except pet food”. The large German DIY chain used this slogan to advertise for many years, attracting masses of customers to its stores. The slogan was so iconic that it even spawned the joke that Chuck Norris, who was known for making the impossible possible, would also get 20 percent off pet food.
I probably don’t need to tell you how things ended with Praktiker: It ended in 2013. Although Praktiker was able to attract many customers to its stores with such permanent promotions, the chain was no longer able to achieve a reasonable margin.
I hadn’t even had this good old slogan on my radar screen until I stumbled across a statement like this during a customer project at the end of last year. The customer in question was doing well economically, but it felt like it was always running behind the end customer’s requirements for its products. It was often not possible to obtain the right purchased parts in the right quantities, which meant that the customer in question was regularly unable to produce what the market needed. And to put an end to this once and for all, the “Praktiker hammer” was unpacked: all orders were simply given a 20 percent discount for several months. No exception was even made for exotic components, where Praktiker was at least sensible enough to exclude a product group such as pet food from its promotions.
In the case of the customer in question, the approach of simply adding 20 percent to all orders was due to the fact that the existing processes and systems were unfortunately not able to distinguish well in which cases extra order quantities could be worthwhile. And so they wanted to play it safe and simply added 20 percent to everything.
Of course, it came as it had to: the availability of components improved, but the price of the shotgun blast was overstocks for many purchased parts, for which there were no or hardly any problems before the increase in order quantities. As a result, the focus of the management is then typically shifted in a completely different way and the inventory whip is brought out.
In a detailed analysis, we helped the customer in question to adjust the master data for each product or product group so that stocks were kept high where it actually made sense to do so and were reduced in a targeted manner where this could be done without any problems. But it will certainly take many months to fully recover from the “practitioner practices”. So be careful with blanket approaches: Sometimes it’s better to exclude more than just pet food from certain promotions…
Best regards,
Yours, Dirk Ungerechts
