OCTOBER,Edition # 35, 2001

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Before you blame the publisher for poor editing of this issue's homily, I am referring to Turn Over Orders.
TOO be sure, to be sure.
Have you ever considered the TOO phenomenon?
Is it a service or is it a burden?
In some ways it is a bit Byzantine, yet reasonably unique in other ways, and often a very sensible way to do business.
How did it start?
Why is not so prevalent in other comparable retail sectors?
Well, there is a bit of history to it.
Basically it is a compromise in a conflict between wholesaler amortising cost and effort, with manufactures wanting to maintain control over retail exposure, shelf space and retail reach.
In the good old days it was much more rampant than today.
In the pre-PDE Jurassic days, when orders were called in over the phone, every day, many times a day, to a wholesaler's supplier order clerk, the time consumed at both ends, and the errors sustained, would today send any operator to the wall.
But in the good old days what did we know?
It was a time when customers were fat, dumb and happy and the wholesaler/supplier sector were a legend in their own complacency.
In this environment, the manufacturers, the large manufacturers, used a subtle tactic called 'store-stuffing'.
Basically fairly simple - stuff as much of your product into the chemist shop (the old days remember) so that the chemist cannot buy (or therefore sell), any competitive product.
This blunt 'marketing' tool effectively jammed stock into every nook and cranny, attic, garage and spare bedroom.
Why did the chemist shop owner do this?
For the false premise that they were getting a great deal.
Something nice, out of the boot of the car, for the little missus and a trip to Tasmania.
This gala event was variously called the winter-buy, or the summer-buy, or just buy-it-up-in-lots.
It certainly was a load-you-up-buy frenzy at times.
So companies like Layn (think Awon) happily put tons of decongestant into chemist shops. Shops were chocablock full of a certain brand of pressure pack products and cosmetic and perfumery outfits did a similar piece of work for Christmas and Mothers Days.
Who won?
Not the good old, poor old, chemist shop.
The cost of the overdraft alone was a burden to pay for all this stuff - made worse when the inevitable clear out sale had to be held, to sell at a huge discount, to free the space for the next terrific deal.
The next cunning buy.
The next big mistake.
It must have been blissful to be a manufacturers sales executive in those days. But, I digress.
It was the sales managers and their army of sales representatives who battled for the purchasing dollar in this none too subtle direct selling, against the moribund, conservative and sit back and take-the-order (over the phone) approach of the wholesalers of the day.
Massacre of the greedy innocents really.
And, only made practical due to the then, significantly fatter margins than is the case in today's competitive environment.
In the 'chemist-only' landscape of yesteryear life was different.
Not a fair fight perhaps but made easier to ignore the mistakes by the apparent security blanket of 'chemist-only' margins.
The supply side had the demand side bamboozled.
Usually by offering 'the deal', something that could not be resisted, even if it was harmful in the long run.
It increased accounts payable, receiving, unpacking - it raised excess stock holdings, increased out of date risk and totally denied the concepts of inventory management we hold more dearly today.
In the last missive, my article was titled "I wonder who is selling me now".
I talked about marketing statistics, benchmarking and other measures to compare retail and professional performances.
This market research/benchmarking is only possible, therefore valuable, if common data is consolidated and processed for dissemination back to the information owners. In the IT business this is known as data warehousing.
One would hope that today's wholesale executives could see that wholesaling information is as important as wholesaling and moving physical product.
One hopes.
The point being, direct dealing, in the old days, and in these days, destroys the critical mass benefit of information reticulation for the 'common good'.
Everything bought direct is not captured centrally, which means it is not measured outside this closed loop.
A thin, dumb and unhappy thing to do.
Anyway back to the TOO concept.
Gradually, starting in the 1970s and maturing in the 1980/90s the use of the PDE made it harder for the direct dealing sales representative to take a manual order. Made more difficult when some retail groups, effectively banned 'store-stuffing' and forced the manufacturers to distribute the winter and summer or another event date 'buy' through the warehouse.
And, even better, for the poor old chemist, negotiated that this was basically on consignment, with excess stock being taken back at the end of the campaign.
A sound practical, sensible, reasonable and today, is the mandatory way of doing things.
So, with the coming of the PDE a winner became a loser.
Unfortunately, the new winner was no more proactive than before when they survived by just taking orders. At least the sales representative army kept retail 'alive' - introducing new product, ideas, tying in with advertising campaigns and so forth.
Most wholesalers sat back at fortress Co-op and grumbled about their customers.
Life would be great without customers mate.
A not too flattering way to explain this is to say the sales representatives did try, in their way, to get product out the door and into the arms of the customer. The wholesaler, meanwhile, waved goodbye to the tote box on the truck and retired to consider a good day's work, well done.
Far away from the whingeing customer as possible.
Something had to give.
Someone had to compromise.
And the TOO came into its own.
I was told recently that in the 1980s, turn over orders made up less than 10% of the warehouse-picking load - today there has been a massive increase.
In some product groups, as much as 40% of orders are taken by a Rep and turned over to the wholesaler for delivery.
Who wins?
Well, more or less everyone.
The manufacturers keeps control, pressure on gaining and holding shelf space. The warehouse still gets the (discounted margin) business and the pharmacy gets fewer deliveries, less invoices, one monthly statement, less work and less risk.
So what is wrong?
Although some of the more enlightened manufacturers, and notably some brokers, use PDE or palm pilots, most of the TOO data is still manually processed.
So you will inevitably notice that TOO orders are often slow to arrive (if you do the checking job properly) and come with more errors.
The slowness and the errors are naturally there because they are based on the Rep writing and sending fax orders, re-keying and other manual handicaps.
In fact wholesalers may sit on the faxed TOO paperwork, let it build up, until the picking workload calms down and then they flood the floor with TOOs to keep the work force moderately busy, in otherwise slack times of the working week. You are aware of this, aren't you?
The PEG network program, that ties the wholesaler to the supplier, electronically, in sort of the reverse way that the PDE ties the pharmacy to the wholesaler, is also now being used by the more progressive manufacturers to process your TOO requirements.
What can you,or should you do to maximise the turn over order processes to better service your pharmacy operation?
Two things.
The first, foremost and most compelling is to request that the wholesaler and the sales representative use the EAN.UPC (barcode) unique product identifier to capture and process the order.
This is retail rule 1.
Secondly, the representative should understand that if the pharmacy was to use the PDE and send the order to the wholesaler electronically, the order is in the pharmacy the next day. Not only is it there, on the shelf and ready to sell, it will be delivered with far less errors that if manually processed.
Therefore the representative should hear from the customer, that's you, that you are reluctant to give turn over orders that will take, days, weeks, to arrive with less accuracy than if you just ordered it in normally.
Presumably, the pharmacy is being offered an incentive to place the 'buy' with the representative?
If you do the real sums you will find that the 'good deal' somewhat evaporates if the product is not in the pharmacy to sell. And if it creates more credit notes and results in more lost sales, then you should have just ordered it that day as usual. There is no radical change required here, no rocket science, only the acceptance of change.
Pharmacy has changed.
Highest use of dispensary computers, POS, PDEs and hosted back room computers in the world.
So why should you suffer inadequate business practice?
Pharmacy has invested in technology, why hasn't the supply partner?
Remember it this way.
You drive most of the business.
Certainly the wholesaler order taking business, at an electronic baud rate, is made possible by the significant IT investment you have made.
So why should some of the manufacturers, with wholesaler compliance by default, run this part of your business at the speed of the fax machine process? Why accept minutes to transmit an order, being replaced by days and weeks for written orders to be transcribed and faxed to the wholesaler?
Bit of the old Byzantine days is back again here mate.
As the young and trendy would say - go figure!

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