When was the last time you visited the back room in one of your stores?
On the rare visits I’ve paid to retail back rooms in recent years, I’ve seen cleaning supplies, shipping materials, perhaps a few boxes or even a pallet waiting to be received and shelves more empty than stocked. I interpreted that picture to be indicative of progress. After all, the goal has been to keep inventory in front of the customer and provide just-in-time replenishment to stores.
Back rooms aren’t what they used to be.
In the 1970s, the organization and efficiency of the back room in my mother’s 3,000-sq.-ft. gift shop would rival many DCs that I visit today. Every SKU that was sold in one of her three stores was received, inventoried, inspected and tagged in the back room of her largest store. Replenishment inventory was kept on floor-to-ceiling shelves and the highest points were accessed by ladder.
There was a receiving area for inbound freight, which also accommodated outbound parcels since many purchases were shipped on behalf of our customers. The back room, which was roughly 700 sq. ft., also housed a fairly elaborate gift-wrapping section and a tiny office for managing purchase orders and computing daily reports.
I expect there are some mom-and-pop stores today that have similar back-room stories, although now most retailers rely on sophisticated DCs to flow floor-ready merchandise to their stores. Back rooms today should not be what they used to be, but there are opportunities to use back rooms more efficiently. For instance, as transportation costs continue to balloon, the cost of carrying inventory may be less than the cost of distribution, particularly on core SKUs that fall within the traditional 80/20 rule.
For those products that account for the majority of sales and that require the most frequent replenishment, it may be more profitable to increase the amount of inventory held in the back room and decrease the frequency of replenishment deliveries.
However, to make that a feasible alternative, the back room would have to accommodate high-density storage and efficient retrieval processes. Certainly, retail stores should not sacrifice space on the sales floor and store