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SHELF-CONSCIOUS

Manufacturers that use third-party merchandisers to help cut in new items, eliminate out-of-stocks, maintain distribution and protect the overall integrity of the retail shelf have never formally defined what they expect from these companies.That is, until now.The National Association for Retail Merchandising Services has just released "Best Practices for Merchandising Service Organizations," a guide

Manufacturers that use third-party merchandisers to help cut in new items, eliminate out-of-stocks, maintain distribution and protect the overall integrity of the retail shelf have never formally defined what they expect from these companies.

That is, until now.

The National Association for Retail Merchandising Services has just released "Best Practices for Merchandising Service Organizations," a guide developed with manufacturer input that gives MSOs a set of "reasonable and measurable" client expectations.

"These standards were written in order for manufacturers to feel comfortable that if they hire Organization A, they can count on the same type of services as Organization B," said Moe Rodriguez, chairman of the manufacturer committee that helped create the standards, and director of retail operations for Pfizer's Warner-Lambert Consumer Health Care, Morris Plains, N.J.

For regular retail projects -- like resets, installations or new product cut-ins -- the benchmarks call for an agreed time frame for completion. Because of unexpected hurdles like late shipments, faulty fixtures and incorrect planograms, it may not be possible for a project to be 100% complete by the due date.

As a result, for "superior" service, a project should be 95% finished within the agreed time line, with remaining stores completed five days after the due date; "proficient" service, 90% to 94% completion within time line, remainder within five to 10 days after the due date; "acceptable, but needs improvement," 85% to 89% completion within time line, remainder within 10 to 14 days; "unacceptable," less than 85% completed within time line.

For continuity coverage (when MSOs provide consistent coverage to the same stores), MSOs are responsible to ensure the "coverage is routed in the most efficient manner and that sufficient staffing is maintained to meet coverage expectations."

Performance measurements should be established on a project-by-project basis in advance of project start date, according to the guide. For superior service, 98% of coverage should be completed each cycle; "proficient," 93% to 97%; "acceptable, but needs improvement," 89% to 92%; "unacceptable," less than 92%.

Following are excerpts from some of the other recommended Best Practices:

Realistic Time Frames: NARMS members must calculate accurate time frames for each project. To ensure the proper allocation of resources, an accurate test set is usually required to establish realistic project time lines and cost structures. If the manufacturer or retailer is demanding an unrealistic time line, the MSO must note it up front. Each party must agree with the cost and the time specifications for each project.

Quality Reporting Procedures: The MSO is accountable to ensure retail calls are completed in full for all tasks assigned. When this is not possible, a reason should be documented for the client's review.

Ongoing project status reports should be available for client reviews at the end of each week. MSOs are encouraged to hold weekly updates with the client to discuss progress, issues and any problems the manufacturer or retailer may need to address. Additionally, the MSO will be able to review any implementation issues during this update.

The MSO is expected to be proactive with a rapid-response system, providing recommended solutions to any issue or problem raised by the client. It should target a response to an issue raised by client within two to three business days, and resolve the issue or problem within five to seven business days.

Quality Billing Systems: MSOs must ensure their client's billing has been reviewed for 100% accuracy based on the actual work completed before it is sent to clients. Project-end reports supporting the billing process should be available for client review within two weeks after the project is completed. The MSO is accountable for the timely invoicing or billing of any project with the necessary documentation attached. All requirements for the billing process should be agreed to in advance of the start of the project. This will help ensure invoices are paid promptly.

Ethical Client Relationships: MSOs must ensure a strong, enduring working relationship based on ethical behavior in all business endeavors. These relationships are based on a natural trust developed through an ongoing, positive communication process. Sharing of information at all levels is critical. This communication process must start with the very first discussion concerning the MSO's ability to manage a project and meet the client's expectations.

Quality Communication Systems: Proactive communication of all problems or issues affecting a project's completion or the quality of performance is the responsibility of the MSO and its respective clients. Without ongoing, two-way dialogue, an MSO may not become aware of problems that need to be resolved.

Key Contacts: To improve communication flow and to ensure good process management, create a "single key contact" for each client. This will reduce confusion and ensure a clear communication path. This one point of contact is an integral element in resolving execution issues.

Team Approach With Clients: Build a strong partnership with clients. Emphasize "team work" between your organization and theirs.

Encourage client participation through attendance at sales meetings or assisting in skills training on their product line or project.

Encourage clients to work with field-level service people to demonstrate quality of performance.

Encourage field audits by clients.

Conduct regular operations reviews on a monthly or quarterly basis.

The account leadership team should meet with the client's leadership team semiannually. The purpose would be to ensure the MSO has a clear understanding of the client's strategic direction at retail.

Qualified and Well-Trained Field Personnel: MSOs must make a commitment to hire field retail representatives that are professional in their appearance and manner, and have basic understandings of the retail environment.

Establish recruitment and hiring standards.

Develop and enforce a personal appearance and minimum dress-code standard.

Make a long-term commitment to training.

Create and administer a fair and equitable performance-evaluation process for all retail-service field people.

Conduct a minimum number of fieldwork audits with each retail representative and their supermarket, with written feedback.

A semi-annual audit of store conditions is recommended on each retail representative.

The Right to Make a Profit: MSOs and the client should have mutually agreeable expectations for the retail initiative. Among the questions to be asked: What are your clients looking to accomplish? What amount of time should be allocated for the retail initiative? What resources and information do you need to provide to the MSO personnel executing the store call? What information are you looking to collect in the way of retail reporting? How will you measure the success of your retail initiative?

Rodriguez said the Best Practices will encourage NARMS members to improve their quality of work. At a time when manufacturers are searching for ways to improve retail execution, specifically cutting in new items and maintaining distribution, the Best Practices are a welcome addition to the industry, he said.

"It's important for manufacturers to build on some type of standards," said Rodriguez.

The guidelines were developed with help from a NARMS manufacturer committee led by a handful of companies, including Pfizer, Bristol-Myers Squibb, Nintendo and Levy Merchandising Services, a division of Levy Home Entertainment, a full-service book distributor. The committee met several times to draft the standards, which received final changes and approval by the NARMS board.

While the guidelines aren't enforceable, they're a way for manufacturers to hold MSOs more accountable, said Jim Hall, immediate past chairman of Plover, Wis.-based NARMS and president of Advanced Retail Merchandising, Lakeland, Fla.

The guide is also aimed at justifying the cost of using a third party. MSOs who welcome the Best Practices may not be the low-cost providers, but they are the ones who execute merchandising and marketing needs in a productive, timely and professional manner, according to NARMS.

At the same time, NARMS wants the standards to demonstrate that the value-added services MSOs provide should be looked at as an investment, not an expense. Rob Denney, director of Levy Merchandising Services, a Hillside, Ill.-based third-party merchandiser, said that the standards are not stringent by any means. Rather, they provide MSOs with a "liberal" set of goals.

"It's more of a report card then anything else," he said. "This will help manufacturers grade MSOs."

And though NARMS 200-plus member companies are not mandated to abide by the standards, Gary Ebben, NARMS' executive director, said they are being warmly received.

"I feel confident that the general membership of NARMS will not only embrace them, but will meet and exceed them," Ebben said.

The Investment

A new NARMS guide is aimed at justifying the cost merchandising service organiztions.

In today's highly competitive market, it's more important than ever for manufacturers to get new items to shelf quickly and efficiently. For this reason, many are using merchandising service organizations.

When choosing an MSO, "Performance Best Practices for Merchandising Service Organizations," a new guide from the National Association for Retail Merchandising Service Organizations, recommends that manufacturers "look at an individual company's full capabilities and recent successes in addition to the price they are quoting."

NARMS stressed that MSOs who use the best practices have invested in equipment, training and the development of their merchandisers and field marketing personnel. And while such firms may not come cheap, they can get the job done right, according to NARMS.

"These companies will be the ones who execute your merchandising and marketing needs in a productive, timely and professional manner," the guide says.