The Variance Tax
Every retailer manages complexity. Store formats differ, channels have different economics, regional preferences are real and so forth. There is also the internal complexity of products and that has to be managed accordingly. Some of that complexity is intentional and strategic. But a lot of it is the result of accumulated drift; exceptions that became the norm and inherited processes that date back to the dark ages. That drift is costing retailers a pretty penny. We call this cost The Variance Tax . The Variance Tax is the total combined cost (in labor, margin erosion, lost time, error rates and other related factors) of maintaining complexity that exists for historical or operational reasons rather than strategic ones. A few examples… Product creation calendars in apparel are typically a “cut and paste” from the previous season. Over time, calendars read like a job description more than a governance tool, riddled with exceptions that have become the norm. Nobody revisits the ...