Progressive Grocer

JUN 2016

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186 | Progressive Grocer | Ahead of What's Next | June 2016 Supply Chain Operations Iowa-based Itasca Retail Information Systems, has dedicated a lot of time to studying out-of-stocks. He was on board in the early 2000s, when Schenectady, N.Y.-based Price Chopper worked with Itasca to make its CAO (computer-automated ordering) system more comprehensive. Te new tool was able to bring out-of-stock rates down to 1.5 percent to 2.5 percent across all center store categories and to about half of its perishables, according to Retail Info Systems News in 2008. Today, Itasca is working with Sobeys, Wegmans Food Markets and other retailers across North America to address out-of-stocks. "We estimate that at least three-fourths of current out-of-stocks are caused by a frustrating combination of antiquated ordering systems plus inadequate shelf-management processes," Kennedy tells Progressive Grocer. "Te grocery industry has been slow at adopting perpetual-inventory systems, which enable automat- ed replenishment and its associated OOS reduction, based on past perceptions that it's difcult to imple- ment, labor-intensive and/or requires too much store discipline to be efective," he adds. "We've been able to prove that this is a myth in 100 percent of our implementations." In fact, Kennedy says Itasca's solutions have solved out-of-stocks and inventory issues at store level while being labor-neutral. "Approaches that don't include the store fail, because there's no beneft to the store," he maintains. "We provide an at-store solution. We employ the store personnel as our eyes and ears to let us know what's going on. Any system will work great if the information is good. And the only way to know if the information is good is to have it validated. In many cases, it has to be done by a human being." Itasca's system still provides auto-replenishment, however. "We don't envision store personnel actu- ally writing the orders, but we do see them helping maintain the inventory," notes Kennedy. "Te reason why we take a store approach is that we think perhaps getting that big number — the number that's required for the manufacturer to supply the retailer — is one thing, but getting all the little numbers — in other words, if you're a 100-store retailer, all those stores with the right amount of product — is more difcult," he adds. "So there might be adequate inventory, [but] it just might not be in the right location." Itasca's solutions are tailored specifcally to the North American grocery industry, which has unique challenges such as a large variety of product sourcing and an emphasis on promotions, he notes. In one of Itasca's most recent implementations, Rochester, N.Y.-based Wegmans is in the process of bringing the Itasca Magic Inventory Manage- ment Solution to all 88 of its stores and in most major departments. Future phases will extend the solution to the general merchandise, health and beauty care, direct-store-delivered, and perish- ables categories — in addition to the grocery, frozen, and dairy categories it has rolled out to chain-wide over the past year. "We are already better at ordering accuracy, stay- ing in stock and reduced overall store inventories," said Jack DePeters, Wegmans' SVP of store opera- tions, in January. Right Inventory, Right Time Over at Dayton, Ohio-based Teradata, store-/SKU- based forecasting is the name of the game for dealing with out-of-stocks. Tim JW Simmons, general sales manager, North America, demand chain solutions and services at the company, notes, "Te key factors causing out-of-stocks are using promotion estimates that aren't based on individual store demand and need; having new item forecasts that are based on av- erages, with limited focus on individual location; and having a one-size-fts-all service-level strategy." Teradata's solutions more accurately forecast promotion and event demand, and also incorporate seasonality, trend and new-item data into their analytics, he says. One national food retailer that recently imple- mented Teradata's demand-driven forecasting and replenishment approach "signifcantly improved its ability to determine the right inventory, at the right place, in the right quantity, and at the right time across the chain," according to Simmons. Te retailer now provides its stores with automated demand forecasts and suggested order quantities. While North America certainly has its own distinct challenges contributing to out-of-stocks, at least one global retailer is learning some lessons that We estimate that at least three-fourths of current out-of-stocks are caused by a frustrating combination of antiquated ordering systems plus inadequate shelf- management processes." —Jeff Kennedy, Itasca Retail Information Systems

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