Progressive Grocer

JUN 2016

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Page 186 of 239

June 2016 | | 187 Lessons Learned A year ago, the Food Marketing Institute/Grocery Manufac- turers Association Trading Partner Alliance shed new light on the problem of out-of-stocks in an eye-opening report, "Solving the Out of Stock Problem." Since that time, the third phase of the alliance's journey to bring on-shelf availability to 98 percent has continued, and the team has validated several of its white paper recommen- dations via retailer-manufacturer learning pilots. Daniel Triot, senior director of the FMI/GMA Trading Part- ner Alliance, shared those findings with Progressive Grocer . Among them: 1) Collaborative Planning: Event forecast plans using one demand signal in support of market-driven events can deliver higher on-shelf availability (OSA) and customer satisfaction, while improving sales and reducing excess inventories. 2) Leveraging Metrics, Process and Technologies: Vari- ous out-of-stock metrics currently exist, leading to multiple views of the "shopper's reality," and confusing leaders and decision-makers upstream from store operations. Leveraging metrics and technologies to better understand the location, quantity and accuracy of promoted/nonpromoted products at the SKU-store-shelf level, determining root causes of OSA failures, and prioritized plans are key to improving OSA. Meanwhile, as part of its mission to provide education and practical tools for industry use, the alliance has collaborated with the Wake Forest University Center for Retail Innova- tion to develop two OSA tools. The first is a Root Causes or Ishikawa Diagram that highlights the leading causes of OSA failures across five retail functional domains: store execu- tion, ordering and execution, forecasting, manufacturing, and category management and merchandising. The second tool provides "best practices solutions" to address OSA for the five functional areas. Both tools are scheduled to be online by June 30 at "Last but not least, acceptance and adoption of a com- mon on-shelf availability definition should remain a critical industry objective to improve on-shelf availability," Triot tells PG . "The Trading Partner Alliance supports the industry ef- forts to move, at a minimum, to a common definition of 'zero on hand,' which is the number of instances when an autho- rized item's perpetual inventory falls to zero or below for that item, regardless of where it is located in the store." Triot notes that the Trading Partner Alliance now has a dedicated email address for questions related to OSA: [email protected] might also apply in the States. Slovenian retailer Mercator operates supermarkets, convenience stores and online operations, yet at one time, its IT sys- tems weren't fully integrated and didn't adequately support its business needs. Specifcally, its ordering and replenishment systems were working in silos, and product informa- tion wasn't held centrally or at the shelf. Palo Alto, Calif.-based Symphony EYC was able to use its Symphony GOLD technology to help the company turn its operations around and signifcantly lower its out-of-stocks, according to Donal Mac Daid, VP of marketing supply chain for Symphony GOLD. "Mercator operates with two huge systems: the supply chain management system, and the merchandising and category management system," notes Mac Daid. "Te frst stage of the improve- ment program was to synchronize these systems together and integrate the business processes so the store replenishment system would be driven by live sales and inventory data. To achieve this, Mercator deployed Symphony GOLD Assortment Planning and Store Execution." Te IT system allowed Mercator to access data at numerous points in the supply chain, including at the shelf, according to Mac Daid. Inventory levels across the supply chain could now be monitored in real time, and orders were placed automatically to suppliers, reducing the risk of out-of-stocks. So far, Mercator has rolled out the Symphony GOLD system to 483 stores in Slovenia: 22 hy- permarkets, 61 supermarkets and 400 convenience stores. Amazon's Always in Stock Mac Daid believes that in the U.S. market as well, the frequency of inventory updates around both sales and inventory needs to increase. "Like all retailers, U.S. supermarkets need to move faster," he says. "It used to be that grocery chains kept, on av- erage, 28 days of stock on hand; now it's seven days. With less days of inventory, they need more support from their IT systems." At least one U.S.-based retailer can claim to have no out-of-stocks, namely, Seattle-based Amazon, notes Mac Daid. "With Amazon as the default standard for online delivery, retailers need to ad- dress their out-of-stock issues or risk going out of business," he warns. "Today's shoppers will go else- where if the retailer doesn't have what they want." Itasca's Kennedy echoes his concerns, noting that SKU reduction as a strategy to deal with out-of- stocks may be a bad idea, when you consider the growth of online retailing. "Tat's the wrong move," he says. "I think that's a move toward limiting your appeal to the consumer. In a day in which brick-and- mortar stores need to compete against online opera- tions, dropping variety is not the best strategy." He adds: "We take a more direct approach to the elimination of OOS, which is [to] go to the root cause — which is generally poor store orders. If we can eliminate poor orders, then we can eliminate out-of-stocks." PG

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