- The effects of low on-shelf availability
- How suppliers and retailers need to collaborate on data analysis
- What to do with inventory fluctuations due to promotions
- How Walmart uses technology to improve its on-shelf inventory
Retailers have to continuously deal with ever-increasing pressure to intensify their sales, reduce costs, and retain customers. The retail industry has conquered new frontiers due to the emergence of omnichannel and modern store patterns. Because of these new frontiers, the competition for profits and customers is fiercer than ever before.
As a result, stores have put into operation more efficient promotions, improved visuals, and the routine launch of new products. While these methodologies may work well to generate demand and product rotation, retailers still have one challenge: on-shelf availability.
Research from the Trading Partner Alliance, created by the Food Industry Association and the Grocery Manufacturers Association, revealed that the product out-of-stock rate continues to stay at an average of 8% and surpasses 10% in the case of promoted goods. Supply chain complications, data elevators, and divergent business processes are causing shelves to become empty.
Persistent items in short supply also have adverse effects on shoppers’ thought processes and choices. The same research also indicated that shoppers rate products’ availability as one of the top three considerations when determining where to shop for groceries. Nevertheless, whenever shoppers enter a store, from every 12 products on their shopping list, one will be out-of-stock. This number increases to one in 10 for in-store promotional items.
Although it directly affects revenue, customer retention, and product awareness, why is on-shelf availability challenging to achieve? While the answer comprises various elements, there is a disconnect between available data and root-cause analysis.
Collaborating on data analysis
Although both retailers and suppliers are individually producing large quantities of data, what is missing is a powerful way to collaborate to extract the actual knowledge and value from the raw data.
To efficiently tackle the challenge of out-of-stock items and empty shelves, retailers and suppliers alike must address the primary cause — inadequacy in data analysis— through mutual collaboration to ascertain harmonious and integrated processes. To accomplish on-shelf availability, suppliers and retailers must have clear insights that comprise a blend of integrated data, rational intelligence, and joint decision-making.
Theoretically, this is a sound strategy. However, let us take a look into the new era of retailer-supplier partnership in actuality and the subsequent value it pushes. Take, for instance, an international consumer packed goods enterprise, catering to thousands of stores, intending to grow on-shelf availability, and trying to decrease stock-outs in exchange for more profit and customer retention.
CPGs, and other suppliers, usually do not know much about a retailer’s store and sales figures. Typically, they only know about orders and consignments of their goods to their distribution centers. Sales data, forecasted demand, and end-to-end visibility of inventory are not visible to them. Consequently, CPG companies, as well as the retailer, have no practical means to quantify out-of-stocks, determine the main reasons for low stock, and take remedial measures.
Promotions and surpluses
Promotions and excess supply add complications to the replenishment process. Promotions can cause stock-outs, leading to higher shipping costs, and a surplus can lead to warehousing expenses. In both situations, operating efficiency depends on insightful decision-making that leads suppliers through preparation, implementation, and monitoring cycles.
For instance, many times, there’s a real rush concerning where to send items from DCs to meet peak demand, such as:
- Deciding on the quantity of the product for placing an order for the approaching promotion, or
- Determining whether to place extra orders after the analysis of the first day’s promotion results
Retailers and suppliers must take care of demand instability per store, day, and SKU each day and synchronize with logistics planning, supply, and in-store daily management.
Meeting the out-of-stock challenge is more delicate and intricate than it might seem on the face of it. New cross-silo data analyses can help suppliers determine demand forecasts and inventory levels to find pain points and vulnerabilities of scarcity, and therefore, make adjustments and prioritize items.
For quite some time, cooperation in planning and decision-making has been a barrier for CPG suppliers and retailers. Nevertheless, the exchange of consolidated data is capable of turning the tables for on-shelf availability. Joint activities between suppliers and retailers lay the groundwork for a “constantly connected” state of affairs.
This connection can bring to light modern, real-time intelligence and result in better decisions and quantifiable results that directly affect on-shelf availability. Prominent retailers and suppliers striving to improve their cooperative supply chain will keep growing in markets where competition is tough, and margins are precious.
How Walmart is improving its on-shelf availability
Is it possible to use technology to improve on-shelf availability after the panic buying of COVID-19? Walmart has implemented a system of robots that move independently through stores, scan shelves, and alert employees of discrepancies ranging from reduced inventory to wrongly-priced products. The retail giant uses these robots to warn management to take quick restorative steps.
San Francisco-based Bossa Nova Robotics created this technology to work in retail stores. In 2017, Walmart installed 50 Bossa Nova bots in 50 stores and added 300 more locations in April 2019. The retailer is adding these robots to 650 stores to bring the total to 1,000.
In 2019, Walmart introduced its Intelligent Retail Lab store, which uses cameras for real-time inventory checking. These cameras transmit on-shelf levels to an artificial intelligence program, which, in turn, notifies stockers that they need to replenish a shelf in the store.
What can suppliers do to increase on-shelf availability?
While Walmart does not provide any on-shelf availability information to its suppliers, SupplyPike’s Retail Intelligence software gathers in-store data for traited and valid items for you.
You can also view a quick map of where you have phantom inventory versus where you have on-shelf availability.
You can quickly view your inventory numbers, including weeks of supply, instocks, and items “in pipe.”
The best part? You can get started for free, no risk! Try it for 14 days!