What is replenishment? 
-----------------------

The dictionary defines replenishment as the “restoration of a stock or supply to a former level or condition.” So, typically this means that product is missing from the shelf and needs to be refilled or **replenished**. The product will have to be shipped from the **reserve storage** in the supplier’s warehouse to the **primary storage** in the retailer’s distribution center and then onto the store itself. 

Why is replenishment essential?
-------------------------------

**Out-of-stocks** occur often and can be a real hassle to both the consumer and the supplier. It’s frustrating having to either purchase a different brand of the product you are looking for or to forgo purchasing the product altogether. As a supplier, it’s even worse, since you are losing sales until you replenish your stocks and losing customers to your competitors. Additionally, retailers issue **chargebacks** if you don’t meet your instock goal. 

![Out of stocks pictured ](https://lh3.googleusercontent.com/jO6GdgogZo-Zx-txg4ymnQgtiCvEmqBZjyz9qKyEOteIBXDiRz5QBf6cq25jNs2zqY7HXTT05kbn-KgW-cwXM7KgWNv8KTHgEtCg4FUGjAts5CUWCJXFHcEvowI4acWiMeXq0Eut)

Walmart, as an example, has a corporate instock goal of 98.5%, meaning that if your product is sold in 1,000 stores, 985 must be appropriately stocked. Otherwise, there are fees levied. Walmart has over 4,700 stores in the United States alone and 42 regional distribution centers (not including grocery or import centers). Just one Walmart DC is one million square feet, so it can be tough making sure all products are where they need to be. 

What causes out-of-stocks?
--------------------------

These days, it can be hard to keep the right amount of product on the shelf. **[Viral marketing](https://www.rangeme.com/blog/influencer-marketing-101-tips-for-brands-just-starting-out/)** has changed the CPG game completely. A sudden retweet from an influencer might spike sales overnight, causing stores to run out of products before more are scheduled to arrive. Other factors may come into play as well. An ice storm may cause delays in your shipping so that your product doesn’t reach the stores on time from the DC, or your buyer may decide to run a sale, or your new marketing campaign did much better than expected.

[![Stop out-of-stocks in their tracks. Start for free. ](https://supplypike.com/wp-content/uploads/2020/03/Stop-out-of-stocks-1-1024x333.png)](https://www.supplypike.com/analytics)

The replenishment cycle
-----------------------

In this post, we will look at Walmart as an example of the replenishment cycle, but other retailers have similar processes as well. Large retailers often have multiple replenishment channels, but the process below is usually a pretty good starting point if you want to familiarize yourself with their supply chain. 

1.  Walmart’s replenishment system notices there is an **Out of Stock** instance at the store level.
2.  The system **aggregates** Out of Stock quantities at the DC level.
3.  A **Purchase Order** is written to the Supplier, with details like:  
    *   Item
    *   Quantity needed
    *   Must Arrive by Date (MABD)
    *   DC destination
4.  The supplier receives the order and ships it out (either **Prepaid** or **Collect**) to arrive by the MABD.
5.  The product arrives at a Walmart **Distribution Center**, where it is parsed out onto trucks that take it to the stores.
6.  Walmart stores typically receive shipments of products **every day,** and shelves are often stocked at night.
7.  A consumer will pick an item off a shelf and scan its **UPC** when checking out, and the replenishment cycle begins again.

Walmart will accept +/-20% of forecast sales, and they measure returns as a negative to your on-hand. Poor instocks may require a [**Store-Specific Order (SSO)**](https://supplypike.com/blog/when-to-do-ssos-store-specific-orders/) in order to replenish your product outside of the cycle and allow you time to adjust your forecasts and demand plans.

Thinking like a replenishment analyst
-------------------------------------

There are vital questions to ask yourself to make sure your replenishment cycle is working as expected. 

*   Did we ship in full?
*   Did we ship on time? If not, were we early or late? 
*   Did I outsell my forecast? 
*   How do I prioritize which items to address? 
    *   90% instock in 4000 stores vs. 90% instock in 400 stores
*   Is my instock trending up or down?
*   What does my pipe look like?  

Instock tends to drop at the end of the week and rise at the beginning, so that is something to keep in mind. At times you will also notice that you may be meeting your sales forecast, but you are still experiencing issues with out-of-stocks. This could mean you have some stores that are overselling their forecast, while others are underselling theirs (canceling the item’s forecast variance out). 

[![Analysis without the paralysis. Start for free. ](https://supplypike.com/wp-content/uploads/2020/03/analysis-without-paralysis-1024x333.png)](https://www.supplypike.com/analytics)

What can I do to keep up with my instocks?
------------------------------------------

If you are experiencing out-of-stocks, there are a few things you can do.

### Ensure you are shipping On Time In Full

First off, make sure your product is getting to your retailer within the timeframe it is expected and in shipments that contain all of the product ordered. SupplyPike can help with our Retail Intelligence Walmart OTIF Scorecard. You can view the number of cases ordered and compare them with the amount that shipped, went unfilled, came early, or arrived late.

![Walmart OTIF Scorecard](https://lh3.googleusercontent.com/2cLkI06yETObSvwkwk_ieH2kGr-eKRSrAMTAsbTdq04CwroS2d1bJ4oUETC8a-I5EBALm_h-3soZ3I884sfK785sWqtfJsADhaVV3ulHjKVfp84ycpWGTlWFt5rrsdOqLBBj7Zjx)

### Submit a Store Specific Order (SSO)

If you have stores with low instocks, you can submit a store supplemental order to get your instocks back up to your goal. This process involves filling out a complicated form that you can get from your Replenishment Manager (RM) at Walmart. Or, you could just use our [**SSO generator**](https://www.supplypike.com/analytics/sso).

![SSO Analysis](https://supplypike.com/wp-content/uploads/2020/03/ssoanalysis-initial-renderv3-1024x619.gif)

### Recommend a forecast adjustment

Perhaps you need to look at your [**demand plan**](https://supplypike.com/blog/demand-planning/) and figure out which direction your sales are expected to go. Once you have an idea, you can recommend a forecast adjustment. You can start by checking your **Quartile Report**, which can easily identify your top selling stores. Our Retail Intelligence software automatically creates one with your latest Walmart data.

![Quartile Report](https://lh4.googleusercontent.com/4cy3pHhPBeoVjDLbIPrIZqf-iZhdc9rSidt3GM39nNvVED72rrivYwEdST6saMKhyLZbyDwV913Vu0GZSiA6K9tNHz11gJS4Bc9POQTmCAtwA8ybSLJT3FXaytCtg4TwI9AB0S_8)

SupplyPike’s Retail Intelligence software has all the metrics you need to keep track of your replenishment needs. Armed with the tools above, you can recover lost sales and prevent instock fees. And you can start a [**free trial**](https://www.supplypike.com/analytics) today!

[![Replenishment at your fingertips. Get the tool. ](https://supplypike.com/wp-content/uploads/2020/03/Replenishment-at-your-fingertips-1024x333.png)](https://www.supplypike.com/analytics)

Replenishment 101: What Is Replenishment?

Learn about:

*   Cross-docking
*   Walmart’s inventory technology
*   Shelf-scanning robots
*   Vendor-management inventory

* * *

Walmart’s global inventory is worth more than [$32 billion](https://leverage.it/be-like-walmart/) on any given day and presently operates more than [11,500 stores across 27 countries](https://corporate.walmart.com/our-story/our-locations). In order to maintain that inventory, the retail giant uses three basic strategies for [**replenishment**](https://supplypike.com/blog/replenishment-101-what-is-replenishment/):

**Cross-Docking**
-----------------

Walmart’s inventory strategy primarily revolves around cross-docking. Under this, Walmart schedules all its inbound and outbound items in a synchronized manner. So, most of the time whenever an inbound inventory truck/trailer arrives, its items are directly loaded onto a waiting outbound truck/trailer. This prevents the need for extra storage space as well as keeps inventory costs down. Since transportation is scheduled with such harmony, transportation costs stay low, as does the transportation time. Such scheduled processes also lower the scope of any discrepancies in the process.

**Advanced Inventory Technology**
---------------------------------

Walmart strives to keep consumer pricing as low as possible. This has led Walmart to invest in advanced inventory technology for tracking and restocking inventory in each of its stores. Technology has also been a major factor in laying down the foundation of Walmart’s supply chain strategies. Walmart was the first retailer to ever use a computer system in 1975. Since then, Walmart has pioneered the usage of barcode scanning, POS data, and even satellite systems in order to become more technologically advanced.

**Shelf-Scanning Robots**
-------------------------

Robots have replaced several tasks that were being done by humans. These robots use shelf-scanning technology that automates repetitive tasks such as checking out-of-stock inventory, incorrect item prices, missing labels, and so on. These scanning robots have proved to improve job productivity and turnaround time by more than 50%.

[![Awesome insights to help you meet demand. Take the tour. ](https://lh3.googleusercontent.com/bdkoddyM9bBj_MRk49XZ5wt_gtI7TBR5azOFo03Y0FYVZfVMwvhq_zEGRDaK6BGS13F-lHTsM7ZzPRAujTSGputhNohDo3sBVzBeB5bEnGXZWqt9etd0iPISmYjEzg)](https://www.supplypike.com/analytics)

**Walmart’s Relationship with its Suppliers**
---------------------------------------------

Walmart has been practicing strategic sourcing to procure the best prices from its suppliers on every product. Walmart chooses suppliers who can ensure that they meet a **[demand](https://supplypike.com/blog/demand-planning/)** every time they enter into a strategic partnership with it. 

Under the agreement, Walmart offers suppliers the option of sourcing long-term as well as high-volume purchases, in return for the lowest possible prices on those products. This relationship also enables them to establish constructive communication for an improved inventory flow while acting as part of one big firm.

What also sets Walmart’s tactics apart from its competitors is that the retail chain does not believe in extending the number of links in its supply chain. Keeping the number of links in the chain low is something that Walmart has practiced since the very beginning. 

**Walmart Vendor-Managed Inventory**
------------------------------------

Walmart’s supply chain initiative, popularly called [**Vendor-Managed Inventory (VMI)**](https://supplierwiki.supplypike.com/articles/what-is-vendor-managed-inventory/), makes manufacturers responsible for managing their inventory in Walmart’s warehouses. This helps keep the rollout fulfillment at 100% of its potential.

With vendor-managed inventory, suppliers access data using Walmart’s information systems, particularly Retail Link. Given access to this data, the decision on when and where to [**replenish stores**](https://supplypike.com/blog/replenishment-201-monitoring-store-level-inventory/) is on the supplier, while Walmart takes care of the actual transmission of goods. 

 Cross-docking allows for a major reduction in transportation time and costs to both the supplier and the retailer. Additionally, Walmart’s use of advanced inventory such as POS data and barcode scanning has allowed it to become a technological pioneer. Walmart’s replenishment cycle is supplemented heavily by the use of robots performing shelf-scans. These strategies have enabled Walmart to become an efficient and effective replenishment powerhouse, netting it [$514 billion in 2019 alone](https://corporate.walmart.com/newsroom/2019/04/23/walmart-releases-2019-annual-report-and-proxy-statement). 

[![Replenishment made easy. Try it today for free. ](https://lh6.googleusercontent.com/VL8zG4_UFRrCo3QV2qPgqfl5QDDvWUvRQSZN0NTHbYqt-NsfKoPBYREI3YyTv9-ByU010i12murKRxusevYeiveguRC_h_T00rhgeRXuoBqQLf2T057ecZC4VfkAWA)](https://www.supplypike.com/analytics)

The Basics Of Walmart Replenishment

Learn about:

*   Why replenishment is important
*   How to create a replenishment process and the different types
*   Replenishment strategies to keep up instocks

* * *

Running out of stock is never an ideal situation. Customers get upset, and businesses lose out on sales. Replenishment ensures that items are always on the shelf, but how do organizations know which products can go **out-of-stock (OOS)** and which ones to reorder from the vendor?

No one can overstate the importance of replenishment. Companies don’t want to miss out on selling products to customers, but they also don’t want to be stuck with overstock. It’s a fine line between knowing what needs to stay in stock and which items to discontinue.

What is replenishment, and why is replenishment important? 
-----------------------------------------------------------

[**Replenishment**](https://supplierwiki.supplypike.com/articles/replenishment-101-what-is-replenishment/) is simply keeping items on hand by filling up what the supplier has used or what the retailer has sold. It gives businesses an edge over their competitors by always having a coveted item in stock. The definition is broad since it doesn’t address which products companies should reorder from their supplier or let run out.

An organization can sell hundreds of an item while it’s on sale. Does this mean another order to the vendor? Seasonal items are something else to consider. A company can sell out of candy corn in early November, but does the supplier need to send more?

Replenishment not only deals with ensuring the item a customer is looking for is in stock, but it also applies to when to reorder the item. In the business world, replenishment means ensuring that a supplier or retailer only orders a product to support an anticipated need.

Suppliers can easily manage when and what out-of-stock (OSS) items need reordering with a replenishment process in place.

Benefits of having a replenishment process 
-------------------------------------------

Organizations will see a return when they have protocols determining [**when to reorder items from the supplier**.](https://supplierwiki.supplypike.com/articles/replenishment-201-monitoring-store-level-inventory/) Replenishment applies to all industries, from fashion and gardening to building materials and car parts. Companies only want to keep products in stock that consumers are looking for and want to purchase.

With an effective and efficient replacement process, businesses will have:

*   Increased levels of customer service
*   Higher inventory turnover and less stock sitting on shelves
*   Reduced costs in the reordering process and inventory waste

With an effective replenishment process, businesses will see less loss in unused products and improved customer satisfaction.

### Cost-effectiveness 

Companies that have effective replenishment systems see monetary benefits. Whether it’s a large organization with an automated service or a small business with a team taking daily inventory, it is fiscally sound to know what to keep in stock and what to discontinue.

Having a dedicated system or team allows an organization to concentrate on other tasks that ensure a good supply chain. Staff or automated systems can prepare for late deliveries or temporarily out-of-stock items since there was time to communicate with the vendor.

Businesses will also know when there might be an excess of seasonal products, so retailers can prepare to run sales ads before the items are taking up space on the shelves. Organizations can also prepare if items are OOS in time to warn their customers.

[![Actionable insights into your replenishment. Get Started.](https://lh6.googleusercontent.com/D6D_z1IRIP5mixgB43YPPTKlEqsitErx75CBcluXNPKFWayCjVl9rDKXXjBHYVQdg1Wg7VS3M7GW3i28ypejVBMjdgWJpDaheRaUjvnN_iVyZkVhJ5grS0WQkAEqQL7ti9xrV9St)](https://www.supplypike.com/analytics)

How to create a replenishment process
-------------------------------------

Suppliers and retailers can create a replenishment process manually or automatically. Manual inventory works for small and mid-sized businesses, but it’s not ideal for larger corporations. There’s too much inventory to track and reorder. In these cases, automatic systems work best.

There are four methods companies can use for their replenishment process. Different businesses will find that what works for them isn’t always the best option for a competitor.

### Reorder point process 

Companies will need a robust **information technology (IT)** system to monitor their inventory as an item sells. It is useful and ensures a product isn’t out-of-stock.

The process is simple. The supplier or retailer enters a maximum and a minimum number of items in stock into the system. When inventory levels fall below the minimum threshold, the system sends a message to reorder to the vendor.

### Periodic process 

Smaller companies will see profit increases using the periodic process. It works for several industries, including fashion and gardening.

Instead of constantly monitoring inventory levels, the supplier manually performs the process every three months. If the items are in stock and there’s back inventory, no reordering is necessary. The company only orders the product when it’s low and during the periodic check.

### Seasonal replenishment process 

Businesses that use this strategy are the ones with high-demand sales for a set period. During the busy season, there isn’t time for inventory. Instead, the company only does this during the down or slow time. It does leave a risk for items being OSS.

During the downtime, the business checks and restocks inventory with the available product. Retailers contact vendors are to replenish the shelves. It is a good way to avoid overstock problems while still keeping most customers satisfied.

### Demand replenishment process 

[**Demand replenishment**](https://supplierwiki.supplypike.com/articles/replenishment-301-avoiding-out-of-stocks/) is a straightforward strategy that works well for many businesses. Suppliers only replenish stock on consumer demand. If a product isn’t selling, the retailer doesn’t reorder it. Out-of-stocks are common with this process but only by customer demand.

A company’s inventory does need frequent checking. An automated system works best. These systems track inventory in real-time, so retailers and suppliers are in sync. Organizations also need to be ready to meet changing customer demands. Tracking popular items is critical, along with having back stock.

The process needs careful planning for it to be successful for the business. Creating a [**demand plan**](https://supplierwiki.supplypike.com/articles/demand-planning/), as well as a [**supply plan**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/), helps with this strategy.

Replenishment strategies and supplier success 
----------------------------------------------

Running out of a product one or two times doesn’t affect most businesses. Companies can expect OOS to occur with popular items. When a business is consistently out of an item, or several products, profit margins will begin to fall. The supplier and retailer will both lose out on sales, along with potential returning customers.

Replenishment is an integral part of any business. It ensures that products are on the shelves. However, replenishment also means companies only have what they need in stock, including overflow product.

Having a replenishment process designed to fit the company ensures that the retailer can stock its shelves for customers. It also helps to prevent over-ordering, especially seasonal items. Under-ordering is just as harmful to a business, and a replenishment strategy will prevent this.

Find a replenishment strategy custom fit for you
------------------------------------------------

With SupplyPike’s [**Retail Intelligence**](https://www.supplypike.com/analytics) app, you can view your instocks and weeks of supply with ease. See store versus distribution center inventory numbers and prevent out-of-stocks.

![Retail Intelligence – Ladder Report – Store & DC Inventory](https://lh6.googleusercontent.com/KJwhtvRdfDcczKY6Cc9FZp3Hml50bkDD4n7NnMnkGZQzQJPE2aRtwb6xAIi6v3kb9jKaVS-bSVvarFDygmv4GwfKvBVMpfIMksfIaMvkOlHZeix4M7_QWpVnMi-vYjZXxh2OMMa2)

Retail Intelligence – Ladder Report – Store & DC Inventory

Dive into deep insights with our Replenishment dashboard, showing instocks, fill rate, and forecast data.

![Retail Intelligence – Walmart Replenishment tool](https://lh4.googleusercontent.com/GBT3nvYarKWKBW5VyhxPGwcJAguzkcEmx228kH2rshMRsG5jkEfYB0EoGPkluqY8UFtDOnq7V1kodleYYHWvFwGIS3UREcn32_hUZoqzmoIo6od7HiVJqPcX2oIH8EZ_AHNnqan-)

Retail Intelligence – Walmart Replenishment tool

[**Get started today for free!**](https://www.supplypike.com/analytics)

[![Replenishment on hand. Take a tour.](https://lh6.googleusercontent.com/MzVw_nOUQ8vii4VslyJ3cuKncMxepJ0UH8wf_ANBZL9lrz3UoFjGQaAfd3OtsUKskJym1ZOW1wjTN3LviDFAP5cvLO688cuKXPzsWxQghkUvWc7F3IaaFI38L-MPFndx_rFFBPiS)](https://www.supplypike.com/analytics)

Why Is Replenishment Important?

Learn about:

*   The different terms you’ll encounter in replenishment
*   The value of learning these terms

* * *

As a retail vendor, an in-depth understanding of essential supply chain terminology is critical to your business success. Replenishment terms and definitions are one key point. For example, many people confuse replenishment with fulfillment – but these are two very different areas.

**Fulfillment** refers to the process of executing and completing a customer order, including packaging, shipping, and processing payment. **Replenishment** refers to the process of sending additional materials to the customer on top of what has already been fulfilled.

For example, if a retailer needs additional goods from a supplier, it might fill out an order form to replenish its supply. Alternatively, if the customer wants more product on top of what the supplier has already sent, we also call this replenishment.

The word “[**replenish**](https://www.dictionary.com/browse/replenishment)” technically means to complete or make full again. This replenishment glossary provides a broad overview of replenishment terms and definitions with which retail vendors should be familiar.

The replenishment glossary terms are subcategorized into the following sections:

*   Inventory
*   Procurement
*   Stock
*   Logistics
*   Policies
*   Calculations
*   Ordering and reordering
*   Other replenishment terms and definitions

Inventory
---------

[**Aggregate inventory management**](https://supplierwiki.supplypike.com/articles/what-is-aggregate-inventory-management/)**:** Aggregate inventory management is a simple method of managing stock. It involves grouping products into three distinct categories: finished goods, work-in-process (WIP), and raw materials.

[**Five types of inventory**](https://supplierwiki.supplypike.com/articles/what-are-the-five-types-of-inventory/)**:** The five types of stock are packing materials, work-in-process (WIP), raw materials, finished goods, and maintenance, repair, and operating (MRO).

[**Inventory control**](https://supplierwiki.supplypike.com/articles/what-is-stock-control/)**:** This important replenishment glossary term refers to a retail vendor’s use of procuring and managing stock. Inventory control is also a synonym of stock control.

**Inventory cycle:** The term inventory cycle refers to the process of planning and managing inventory levels. It includes replenishment.

**Inventory forecasting:** Inventory forecasting is a system that predicts inventory levels, service level performance, and expenses for the future. It can help suppliers plan their business operations.

**Inventory optimization:** Inventory optimization is the management process that allows for maximum service at the lowest possible cost.

**The maximum level of inventory:** The maximum level of stock refers to the “order-up-to” number in an inventory system that uses a minimum/maximum inventory policy. The order quantity will depend on how big the gap is between the available and maximum figures.

**The minimum level of inventory:** The minimum level of inventory refers to the level of stock that will trigger a replenishment in an inventory system using a minimum/maximum inventory policy.

[**Phantom inventory**](https://supplierwiki.supplypike.com/articles/phantom-inventory-is-haunting-your-supply-chain/)**:** Phantom inventory refers to stock that the inventory system classifies as sellable inventory that’s available in the store even though there’s no actual marketable item.

[**Vendor-managed inventory (VMI)**](https://supplierwiki.supplypike.com/articles/what-is-vendor-managed-inventory/)**:** Vendor-managed inventory (VMI) refers to pushing all merchandise responsibility from the retailer to the manufacturer. VMI allows for cost-cutting and avoids overstocking.

Procurement
-----------

**Order quantity:** Order quantity refers to the set number of units ordered when inventory levels reach the designated reorder point.

**Order quantity minimum:** The order quantity minimum refers to a number (which the retailer negotiates with the supplier) used to determine the minimum amount of product that a customer must order. Suppliers usually use the demand history to determine the order quantity minimum.

**Order quantity multiple:** Suppliers may require the retailer to order multiples when they need their customers to order items in a set number. For instance, a supplier may not let you order just one product but must require that you order five.

[**Procurement best practices**](https://supplierwiki.supplypike.com/articles/procurement-best-practices/)**:** Procurement best practices are techniques to streamline procurement and make it more efficient. Options include using cloud-based procurement tools, optimizing inventory, and more.

**Procure to order:** When a supplier designs an item as procure to order, it must be ordered from a supplier or produced after a customer requests it. A synonym of this term is make-to-order.

Stock
-----

[**ABC code**](https://supplierwiki.supplypike.com/articles/what-is-abc-analysis/)**:** An ABC code tells you how quickly a piece of stock or product moves. An item with a high turnover will move through the warehouse quickly and is known as a fast mover.

**Cycle stock:** Cycle stock refers to the amount of inventory anticipated to cover lead time demand.

**Fill rate:** This metric indicates item availability. It measures the ratio of requested items to items supplied using on-hand stock. It is also a KPI of [**On-Time and In-Full**](https://supplierwiki.supplypike.com/articles/how-to-explain-otif-to-your-5-year-old/).

**Inner pack:** The term inner pack refers to the interior packaging that a product comes in. The inner pack might consist of bubble wrap, styrofoam, or protective plastic materials.

[**Instock**](https://supplierwiki.supplypike.com/articles/how-are-instocks-determined/)**:** A product is an instock if it’s already with the retailer or warehouse and is ready for consumer purchase. The vendor doesn’t have to take the added action of ordering the product for the customer.

**Master pack quantity:** Master pack quantity refers to how many multiples of a product you must purchase from your primary vendor.

[**On-shelf availability (OSA)**](https://supplierwiki.supplypike.com/articles/measuring-on-shelf-availability/)**:** On-shelf availability refers to how much of a product is immediately available to consumers in the store. It means they can take it off the shelf.

**Out-of-stock (OOS):** An item is an out-of-stock if it’s not immediately available for the consumer to purchase. The retailer has to order it first.

**Safety stock:** Safety stock refers to how much inventory is available to accommodate random increases in demand. Safety stock aims to reduce the likelihood of stockouts.

**Safety time:** Safety time refers to the number of days tacked onto the lead time in the interests of accommodating lengthier supplier lead times. A more extended safety time minimizes stockout risk.

**Service level:** The service level metric determines a retail vendor’s ability to avoid stockouts throughout replenishment lead time. For example, a service level of 80% means a 20% chance of a stockout occurring.

[**SKU rationalization**](https://supplierwiki.supplypike.com/articles/sku-rationalization/)**:** SKU rationalization is the process of determining which items (or [**SKUs**](https://supplierwiki.supplypike.com/articles/what-are-the-different-item-codes/#store-keeping-units-skus)) to keep in the supplier’s catalog and which to suspend or discontinue. It helps remove slow-selling products and maximize efficiency.

Logistics
---------

[**Demand plan**](https://supplierwiki.supplypike.com/articles/demand-planning/): A demand plan indicates how much inventory a vendor can anticipate selling. This plan allows vendors to forecast how much product to manufacture, store, and ship.

[**Supply plan:**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/) A supply plan predicts how much product a vendor will need, detailing the steps necessary to manufacture a product, store it in a warehouse, and ship and stock it.

[**TI/HI or Tie-High**](https://supplierwiki.supplypike.com/articles/what-is-ti-hi/)**:** A common replenishment glossary term used in the logistics world, TI/HI or Tie-High refers to pallet stacking.

**Vendor review cycle:** The vendor review cycle refers to the number of days an individual would need to wait before they place an order to the vendor that would be big enough to waive freight charges. The vendor review cycle is equal to the total annual purchases (both non-stock and stock) divided by the purchase order amount (in dollars) that would be necessary to qualify for free freight.

Policies
--------

**Backorder policy:** A backorder policy provides guidelines for what to do in case a stockout occurs. In this case, product units that the supplier can’t deliver immediately will be available later.

**Loss policy:** A loss policy provides guidelines for what to do in case a stockout occurs. In this case, units that the supplier can’t deliver immediately are considered “lost,” meaning the customer doesn’t get them and may turn elsewhere for the product.

**Lot for lot policy:** The lot for lot policy is driven by a reorder point (ROP) minimum and replenishment quantity (equal to consumption). It’s also known as a “sell one, buy one” approach.

**Minimum/maximum inventory policy:** A maximum/minimum policy is defined by when **supply reaches a minimum**. Once this occurs, an automatic trigger kicks in, and an order is placed up to the maximum inventory level.

**Q, R or R, Q policy:** A Q, R or R, Q policy is driven by the reorder point (defined as R) and the reorder quantity (defined as Q). The replenishment quantity remains consistent.

Calculations
------------

**Average daily usage:** You can calculate a product’s average daily usage with a simple equation. Simply divide the monthly use by the number 22.

**Average monthly usage:** The average monthly usage figure is calculated according to reorder point, ROP, models.

[**Economic Order Quantity (EOQ)**](https://supplierwiki.supplypike.com/articles/what-is-the-economic-order-quantity-eoq/)**:** EOQ is one factor used to determine the reorder quantity. Suppliers can also use an ROP model to figure out the settings for specifying their EOQ.

Order and reordering
--------------------

[**Backorders**](https://supplierwiki.supplypike.com/articles/backorders-and-their-effect-on-supply-chain/)**:** Backordering refers to a process in which a vendor gives customers the option to place orders even though the vendor lacks sufficient stock.

**Lead time:** Lead time refers to the time that passes from the point when the retailer realizes it needs more inventory to the point of that inventory being back in stock.

**Lead time demand:** Lead time demand refers to a random figure that encompasses all the requests during a specified lead time.

**Line point:** The line point defines the maximum quantity limit that must be reached to include a product on a vendor purchase order. 

**Reorder point (ROP):** ROP refers to the specific number of products that the retailer must reach to trigger the system to add that product to a purchase order. It considers merchandise usage and lead-time, ensuring stores don’t run out of the product without overstocking.

Other Replenishment Terms and Definitions 
------------------------------------------

[**Cross-docking**](https://supplierwiki.supplypike.com/articles/what-is-cross-docking/)**:** Cross-docking involves delivering products directly to the consumer. It skips the handling process of production facilities. 

[**Gordon Graham**](http://www.gordongraham.com/about.html)**:** Gordon Graham is a recognized expert in inventory management and has authored several books on distribution management calculations and theories.

[**Item codes**](https://supplierwiki.supplypike.com/articles/what-are-the-different-item-codes/)**:** Item codes are unique identifiers for products. Different sectors and geographic areas use other item codes. For example, there are specific European Article Numbers (EANs).

**Per car quantity:** Per car quantity refers to how many multiples of stock a customer wants for a specific part. The customer does not need to order the per car quantity. For example, if the per car quantity for tires is four, the customer can still order just one tire.

**Return on added investment (ROI):** The ROAI refers to the bottom line the supplier hopes to reach when it adds money to its inventory. An inventory management system uses ROAI to calculate the extra quantity that customers must buy.

**Rule of thumb:** A rule of thumb is a simple and easy-to-understand way to define inventory requirements. For example, a rule of thumb might be to order one week’s worth of supply whenever inventory falls below three days’ worth of supply.

The value of a replenishment glossary
-------------------------------------

Mastering the above terms can help you save time, stress, and confusion as a retail vendor. While this list isn’t comprehensive, it covers many significant must-know phrases and words you should know for your business to thrive.

Want more? Start with **[Replenishment 101: What Is Replenishment?](https://supplierwiki.supplypike.com/articles/replenishment-101-what-is-replenishment/)**

Replenishment, the SupplyPike Way
---------------------------------

With SupplyPike’s [**Retail Intelligence**](https://www.supplypike.com/analytics) app, you can have all of your favorite replenishment metrics right at your fingertips. View a map of traited vs. valid stores or a map showing a product’s on-shelf availability.

![Retail Intelligence – Traited vs. Valid Map](https://lh6.googleusercontent.com/Move0AhHecJD_aExsGRezONbUkQvWgaDe_RIg3fxvPwWqK_fPooHo2detz_2i8hlLMdPJMIGnpv6ekP9OuQ7onSlTOiQqDAsr0BRKigpFjT433ZfbsxO9mauVwkx_CX-7XWakp8E)

Retail Intelligence – Traited vs. Valid Map

![Retail Intelligence – Shelf Availability Map](https://lh6.googleusercontent.com/4y4qOI0IT20og2GCQMpOGd0Roi_Vz7TXiXIWVosSvStGCwPSnQj-LCznmvThS7EhvE4GZndjT1vw56k90FV3hUcXRi61XId3AspYrqyVnDN-OQzOYZtjth_CUA3RRYTtIbZot2bn)

Retail Intelligence – Shelf Availability Map

[Get started today **for free**](https://www.supplypike.com/analytics) to see your replenishment insights!

[![The definition of replenishment. Take a tour.](https://lh3.googleusercontent.com/YRXoDVA3C4anKR1R8T-IneHPCeJw-uDKBWFJhqtMZ1ThQv3V18683_BvpmgJpT6XNmTG16jnbQJNi5OziLZfx0LVPSzG-u5nb3DxHZkPWCN8wjCY4MGs1hZ69AnENkfG8d7vAUno)](https://www.supplypike.com/analytics)

The SupplierWiki Replenishment Glossary

Replenishment 101: The Basics

Learn:

*   How a product is determined to be replenishable.
*   How to measure instocks.
*   What “in pipe” means.
*   What pack sizes are and how they affect your replenishment.

* * *

In last month’s post, we went over **[Replenishment 101: What is Replenishment?](https://supplypike.com/blog/replenishment-101-what-is-replenishment/)** This month, we thought we’d dig in a little deeper and look into monitoring store-level inventory.

Traited and Valid
-----------------

In order for an item to be considered replenishable in Walmart’s system, you’ll need to check the order book flag, item status, effective date, MBM code, and positive forecast.

It’s also important to note the difference between traited and valid. An item can be one and not the other, or both.

*   **Traited:** When an item is chosen by the buyer to be put on the modular, it is considered “Traited”.
*   **Valid:** When an item is actively replenishing, it is considered “Valid”.
*   **Traited and Valid:** The item is on the modular and is being replenished at the store.
*   **Traited Not Valid:** The item is on the modular but is not replenishing because the store manager might decide not to order the item for her store due to reasons like low sales, too many returns, too much inventory, etc.
*   **Valid Not Traited:** The item is not on the modular, but the store manager orders it due to customer demand at her store. 

Products are usually traited for certain stores depending on their likelihood of high sales performance. For example, if a store is next to a beach, then bathing suits would likely be a traited product there and may not be so at a store located inland. It’s important to keep track of your traited and valid store counts to ensure you have sufficient inventory to cater to these stores (and especially if the store count changes). 

With our **Retail Intelligence** software, you can graph traited and valid store counts over time and quickly spot changes in the **Performance Report**. 

![Traited Store Count Over time ](https://lh6.googleusercontent.com/DvXY_mxFvitRWYOwmL_GfOpUDOF5L6ZEmPUYYfJyXlx2QqDIKLa9_-CQRaAzE3ZYLzafePX3TIfNoCPu17becRrdovkNcaebNPUfM7U1xRc8_cwzp8qdyXyzUWr5Gi7g_vASPEgL)

Instocks
--------

Instocks are an incredibly important metric to keep track of as well. There are [**three instock metrics**](https://supplypike.com/blog/instock-metrics-cpgs-supply-chain/) to keep in mind:

*   **Current Instock Percent:** measurement of valid stores that have at least one unit on hand
*   **Current Replenishable Instock Percent:** measurement of daily forecasted demand against current on hand store inventory. Does the store have sufficient inventory to meet today’s forecasted demand?
*   **Instock by Week:** measurement of historic instock percent 

These metrics will help you examine your instocks on a corporate level. Walmart has a corporate instock goal of 98.5%, though there is some minor variation between departments. If you fall below your departmental instock goal, it’s time to look under the hood and see which stores are having issues.

[![Replenishment tools on hand. Schedule a tour. ](https://lh4.googleusercontent.com/0HQKBOT77B0oAAsFDMGo25jWhW1jFc5tNsd88ZRqS3MNOwgqVgk0hY5zlj2-f_vZ3QjYOTng6h8Z0yC6P6QSHsCTLtAxVV5ONJtbAi38eHBWhYqtY8rYrsx1vebnj2o3Fm5CKzp3)](https://www.supplypike.com/analytics)

In “pipe”
---------

There are four things you’ll need to check in order to get a full picture of your replenishment cycle. Each of these statuses counts towards what’s “in the pipe”.

1.  **Store On Hand (OH):** This is the number of units actually in the stores.
2.  **Store In Transit:** This is the number of units that are traveling from the Walmart distribution centers to the stores.
3.  **Store In Warehouse:** This is the number of units currently in the Walmart distribution centers that have been allocated for stores but have not been shipped yet (i.e., they’ve been picked). 
4.  **Store On Order:** This is the number of units that are currently on order for a specific store from the supplier.

If you see that you have no OH units and nothing on the way (in the pipe) for certain stores, you’ll likely need to start doing further analysis to determine the root cause. Consider things like

*   Have you been shipping your orders in full?
*   Are you routing and shipping them on time?

If you have determined that _your_ supply chain is healthy, you can also reach out to your RM to determine if there are any blocks on ordering for certain stores, confirm that the order book flag for the item is on, etc. You can also work with your RM to determine store-level forecasts to ensure the correct amounts are being ordered at the store (and not just Walmart distribution center) level. 

One quick fix to keep in mind may be to create a [**store-specific order (SSO)**](https://supplypike.com/blog/when-to-do-ssos-store-specific-orders/) in order to quickly replenish inventory while waiting for forecast recommendations to take effect. 

SupplyPike’s **Retail Intelligence** software goes into deep detail about your replenishment statistics, showing you such metrics as traited and valid store counts, forecasted units, forecast variances, and your Walmart GRS Sales Forecast.

![Retail Intelligence Software: Walmart GRS Sales Forecast and Store Counts ](https://lh5.googleusercontent.com/ny6kzX3JbLGtSD2BQUaKLWd7Xqtn793vgeBBeIwTIU3ULM6yNktDf0VWEjQsiygcL81zq3r82TweRnmQg0rhiFRQR22evO7cl51EUYzclaVB7nEkmMhp9JQkZ3C10TzygALJME6W)

Pack sizes
----------

Another interesting angle you can examine to get to the bottom of persistent replenishment issues is your items’ pack size quantities. These quantities determine item order increments that are shipped not only from the supplier to the Walmart distribution centers but from the distribution centers to the stores as well. 

You want to ensure that Walmart has the flexibility it needs to replenish stores quickly, while also balancing the costs of packing product efficiently for your company. Generally speaking, smaller pack sizes are better for replenishment as Walmart can order, for example, single units to stores, though they are, of course, more costly (with increased packaging) and demand more labor from suppliers. 

To understand pack sizes, you’ll need some definitions:

*   **Vendor Pack (****_Case_** **Pack):** A vendor pack sent from the CPG to the retailer’s distribution center. It contains sellable units, known as “eaches”.
*   **Vendor Pack (****_Break_** **Pack):** A vendor pack that contains one or more **warehouse packs**. Warehouse packs can each be sent to different stores.
*   **Warehouse Pack:** The inner box inside a vendor pack, containing one or more eaches.

![Vendor Pack or ](https://lh3.googleusercontent.com/8gKI6Rp-7kczqoVM0F9LgYoLq5YZHvL2z0unbHhCaVDNNhqqO3mJiU_RRx3soSLLM1T1Pwy8JX-F9N09P9h5T-FyfVlgE6-SGZw86fQznhGjl4R6aYU3GMAxJz_fwRzYLKXsHuSc)

To help illustrate the concept pack sizes, here are some example item configurations based on the graphic above:

*   If your item is set up with a **Vendor Pack** 48 / **Warehouse Pack** 48 (**Case Pack**) configuration
    *   You are shipping one box with 48 units to the Walmart distribution center, which in turn is sending that same box with 48 units to the store 
    *   **Pros:** Cost-effective for the supplier
    *   **Cons:** Limited flexibility for Walmart, especially for slower-turning items. Based on this configuration, Walmart can only send 48 units to a store at one time. If you only sell 10-15 units per week, the system will never “see” that the store needs 48 more units and will not place an order. 
*   If your item is set up with a **Vendor Pack** 48 / **Warehouse Pack** 12 configuration
    *   You are shipping one box with 48 units (divided into 4 warehouse packs with 12 units each)  to the Walmart distribution center, which in turn is sending individual warehouse packs to the store 
    *   **Pros:** Better flexibility for Walmart. Based on this configuration, Walmart can send 12 units to a store at one time. If you are selling 10-15 units per week, the system will “see” that the store needs 12 more units and will place an order for a warehouse pack accordingly
    *   **Cons:** Less cost-effective for the supplier, as you must account for additional corrugate and printing for each warehouse pack 
*   If your item is set up with a **Vendor Pack** 48 / **Warehouse Pack** 1 configuration 
    *   You are shipping one box with 48 units to the Walmart distribution center, who in turn is sending individual units to the store 
    *   **Pros:** Cost-effective for the supplier
    *   **Cons:** Great amount of flexibility for Walmart. Based on this configuration, Walmart can only send units in any increments needed to a store at one time. Likely to not encounter pack-size replenishment issues. 

Walmart also has a “pack and a half rule”, meaning that one and a half inner cases must fit on the shelf. For example, if you can fit nine units on a shelf, your inner pack must be six (i.e., six plus three). Having smaller pack sizes also helps with the pack and a half rule.

How can I manage my replenishment?
----------------------------------

SupplyPike has a dedicated analysis tool for measuring replenishment for your stores. You can view your replenishment goals, your forecasts, and your traited and valid store counts. The best part? You can get started for **free** today. Just [**schedule a tour!**](https://www.supplypike.com/analytics)

[![Customizable sales metrics. Get started today. ](https://lh6.googleusercontent.com/rHgoWgxeolGKgHGbHzIwa9lRmZDWHZsUWXkNSHg3PbuODg_v3GO161ctLqvme5NeSZ_L4r4YmLFLb9h2ybOD0K-0YIxINLopGXNNV8x6PQBs3Abkt5gfEnXlJI8_kuJXaYwcF7wE)](https://www.supplypike.com/analytics)

Replenishment 201: Monitoring Store-Level Inventory

Learn about: 

*   What instocks are
*   What a “pipe” is 
*   How to calculate instocks 
*   Avoiding out-of-stocks 

* * *

Determining instocks is a necessary task for businesses to supply consumers with the products they want and need. For a business to succeed, maintaining its stock and replenishing out-of-stock items is essential. 

Several different pieces contribute to calculating instocks and determining replenishment. If a business fails to address each of these parts, it is in jeopardy of losing customers. To avoid having unavailable items and ensure you please your customer, let’s get into the steps to determine your instocks and replenish your merchandise. 

What are instocks? 
-------------------

Let’s begin by defining some of the terminologies we will be using throughout this article. 

An [**instock item**](https://www.collinsdictionary.com/us/dictionary/english/in-stock#:~:text=phrase,are%20available%20for%20fast%20delivery.) is essentially any product stored at a retailer or warehouse ready for customer purchase. It is not necessary to order instock inventory for a customer. They can either purchase it in person or online, and it is sitting at the location of purchase or in a warehouse waiting for shipment. 

An [**out-of-stock item**](https://www.collinsdictionary.com/us/dictionary/english/out-of-stock#:~:text=out%20of%20stock%20in%20Retail&text=When%20a%20store%20is%20out,item%20available%20to%20buy%20now.&text=your%20local%20store.-,When%20a%20store%20is%20out%20of%20stock%20of%20an%20item,item%20available%20to%20buy%20now.) or OOS is a product that is currently not available for customer purchase. OOS items can take place at physical stores, online stores, and warehouses. The product is either not there at the store or not in the warehouse. When an item is out-of-stock, stores need to replenish it, meaning to make it available for purchase to the customer.

[**_Related Reading: How Do I View My Instocks in Retail Link?_**](https://supplierwiki.supplypike.com/articles/how-do-i-view-my-instocks-in-retail-link/)

How are instocks determined? 
-----------------------------

Having a successful business has many parts, one of those extra crucial parts is having items in stock for customers to purchase. There’s no easier way to lose customers than repeatedly have the product they want out of stock. If that happens, the customer will become frustrated, or even worse, will search out that product from a competitor who does have it in stock. 

For stores to keep their instocks under control, let’s talk about how instocks are determined. 

We determine [**instocks**](https://supplierwiki.supplypike.com/articles/replenishment-101-what-is-replenishment/) by how many physical products there are currently [**on hand**](https://netamorphosis.com/insights/glossary/on-hand-inventory/#:~:text=Insights%20%7C%20Glossary%20%7C%20On%20Hand%20Inventory,sold%20or%20used%20by%20consumers.), meaning at the store. When a product is on hand, that means it is in stock and ready for sale. This part of calculating instocks is the simplest. However, there are more parts to determining instocks than just the products at the store. 

### Calculating instocks

Instocks are determined when you calculate your instock levels. Determining instocks is split into [**three different pieces of data.**](https://supplierwiki.supplypike.com/articles/replenishment-201-monitoring-store-level-inventory/) 

There are the instocks that are currently available, replenishable instocks, and weekly instocks. 

*   A store’s current instocks are the number of that particular product available at the store and ready to go. 
*   The replenishable instocks are the amount of product estimated to be of need for the projected demand on that particular business day. 
*   Weekly instocks account for the percentage of stock of a product needed based on last year’s data. 

All of these numbers contribute to a store’s instock levels. The instock levels will determine the replenishment needed to avoid having out-of-stock items.

![Get instock insights. Sign up now.](https://lh6.googleusercontent.com/hTmr1v5bTVaNuBr-Sofzk7LJ9q4JEg3HcDZa89aqsIMVuPf5z5L9upx9Ml2O9OwcR4g4vb04v91w-k2aa6PqIYrr-anrnZSiHCMsB08S5ikpCsXgty6FPW-OdOFqOuQiqenfIyER)

What is a “Pipe” in replenishment? 
-----------------------------------

When a store is figuring out its instocks, there is more to the number of products it has than what’s physically at the store or the warehouse. Some products are [**in pipe**](https://supplierwiki.supplypike.com/articles/replenishment-201-monitoring-store-level-inventory/#in-pipe). 

### Products In Pipe

Determining which products are “in pipe” involves four different parts:

*   Store on hand
*   Transit products
*   Warehouse products
*   Store on order

The first part is determining the **store on hand (OH)**. Store OH represents the number of physical products already present at the store, ready for immediate sale. 

Then there are in **transit products**, which are on their way to the store from a warehouse. 

After that, there is **store in warehouse products**. Store in warehouse accounts for merchandise ready to ship to stores but has not left the fulfillment centers yet. 

The last one is **store on order products**. Store on order products are pieces of merchandise that a store has ordered from the supplier but are still pending fulfillment.

Stores should be tracking in pipe items. When they do this, they will make sure that if there are none of that particular product in-store on hand, there are some in pipe at one of the stages listed above. 

Replenishment 
--------------

Ensuring stores have the products their customers desire means that business owners have to replenish their products to keep up with consumer demand. Replenishing stock begins with using the instocks data to determine how many units are necessary to keep up with the supply. 

A way for businesses to figure out their replenishment needs is to create a [**supply plan**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/). A supply plan measures the amount of an item necessary to have on hand to meet consumer demands. Supply plans depend on previous data from past years of consumer demand for a specified product. 

For example, an item sold well during that same time the previous year. Let’s say Superbowl Sunday. A particular brand of well-known potato chips skyrocketed the weekend of the Superbowl the year prior. The supply plan would be to ensure that item is in stock at projected levels based on the year before. 

The supply plan covers more than just the on-hand items and in pipe items. It accounts for the entire lifespan of a product. It follows the product creation to landing on the business’s store shelves. 

Suppliers can create supply plans for short periods, multiple months ahead to years, based on their needs. To find more information on making a well-organized supply plan, check out our [**Supply Plan article**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/). 

[**_Related Reading: What To Do When Walmart Runs Out of Stock_**](https://supplierwiki.supplypike.com/articles/what-to-do-when-walmart-runs-out-of-stock/)

Final remarks 
--------------

While determining instocks has many parts, it’s crucial to consider all of the pieces to ensure that you will have enough products for your customers to purchase. When a business creates a supply plan and uses data from previous years, they are more likely to be well-stocked and make sales. 

Visualize your instocks
-----------------------

Keep up your instocks with easy-to-use, actionable insights into your stores’ stock! Using the Walmart Inventory feature of [**Retail Intelligence**](https://www.supplypike.com/analytics), you can see your instocks, weeks of supply, and in pipe items at a glance.

![Retail Intelligence – Walmart Inventory](https://lh4.googleusercontent.com/7SgSS5Fds_ij2Y-9SLHyBDZ4g6Ko2HIzYST6oUniNa-FyeZ9XnmwRO6Z9Siqv6q39H5op5h3f_85nWRza4ggslLWkvG7NtXBSd1CwNlKIx4j5MzA1MU10cqWxAvyG7g0CW5EnAqX)

Retail Intelligence – Walmart Inventory

See a map of stores with low stocks and potential missed sales to predict out-of-stocks.

![Retail Intelligence – Walmart Out of Stock Predictor](https://lh3.googleusercontent.com/B2kHoWEZOcVg4uztmsDiwNgwsPn64FRgBQ0YPPZMAEkN8vz7AWyKima3OWhtJQNgIoNXAyTgDm2nRJw2tfMiRMo404h4yj89qwl6R0Y-YON0oKVyL4whXQ8OEGRmXJMQwTW0iQIl)

Retail Intelligence – Walmart Out of Stock Predictor

Try it [**for free for 14 days**](https://www.supplypike.com/analytics) to see your stocks!

[![Predict and prevent out-of-stocks. Get started.](https://lh5.googleusercontent.com/cjSC8YcUXFooRLUe6zvdnLxEvFWUlPgb4iwtXKroV0RoPkW6OvWCAmdJ5D17cqFmgRQoEz_XTlQHpvlIIWDDgTZhZIzzHnSdcxIqIV9aQ6De1QYojFGWwcsnRQX4E-suj3CUkEzm)](https://www.supplypike.com/analytics)

[](https://www.supplypike.com/analytics)

How Are Instocks Determined?

Learn about:

*   How to pull your current instocks report
*   How to pull your historic instocks report
*   The results of these reports

* * *

Keeping track of your store instock levels is one of the most important parts of managing your Walmart business. Forecasts and supply chain execution are major drivers for keeping stores instock, but how do you actually determine your store instock levels? What level of detail is available in Retail Link? 

This article will detail several ways to see store instocks at the item level, store level, and even historic weekly instock levels.

Before diving into the different applications and report templates, it’s important to note the difference between the various instock metrics.

1.  **Instock %** – This metric looks at which valid stores have at least one unit on hand. This metric does not consider forecasted demand, so it is not an adequate metric to determine whether a store has sufficient inventory.
2.  **Replenishment Instock %** – This is the most common instock metric. Replenishment Instock % looks at replenishable (valid) stores and compares store inventory to forecasted daily demand to determine if a store has sufficient inventory to cover forecasted customer demand.
3.  **Customer Instock %** – Rarely used, this metric looks at which stores, both valid and invalid, stores have at least one unit on hand. 

There are various ways to determine your store instock levels. We are going to concentrate on the most popular method: **Decision Support System (DSS) Custom Queries**.

**_[Related Reading: Replenishment 101: What Is Replenishment?](https://supplierwiki.supplypike.com/articles/replenishment-101-what-is-replenishment/)_**

Decision Support Custom Queries
-------------------------------

Decision Support allows the user to build custom queries, as the name suggests. Suppliers can define specific criteria in a database query, returning exactly the data they need to see.

For instock purposes, the supplier can view instock in two ways: **current** and **historic**. We are going to build both queries in this lesson.

### Current Instock

Within any DSS report template, any Report Column with the abbreviation “**Curr**” means current, or as of the previous evening. This means that a column selection of “**Curr Str On Hand Qty**” will show inventory physically on hand at the stores **as of the previous evening**.

_Tip: Many of the Report Column names in Decision Support are difficult to define. Fortunately, DSS provides an option to help define the purpose of each Report Column. Users can right-click on any column and see a definition of the metric in the left sidebar._

![Decision Support Report Columns – Tooltip](https://lh4.googleusercontent.com/dwECS6kBRhCfJ5uisHIKFKPtT712TKZUl0vA-jTj9ni7-WkFMDuoXFLw8gmJ7KUuevP0s8FhxNijBGhr0g8LshHRdfcTpjm1LYwmzvKNkXmYOvYp9BpEN4LsaJRve7Qz2tBC0fZM)

_Decision Support Report Columns – Tooltip_

To build an item-level instock report, the easiest way is to use the Company Summary report template. This template can be found in the Sales and Margin folder in DSS. Click on **Company Summary** to open the Report Wizard.

In the **Columns tab,** select the report columns in the following screenshot. Remember, you can right-click on any Report Column to see a brief description of that selection. If you are unsure in which folder a column is, use the **Search** feature at the top of the report columns list.

![DSS Report Wizard – Columns tab for current instocks](https://lh5.googleusercontent.com/GqvY6RvW2mjMTn8tumsI6LeoRHrnBOvxDagVO3xQMAaEViQ3Rf2WyLUvObJXxDiERx35p3lEGKbeByVtpefcCVBz548mJSezCPr4_JzC8BdpgTSe_PfICHkBBmaziHB6B90WE4o1)

_DSS Report Wizard – Columns tab for current instocks_

Columns to select:

*   Prime Item Nbr
*   Prime Item Desc
*   Instock %
*   Repl Instock %
*   Cust Instock %

On the **Items tab**, we define the “pool of data” for our query. In our report, we are going to ask DSS to return every item associated with our 6-digit supplier number. You can use different Item filters based on your specific needs.

Use the following screenshot as a guide for the Items tab selections.

![DSS Report Wizard – Items tab for historic instocks](https://lh6.googleusercontent.com/knyN6GgZqtxxtMCxjkhJTLD3ueJGK9Agou10DdbIyQnz8byaDoCDUbP4lLNtWAIUVH8uNNlYiqh-JsPk6RqYhfTC_Ipgx1ep41DaFmvz0g66gvI49Hk05imhDnkrsivo1PUv9U3p)

_DSS Report Wizard – Items tab for historic instocks_

Select **Vendo Nbr (6-digit) Is One Of** and add your six-digit item number.

The **Times tab** is where you can define the time range for this report. Since we are only interested in a current snapshot, the time range selection is irrelevant. The instock metrics we selected on the Columns tab will return data from the previous evening **regardless of the time range selected**_._ 

Use the following screenshot as a guide for the Times tab selections.

![DSS Report Wizard – Times tab for current instocks](https://lh4.googleusercontent.com/hBiXHLHZ8L8QxJUa1juh1HQ6mzWZ3BhAdPwH-U7FcjaircoAqeCjCN4QiQ2SwfMM_XAZDYfu9qLvgmuZCZHjxyjwuN4lTKwxjeNS_yWt9H5FrppKfudLZezO83RrMVHY2QEtGX83)

_DSS Report Wizard – Times tab for current instocks_

Times to select:

*   By Fuzzy Dates
*   Time Range 1 Current Week

The **Submit tab** is where you can name, run, save, and schedule this report. 

*   **Title** – The heading that appears above the data results in the Excel document.
*   **Run Now** – Tells DSS to submit the request to the database for processing. In essence, “Go get the specific data I asked for in this query.”
*   **Save** – Adds this report template to My Reports for use in the future.
*   **Schedule** – Instructs DSS to run this report on a recurring basis (weekly, monthly, quarterly, etc).

![DSS Report Wizard – Submit tab for current instocks](https://lh6.googleusercontent.com/-SlyswL9Rd5N4TeuwiqLRFBHtAsqsR5eYKQgelzkn6xO3vbh2BhZKjky_Vj1BfhLZitYV3th1jpPEd_mMmt1ALyYWW6_wV7kHMX_xEPAz1UgqHBIc8E4ic3CGwc3nv3RS-Vh6H-z)

_DSS Report Wizard – Submit tab for current instocks_

#### The Results of the Current Instock Report

Once downloaded, the Excel sheet should look similar to the screenshot below. You’ll notice the three distinct instock metrics, as defined earlier. This data updated the previous evening. 

**_Note_**_: Since we opted to run this report using our 6-digit vendor number, the query returns every item associated with this contract – including items that might not be currently selling in Walmart stores. Any items with 0% for the instock metrics are not active and you can disregard them._

![Instock by Item – Excel report](https://lh3.googleusercontent.com/oroMBQY3YlEoPl78GVKzYzIRg_y9i7FnRNqP7kiBudGmsMMH9ovC6wa4wsjNp8Q3rv10AymbouF9cD0xu6W1IMhS_Dn-O_TYCsHUql7FS_0MGIm55CNqGHEztP8PgirIDU6Ljk7H)

_Instock by Item – Excel report_

[![Ditch the spreadsheets. Take a Tour.](https://lh5.googleusercontent.com/FhNsC_fxyfif3G9wFvzR7DMc1-v4GFgMV4nCCZA57D8JVXeimTI7J259Qc0Pvchv5RAnATsLRg4DSC3aKeKSXawuC0GsWDSrUAMujw1EajKwRQDqZXjJbnqQhccqIhtVRfN911GM)](https://www.supplypike.com/analytics)

**_[Related Reading: Replenishment 201: Monitoring Store-Level Inventory](https://supplierwiki.supplypike.com/articles/replenishment-201-monitoring-store-level-inventory/)_**

### Historic Instock

The previous report resulted in a snapshot of the current instock position for your items. This data is useful to see what is going on _now_, but what if you are looking at historic sales and notice an abnormality in the sales data? In such an instance, it would be useful to see what the instock situation was _then_.

Fortunately, DSS allows users to view historic performance metrics with just a few changes to the previous report.

Select the report columns in the following screenshot. You will notice the addition of the **Time Selection** selections. This is the key to instructing DSS to return historical data, not just a snapshot of last night. The selections you should make here are:

*   **Time Across Data Across** – this instructs DSS to dedicate a column to each time increment
*   **WM Week** – this defines the increment. In this case, DSS will return the metric we selected (instock) for each week in the Time Range we select later.

![](https://lh3.googleusercontent.com/TjQCHi7jLaulkhCtObEcH2geAOVo9ImliETP37QL-rWcfnUqH1N-LvujuLMrGyoyks1nYyCgLbGxYpPcai3lMVb4372uxv9RiGH0W8LTDJiFZ1QenaIXx6zOBQ8n0Oik71l-CL12)

_DSS Report Wizard – Columns tab for historic instocks_

For our purposes, you can make the same selections in the **Items tab** as in the last report.

![DSS Report Wizard – Items tab for historic instocks](https://lh6.googleusercontent.com/knyN6GgZqtxxtMCxjkhJTLD3ueJGK9Agou10DdbIyQnz8byaDoCDUbP4lLNtWAIUVH8uNNlYiqh-JsPk6RqYhfTC_Ipgx1ep41DaFmvz0g66gvI49Hk05imhDnkrsivo1PUv9U3p)

_DSS Report Wizard – Items tab for historic instocks_

Columns to select:

*   Prime Item Nbr
*   Prime Item Desc
*   Time Across Data Across
*   WM Week
*   Repl Instock %

The **Times tab** is where you will define the **time range** for this report (i.e. last four weeks, year to date, etc). This is different from the time increment we defined on the Columns tab, which instructed DSS how many “slices” to divide our time range into. 

For instance, our report is requesting instock data for the current fiscal year to date, in weekly increments. So, if we were 15 weeks into the current fiscal year, the report would display an instock datapoint for each of the 15 weeks.

Use the following screenshot as a guide for the Times tab selections.

![DSS Report Wizard – Times tab for historic instocks](https://lh4.googleusercontent.com/KmnPpdmJyKuz56tKNRWY1nMv3MG5Z51nm0rcAju6nA7DuTvmQ8YZynbxg5OTJidn8ja0i-U4FeAA796jV7963GSnmvn9xstOe39Th0FB5pQOYpn3XeTO82_qZS4WC3i74q-J_-Hy)

_DSS Report Wizard – Times tab for historic instocks_

For the purposes of this report, select:

*   By Fuzzy Dates
*   Time Range 1 TY Fiscal Year to Date

On the **Submit tab,** name, run, save and schedule (optional) this report query.

![DSS Report Wizard – Submit tab for historic instocks](https://lh6.googleusercontent.com/ZAToR90_18usOz78XgVE9SCWPD8l4p70i_Z7NXtU7ync5Z5q9mH2ttm7zeap-ai3Rh29DyEh3DSJwdBe8x43_uWKVyllhPV2VOgaD_vycy7Oh_IptKovutyXWgrzOoNVqxfOUaom)

_DSS Report Wizard – Submit tab for historic instocks_

#### The Results of the Historic Instock Report

Once downloaded, the Excel sheet should look similar to the screenshot below. You’ll notice that there are many more columns in this report. Remember, we are asking for historical instock **by week**. Therefore, the resulting columns display the instock for each historical week within our chosen time range.

The report associates the numbers presented in the column headings with the year and week, in Walmart’s YYYYWW format. For example, a column heading of “202015 Repl Instock %” means that the data in this column is the replenishment instock percentage for this item during Week 15 of 2020.

![Historic Instock – Excel report](https://lh6.googleusercontent.com/5jQeQw1pUEhHfFovE2UpwocFSBIFmtbTnd7I9mhWelTn9QpcUmzp6BNZJiOWP1l2ODUm9B3fiCE3NNkkVs23pTNpa0Ykfl066sYRdieYQzv7BfLm_Pojku2Mcf6DsJIhKWUNX2P4)

_Historic Instock – Excel report_

In Summary
----------

You now have two powerful DSS queries in your analytics arsenal: current instock position as well as historical instock trends. Instock is of utmost importance to your success with Walmart, and these reports will help you identify and potential liabilities.

Get Powerful Insights into Your Instocks
----------------------------------------

With SupplyPike’s [**Retail Intelligence**](https://www.supplypike.com/analytics), you’ll never have to deal with messy spreadsheets again. Our metrics give you crystal clear insights into your stocks and help you avoid out-of-stocks.

![Retail Intelligence – Instock and Store On Hand](https://lh5.googleusercontent.com/wP9jKW72bN3JPbrxNwcgu8Yu09FHTBVFAm3HCg6eMX8F8SdP3gOU7U4FzD1R_mOssTIPkcdbRPoaNhMEpWgjhkBVQwFvbCKcHq12YdPKLqGm3fJMAOXann1LCPHhmPVPLLhArR8d)

_Retail Intelligence – Instock and Store On Hand_

The best part? You can get started [**for free for 14 days!**](https://www.supplypike.com/analytics)

[![Powerful reports. Actionable insights. Get started.](https://lh4.googleusercontent.com/QucDx7Dhc93oWPgYLpJwn98tUXHEXd1_96H4EpGsHVZxSJ7n0KKDTWguD3lKTT8bA61rlnfNjCJcTflDybNEbN43PRSdgDRutCWxLCXwK1myyFkWme3lMF48KzZe6GqxDl72vDp4)](https://www.supplypike.com/analytics)

How Do I View My Instocks in Retail Link?

Phantom inventory can be as spooky as it sounds if you let it get out of hand.

**What is phantom inventory?**
------------------------------

Phantom inventory occurs when a Retailer’s Perpetual Inventory System states there is sellable inventory available in a store, but none actually exists. It can also occur when the store’s system displays a higher quantity of product in-stock than is actually available in the store; phantom inventory is the difference between the two. Because phantom inventory never generates sales, Store Managers and Buyers may conclude the product is not selling well and decide against reordering or even carrying the SKU. The reported inventory level is essentially a figment of the imagination, hence the “phantom” moniker.

Phantom inventory can cause major out-of-stock issues, thereby contributing to the “Ghost Economy”, a term used to describe the staggering $1.75 trillion combined impact that out-of-stocks, overstocks, and preventable returns have on retailers worldwide.

**What causes phantom inventory?**
----------------------------------

A number of issues can cause phantom inventory:

*   theft,
*   broken products not removed from the Perpetual Inventory (PI),
*   [mis-picks](https://www.newcastlesys.com/blog/bid/353292/what-is-a-mispick-in-the-order-picking-process), mis-receipts, and data entry errors,
*   checkout issues (i.e. scanning errors)

**[Related Reading: Environmental Effects of Supply Chain Waste](https://supplierwiki.supplypike.com/articles/environmental-effects-of-supply-chain-waste/)**

**How does it affect your supply chain?**
-----------------------------------------

Let’s walk through a scenario. For example, the store’s system shows that your company’s product is in-stock and ready to be bought. But in reality, it’s not in the store. A customer is looking for your product. They can’t find it; so they enlist a store employee’s help in locating it. The product is nowhere to found. This results in a lost sale, a dissatisfied customer, and operating costs spent on the employee’s time responding to the customer’s request.  

The employee may not address the issue, thinking that the product will simply turn up eventually. The employee may make a manual order for additional inventory, but once that newly received inventory sells through, the same phantom inventory situation will occur again, unless the inventory is adjusted. However, it is very unlikely an adjustment will be made until the end of the modular cycle. Thus, the store’s potential sales for this SKU will be impacted for the entire modular cycle. Phantom inventory strikes again!

The effects can be dire. As detailed in a [Wall Street Journal article](https://www.wsj.com/articles/guest-voices-retails-phantom-inventory-menace-or-the-ghosts-of-holidays-present-1483030213?mod=djemlogistics), professors at Stockholm Business School, Air Force Institute of Technology, and MIT’s Center for Transportation & Logistics sought out to measure the effects of phantom inventory by collaborating with a major CPG.

> Their research “showed that for a category of laundry detergents sold by a large retailer, lost sales were almost five times greater than previously assumed owing to unobserved stock-outs.”

**How can you spot and fix phantom inventory issues?**
------------------------------------------------------

Identifying and fixing phantom inventory issues begins with product visibility. Product visibility becomes more and more difficult based on the number of SKUs you’re tracking. Let’s say you’re a CPG with 5 SKUs, available in 2,000 Walmart U.S. locations. Or you’re a larger CPG with 40 SKUs in all 4,761 Walmart U.S. locations. Whether you’re examining 10,000 data points or 190,000 data points per week (or even per day), legacy spreadsheet systems aren’t going to cut it when it comes to crunching data in a timely manner.

How can you spot inventory discrepancies when you’re manually running reports on thousands of data points per day? You have poor product visibility because getting granular with sales and inventory data would require a major time commitment that no CPG analyst likely has.

Phantom inventory analysis, at any scale, calls for a more powerful retail intelligence tool that can quickly work through your data points _for you_ to point out trends and irregularities so they can be addressed in a timely manner. Particularly, if the analytics solution is equipped with **machine learning capabilities**, demand inventory uncertainties can be worked into forecasting plans by copying demand patterns for each individual SKU. This will provide a more accurate picture of future inventory needs, thereby helping to curb phantom inventory issues and save the associated costs. 

[Click here to read more about replenishment tools for your business.](https://go.supplypike.com/replenishment) 

[![The right tools for the job. Get started for free. ](https://lh4.googleusercontent.com/3PwgVCmWXUjHwsppMEpclUkfdjIc5M8l9a7BQSqIyqbcbjfj9AdXMhsPATcayX7rqNhrQPRUL5wgk9i16YtrCY6pWJYHfMQeKWRXfOMonilSiZQd5X7HSdW1ToLFBq7LFgsizLwT)](https://www.supplypike.com)

Phantom Inventory Is Haunting Your Supply Chain

Learn about:

*   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**](https://supplierwiki.supplypike.com/articles/measuring-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%](https://www.supermarketguru.com/articles/out-of-stocks-achilles-heel-of-food-stores/) 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. 

[**_Related Reading: Phantom Inventory Is Haunting Your Supply Chain_**](https://supplierwiki.supplypike.com/articles/phantom-inventory-is-haunting-your-supply-chain/)

**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.

[![On the shelf when you need it](https://lh6.googleusercontent.com/v8Ya30akdjztYCSDNNwSUj5xdwN3QSjv5334nWyIdgSU9MgI2YXb_UzmkLy57ks8nY8MmxWYhaLhygyPXMd1MSxo43XbYdOTuqsc1aQwBPe0awRPPTEHZMIuny3GWw)](https://www.supplypike.com/analytics)

**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](https://thespoon.tech/walmart-unveils-new-ai-powered-store-to-monitor-inventory-but-no-cashierless-checkout/) 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**](https://www.supplypike.com/analytics) software gathers in-store data for traited and valid items for you.

![Retail Intelligence - Traited, Valid, POS counts](https://lh3.googleusercontent.com/Tb15IzlJOekNTVKI7i-PjOq3T6Dsl-AFDumI6wRFRtD71J_YSGAGAqRFUUfgJ0r-02YetuMMxFkRBdjtft_i3fqtekQD5Nd1iUBajLgLTd7ezEjt_OCnu-d014gH4g)

Retail Intelligence – Traited, Valid, POS counts

You can also view a quick map of where you have phantom inventory versus where you have on-shelf availability.

![Retail Intelligence - Shelf Availability Map](https://lh3.googleusercontent.com/EmdHum63bQ25xCMgNWIV8VRjkntrHtUpXLuNDF6ims0Ui7tUgSxwIXPjXJs0YsZaGTYvMmShwH-f1eCod3CajLWxLlWAS6QP1fc-GTeCWevpVYddubazOpiz4vlTrw)

Retail Intelligence – Shelf Availability Map

You can quickly view your inventory numbers, including weeks of supply, instocks, and items “[**in pipe**](https://supplierwiki.supplypike.com/articles/replenishment-201-monitoring-store-level-inventory/#in-pipe).”

![Retail Intelligence - Walmart Inventory KPIs](https://lh5.googleusercontent.com/X39WsZ92QYjOTHQZxaUHla-QWdy7rrsjPe7zS6m0jIJ1gsdRu77y6Dz07pjwMydeVHmt4TAwY-C2nMbU6pdwq8cx1sIOwPQKKIOvyDA7U3a7CMs6Oia5jCGQW7Tl9A)

Retail Intelligence – Walmart Inventory KPIs

The best part? You can **get started for free**, no risk! [Try it for 14 days!](https://www.supplypike.com/analytics)

[![Demand meet Supply](https://lh5.googleusercontent.com/k5YX9S13IRaN8cfoVQRV-4saTk3mrFfV2CuPf4R1VZNw_Bs-v2J48k8anQ9E1EoFjcnBLk4MPgokPwGzXrlRHWXDEcgBKmuPC5jf2PCtsFK-_oQwDT-7fgp4QlC39A)](https://www.supplypike.com/analytics)

How to Improve On-Shelf Availability

Upping Your Instock Game

Learn about:

*   When and how Walmart creates purchase orders
*   Walmart’s Corporate POS Forecast
*   Walmart’s Supply Plan report in Retail Link

* * *

One of the great sins of retail is not having the product available when a customer wants to purchase it. While simple in concept, maintaining sufficient store inventory can be a complex and sometimes daunting task. This article will familiarize you with the fulfillment components, supplier expectations, and helpful planning tools necessary to ensure that product is available for your Walmart customers.

The Life of a Purchase Order
----------------------------

Why are we discussing the life of a purchase order when we just want to know how to avoid out-of-stocks? Because there are many moving parts involved in the supply chain and fulfillment, it is crucial to understand the purchase order components and both parties’ responsibilities – Walmart and the supplier.

Long before suppliers receive the [**EDI transmission**](https://supplierwiki.supplypike.com/articles/what-is-edi-electronic-data-interchange/) alerting them of a new Walmart purchase order, Walmart’s Replenishment Management Teams have done extensive planning and research. While suppliers might feel like they are flying blind until they receive an order, there are several useful tools that help suppliers gain insight into the demands that their supply chains must meet.

### 1\. The Corporate POS Forecast

The Corporate POS Forecast is Walmart’s first pass at predicting how much it thinks **the consumer will purchase** in the future. In a nutshell, the Global Replenishment System (GRS): 

1.  looks at two years of **historical sales data**, removes any abnormalities and non-recurring events, 
2.  accounts for **any planning changes** for this item (i.e., store count changes, modular adjustments, selling season, etc.), and
3.  produces a **Corporate POS Sales Forecast**. This report is the basis for everything to follow!

### 2\. Supply Plan

While the POS Forecast is a projection of what Walmart thinks its consumers will purchase, [**the Supply Plan**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/) offers insight into **what Walmart believes it will order from the supplier**. 

This document builds off the Corporate POS Forecast and considers store inventory position, markdown strategies, promotions, and changes to safety stock. This report is an essential tool in the supplier’s supply chain and procurement decisions and gives the supplier advance notice of expected order volume. 

While the Supply Plan is an excellent tool for planning procurement and factory needs, it is important to note that the data in the Supply Plan is not a promise to buy the supplier’s products. It is for planning purposes only. Suppliers should do an audit internally to determine the projections’ accuracy compared to actual orders in the same week.

### 3\. The Purchase Order

The result of all of the previous forecasting, analysis, and planning is the final **purchase order**. If the supplier has been reviewing the POS forecast and Supply Plan, the quantities ordered should be close to expectations. 

If there are any significant variances between **projected order volume** and **actual order volume**, suppliers should address these with their Replenishment Manager after reviewing the POS Forecast and Supply Plan.

### 4\. Fulfillment

Most suppliers are familiar with the [**On-Time In-Full (OTIF) expectations**](https://supplierwiki.supplypike.com/articles/walmart-otif-metrics/) Walmart outlined in 2017 and [revised significantly in September 2020](https://supplierwiki.supplypike.com/articles/new-2020-walmart-otif-changes/). The retailer designed its OTIF program to ensure that all forecasting and planning before order creation results in the correct amount of product arriving at stores when expected. 

After all, planning is only one component of the supply chain process. Execution is just as essential and is critical in ensuring that the planned store inventory is on the store shelves **when analyses project the consumer to purchase it**.

Proper forecasting, communication, and execution are all paramount in keeping stores instock. Now that we’ve gotten an overview and understanding of how the pieces fit together let’s take a more in-depth look at each of the tools previously mentioned.

Corporate POS Forecast
----------------------

The POS forecast is Walmart’s consumer sales forecast. It answers the question, “How much of our products will the consumers purchase in the upcoming days, weeks, and months?” This forecast is essential in determining **how much inventory the stores need to keep on hand** at any given time.

There are several ways to view Walmart’s consumer POS forecast. We will concentrate on the data available in Retail Link’s **Decision Support System (DSS)**. 

The following screenshots walk through the exact steps necessary to obtain Walmart’s forecast data. Note that the forecast updates weekly, so suppliers should review this report weekly to determine if any significant changes have occurred. 

[![Forecasts in your inbox every week. Take a tour.](https://lh5.googleusercontent.com/l_wdJd4sZpP39TsD9nqEJOf2dQjLVt-m3qW0kbLtm-AZ178rtpZXded5cqNMrOO_0a70v01dsIIuoFFO4_KktQyHoWsfAi2Af2ni4e5HI8ZrcnafiKl66Mbi4IPkmUxyTUXtsiJD)](https://www.supplypike.com/analytics)

From the DSS home page, select **Supply Chain** from the list of **Report Templates**. Open the template called **Corporate POS Forecast**. The resulting template should look like the following screenshot.

![Retail Link – Corporate POS Forecast report template](https://lh5.googleusercontent.com/2yVO5wCisxI5LjB6Miadv3_U18Ob4yzR3USjnPbw3WOfKlRdgT6TJALkqWm07xcvn5WE8D_dmCfSqi5R5JIF9U41CWPFre4zrAVi0DTTPU40ky3pl9_LMu7LEhHmKehPN3O5Ha2Y)

_Retail Link – Corporate POS Forecast report template_

You will notice that this report does not contain options for selecting Report Columns, Time Ranges, or Locations. This report is preset and only requires a selection for the Items pool of data.

There are several options to choose from on the Items tab, but the most commonly used filter is by your **6-digit supplier number**.

From the left menu, select **Filters**. In the list of folders that appears, scroll down and open the folder titled “**Vendor Nbr (6-digit)**”. In the input box on the right, enter your 6-digit supplier number and click the **And** button. 

![Retail Link – Input 6-digit vendor number](https://lh3.googleusercontent.com/FP0NPYTQYFvxw3J05ZzianH-rIIjIcdLaUQBU2nJ3ilfkPlwQOjw7ZZd3jefnjSPuATTEfbdYaN89kf8_PobNSuhBPA7T_ArPIVb3Vailrf8cnJo2e58oHVNwl17jCT02nugzY2c)

_Retail Link – Input 6-digit vendor number_

That’s it! There are no additional selections to make on this report. Simply navigate to the **Submit** tab at the top of the page to name the report, submit it for processing, save, and schedule it (if desired).

In the title field, name the report “Corporate POS Forecast.” Click **Run Now** if you would like to retrieve the data immediately. 

If you would like to schedule this report to run repeatedly, you can do so by selecting a day of the week under the **Schedule** column. Select Monday from the options that appear. You must provide an expiration date to schedule any DSS report. This date can be well into the future. Either use the calendar to select an expiration date or enter the date manually as MM/DD/YYYY.

Click **Save** to save the report template in DSS. All saved templates are under **My Reports** on the DSS homepage.

![Retail Link – Scheduling a Corporate POS Forecast report](https://lh5.googleusercontent.com/SVoqCpyek4mOiwihdnoG3YNXZK3AEjjEMAvcaHz_9nhFOQNs-OWSYcwvnvL-hRBj9LQa7AqSQmvqxyBDGzzCmVbVYbJcuoksZ6NvnFWsMxyY6Bx6HL1tG29HM0U7tNnaOXLLGdRY)

_Retail Link – Scheduling a Corporate POS Forecast report_

### Corporate POS Forecast Results

A screenshot of the Excel results is below. The first few columns display information about the item as well as some inventory and supply chain KPIs, including: 

*   Valid Store Count
*   Store On Hand and On Order quantities
*   Instock %, Replenishment Instock %, and Customer Instock %

The actual forecast data breaks down into two parts:

*   Future 13 weeks, by Walmart week
*   Future 12 months, by Walmart month

As you can see, the data displayed is the units that Walmart projects the consumer will purchase compared to last year’s _actual_ units purchased by the consumer. 

This document should serve as a starting point in your forecasting and replenishment efforts.

![Corporate POS Forecast in Excel – Vendor information](https://lh3.googleusercontent.com/gkV_9z9vQnaIiM-LTb4DSb1kO0-qDKXdX_jfVZgc-1YGT-tsoymXiuBmdf7OPRRQF8HGDx6CBX4Tzn1YYvLxFi1C6KaRG3AnG4WbO_WfIgh7IDG48A_mcXPPsf8cI_QofE6_U-WZ)

_Corporate POS Forecast in Excel – Vendor information_

![Corporate POS Forecast in Excel – Item information](https://lh3.googleusercontent.com/KqlbL87D19BYej9wy53-Nzlwz29geNSWhBmpUNFMUChQ7AtzWw71okx6R7tipd2NhXbvbKyEiB6MO5cDM41yry5LPhr8XKOnJQGU4Zkxjcn9TtZCoBU19pJpPL4TMrSVMaPEMJzq)

_Corporate POS Forecast in Excel – Item information_

[![Break free from spreadsheets. Try it today.](https://lh4.googleusercontent.com/lPXRwPA1j3J6yAKNdfVXK9B6PVv6tRuNfOjoijRDt8RG64eDQAl8p-DO0lIUiogeFHUZsSk7zk90BwZCDF_PYSDCTPpvXp6P1YVs-c8Z6CkKBSwSWPo4aEJlc1Js8ZYhOvGULHqX)](https://www.supplypike.com/analytics)

Supply Plan
-----------

Now that we know the projected consumer purchases, it is equally important to see what Walmart forecasts it will order from the supplier. This data is in the **Supply Plan**. 

The Supply Plan takes into account existing store inventory, markdown strategies, and safety stock considerations when determining how much inventory to order from the supplier. It isn’t as simple as saying, “The consumer is going to buy X number of units, so Walmart needs to order X number of units from the supplier.”

To create the Supply Plan in DSS, navigate to the **Supply Chain folder** and open the **Supply Plan** report template. The DSS report recipe for making the Supply Plan is in the following screenshots.

**Columns Tab** – Select the following report columns:

*   Prime Item Nbr
*   Prime Item Desc
*   Whse Nbr
*   Whse City
*   Plan Create Date
*   Plan Order Date
*   Plan Receive Date
*   Units

![Retail Link – Supply Plan Columns tab](https://lh4.googleusercontent.com/Px9zPhE6d3mDm3p66xybYw4EbIe0fP6Q7NHZPpBywuYxoULYD6-lfeVnDFYsKFZcd73v6R-OfJl0cL9vYs8qQLGIrEYPpgqFzBZGnq5vICejHemdUX3Ora2QV6W2qq0nvapf77Ef)

_Retail Link – Supply Plan Columns tab_

**Items Tab** – From the left menu, select **Filters**. In the list of folders that appears, scroll down and open the folder titled “**Vendor Nbr (6-digit)**”. In the input box on the right, enter your 6-digit supplier number and click the **And** button.

![Retail Link – Supply Plan Items tab](https://lh5.googleusercontent.com/a7Go0HtI9qb1lvQzDl4bkn3yDj-Ybm33M5nBkl4VPonPHxAA40ACABSGR0F2HtFLOwXZ1TN8XPXGs8LEoAUNUUd0aArXLTnl1ErrjPfEQUVSpA1N4dtx1RPOjKg5vWoDD3JyCJdP)

_Retail Link – Supply Plan Items tab_

**Locations Tab** – Select **Warehouses** from the left menu, then click on **ALL WAREHOUSES**. **Note**: Retail Link creates forecasts at the store-level, but rolls them up to the warehouse-level for PO creation.

![Retail Link – Supply Plan Locations tab](https://lh6.googleusercontent.com/Eh3eTiwxwmNRMAlnM9DnMKH0I1h-R1bvNHTmke1un0mDXVC8vV2omHg1YShj8h1T8mSaQDgq6bgPbDMEnmtIEN-_ddahUzV-6KGd1Bx1bh3qtpBV43mxTsh_9xIDjth89FqLZMAq)

_Retail Link – Supply Plan Locations tab_

**Times Tab** – From the left menu, select **Time Range 1**. Open the folder titled “**Future PO Ship Month**.” Select all available months. Note that your supply plan might not show data for all future months, depending on how far out your category projects orders.

![Retail Link – Supply Plan Times tab](https://lh3.googleusercontent.com/dXNmX-uAFw9IPk_EdTYrZ5IT-Nu794fZ9q15fi07z0bFJKCGYBUlQHzi07R85G5Rxah-H-d94nAImwSbM3VoNAec7l5JnDNW4sm1XLLaMShC84SA3S-EITPM-ZwKkfDBfiZ5d9oa)

_Retail Link – Supply Plan Times tab_

**Submit Tab** – Like the POS Forecast example, the **Submit** tab is where you can run, name, schedule, and save the Supply Plan.

![Retail Link – Supply Plan Submit tab](https://lh6.googleusercontent.com/psR1UHMlneliC4O-pW292Tu9pBS3a_WZx59t8tPyeeixZDlu7wRjr_7MrBN-p8VWDb0LYBjNjc5NE_vcBFLh9DQBUVVh8xw3IkalG_iL13XxcqpdTOGJmpyeI4GmFnJ320c9z5_0)

_Retail Link – Supply Plan Submit tab_

### Supply Plan Results

A screenshot of the Excel results is below. As you can see, the report displays the data by item as well as by DC. If your company ships from multiple ship points, you can allocate internal inventory to each ship point. 

Supply Plan data columns are:

*   Plan Create Date – the date that you entered the current projections into Retail Link
*   Plan Order Date – the date that Walmart projects ordering the listed quantities from the supplier
*   Plan Receive Date – the date that Walmart projects receiving the inventory at their respective DCs
*   Units – the projected order quantity, in eaches (not cases)

![Retail Link Supply Plan in Excel - Vendor Information](https://lh3.googleusercontent.com/gkV_9z9vQnaIiM-LTb4DSb1kO0-qDKXdX_jfVZgc-1YGT-tsoymXiuBmdf7OPRRQF8HGDx6CBX4Tzn1YYvLxFi1C6KaRG3AnG4WbO_WfIgh7IDG48A_mcXPPsf8cI_QofE6_U-WZ=s0)

_Retail Link Supply Plan in Excel – Vendor Information_

![Retail Link Supply Plan in Excel - Item Information](https://lh3.googleusercontent.com/KqlbL87D19BYej9wy53-Nzlwz29geNSWhBmpUNFMUChQ7AtzWw71okx6R7tipd2NhXbvbKyEiB6MO5cDM41yry5LPhr8XKOnJQGU4Zkxjcn9TtZCoBU19pJpPL4TMrSVMaPEMJzq=s0)

_Retail Link Supply Plan in Excel – Item Information_

Remember, the Supply Plan is _not a promise to buy the listed quantities_. This tool is to help in planning the supplier’s procurement procedures. We recommend that suppliers perform an audit comparing the projected orders in the supply plan with actual orders placed for that same week. 

The Supply Plan is updated every week by Walmart, similar to the POS Forecast. Additionally, there is currently no way to pull a historical Supply Plan. Suppliers should employ the best practice of downloading the Supply Plan each week to keep their own internal archive of what Walmart projected that they were going to order versus what they actually order. This weekly report can serve as supporting documentation should the supplier’s inventory be inadequate based on projections that are not in line with actual orders.

If there is a high correlation between the two data points, suppliers can consider the Supply Plan data more reliable. However, it is not uncommon to see sometimes significant differences between order forecast and actual orders. Such differences can be detrimental to the supplier’s success with Walmart if they are planning solely based on the Supply Plan, without any internal audit.  If there are significant variances between the Supply Plan and actual orders, suppliers should reach out to their Replenishment Manager for suggested solutions.

In Summary
----------

There is quite a bit that goes into just the planning phases. The Corporate POS Forecast document gives insight into Walmart’s consumer purchase projections, and the Supply Plan offers guidance on how Walmart plans to replenish the inventory that the customer purchases. These two documents together arm the supplier with some valuable tools to keep stores instock at all times.

Utilizing a Third-Party Software Solution
-----------------------------------------

There are third-party software solutions that provide this information without you ever having to go into Retail Link. SupplyPike’s **Retail Intelligence** software is one that allows you to view automated weekly reports, including your GRS and POS forecasts with Walmart. 

![Retail Intelligence – SupplyPike Sales Forecast](https://lh6.googleusercontent.com/34iVGaOu1cUPAvCaQga7jYmWeqdqk3bRVE9F5rlCTxwl1TzfbiU5oRkM5OLznsKpPNQ0NkQIayRcQeLgAVLHSM4cHWZbXFba4pRGm1pJmcfQZwEtOBZqJzBLFbzvhwd-fRUf4nZR)

_Retail Intelligence – SupplyPike Sales Forecast_

![Retail Intelligence – Supply Plan](https://lh6.googleusercontent.com/ExxQByCooE5QWggj5m6svTVYQqcaNw0oUqYJbIXAlUldOewgFJBl01gAhumvgedbd30WIglID9kN0G-GpouTYsUUac_mpT_R-Uh6F6n44wbEKP5VwwhkQLmlFRbn5WNW8EreZ38M)

_Retail Intelligence – Supply Plan_

SupplyPike’s Retail Intelligence software has a **free 14-day trial.** [Take a tour today!](https://www.supplypike.com/analytics)

[![Replenishment done right. Get started.](https://lh6.googleusercontent.com/ab3qPijESSZi8J8pJ_imbENqdGt7s0mPqu28UtluuOSkV4_DgAHf4QTT-Th1Ff7gjIKibz3JBAr6aSpzXazaN3ZHdlpsrmKtWPdBDAZ2dBXdz__lCStsNJsRkp6BaTjzGqXNK-mT)](https://www.supplypike.com/analytics)

Replenishment 301: Avoiding Out-of-Stocks

Learn about: 

*   The Out of Stock – Root Cause App in Retail Link
*   How to use the dashboard to track replenishment issues
*   What to do once you’ve gathered the information 

* * *

Store instock metrics are the defining moment of a supply plan. Setting aside anomalous events like weather and other force majeure circumstances, a successful [**supply plan**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/) should always result in inventory availability at stores when the consumer plans to purchase. 

But what happens when something goes wrong? What if your company does everything “right,” and you still find your instock metrics below acceptable levels? In these circumstances, it’s necessary to follow a formal **root cause analysis** to determine what, specifically, is leading to the deficiencies. 

A root cause analysis aims to determine what the name suggests: the source leading to any unexpected or undesirable result. You can use this analysis for virtually any investigation. Thankfully, Retail Link contains several tools and methodologies designed to address these deficiencies specifically.

Out of Stock – Root Cause Dashboard
-----------------------------------

Before introducing this tool, Walmart forced suppliers to download and examine significant volumes of item-level and store-level data to determine the root cause for instock deficiencies. The **Out of Stock – Root Cause Dashboard** provides the supplier with top-level guidance on the various factors that can cause instock defects. With this initial guidance, suppliers can concentrate on the specific causes that they can control.

Let’s examine the Out of Stock – Root Cause Dashboard in Retail Link.

### Populating the Out of Stock – Root Cause Dashboard

To access the Out Of Stock – Root Cause Dashboard, find the Out of Stock – Root Cause Dashboard Application icon in your Apps menu on Retail Link. You can do this by searching for “out of stock” in the Apps search bar at the top.

![How to access the Out of Stock - Root Cause Dashboard](https://lh4.googleusercontent.com/0C03MyR_voKp--Jtu008nO1U-h_VfMqc2Zz3g5uoMD0YziPKyEG3gQyinfnij_Q8GKVOvEdT2u-X8RS3JPAdCuSExPZ7yQUoKcr09ESrhmFY0I-g6wfv1kWoIPd6IjN2JVBgdJX-)

_How to access the Out of Stock – Root Cause Dashboard_

When the dashboard loads, no data will appear. You must apply specific filters to see the relevant data. The dashboard allows suppliers to investigate out-of-stock data at various levels, such as item, 9-digit vendor number, and location. 

To populate the dashboard, click on the icon with the three horizontal lines in the upper left corner. You can apply any of the item filters displayed below. Alternatively, you can search instock root cause by location. Click **Apply** to see the relevant out-of-stock data. 

**Item filters:**

*   Business unit (BU)
*   Supplier business unit (SBU)
*   Department
*   9 Digit Vendor number
*   Category
*   Fineline
*   Consumer ID (CID)
*   Item Number

![Apply filters to view relevant out-of-stock data.](https://lh3.googleusercontent.com/ogaEURfnsusS94HJvNLcGYJ1_8DTXKgc9vn_-flnQVXgOpOdzJAqaQx12ug-IGf2IWTtdFZ38JfRlnWYtGj5leV8zLfUgvmUVecE9bxjpjgBSoKkdw4q8G4Zx7JVreWZB0XaBw5j)

_Apply filters to view relevant out-of-stock data._

[![Get insights into your instocks. Get Started.](https://lh5.googleusercontent.com/F6oeuv0v2DtFc-qCpL1dp7QWS6x9CJ_745UwbuZZwq5aNHarzTwOLJRv-_Dmkh1yZNG9ApfIzKUkzrWy8pFrAUZ-BZZAHRd-BTWU-0hJ5SbNPqAZGTa29ev8PbZLylGlG565U8EL=s0)](https://www.supplypike.com/analytics)

### Dashboard results

The chart below shows the current instock performance and a separate column for each of the root causes that makes up the **difference between the current instock and 100%**, known as a waterfall chart. 

You can hover over any of the columns to further break down the root cause associated with that bucket. Click on any column to see the lower-level analyses illustrated on a graph. The definitions of all the buckets viewable in the waterfall are listed below.

![Out of Stock - Root Cause Dashboard Results](https://lh6.googleusercontent.com/VeeyqBy2pGmO2Cj4Ah_XAY2pn4p8n4EIqa77dzwoUOso6rkF2oMYGc_BA7BXeYYrRkEMq6D_OVTqO_4ynTV8jMMXLILHA8oGYl1q7xwFc9iqLQf4kqrHK6xVgdE92FgaxA0tpEeA)

Out of Stock – Root Cause Dashboard Results

**Note**: You might not see all of the columns listed below. The waterfall chart only displays columns that have data assigned to that bucket. Retail Link denotes the accountability for each bucket as either Walmart, Supplier, or Walmart/Supplier.

*   **Instock** – Indicates your current Instock performance for the filter you selected. The difference between this number and 100% is your total out-of-stock. Retail Link breaks down the out-of-stock deficiencies in the subsequent columns.
*   **Modular** – Indicates how much the out-of-stock is due to modular factors. Several factors can impact your instock numbers. Examples of modular impacts are:
    *   **End of Life (Walmart)** – The product is transitioning off of modulars. Since an item is dropping from the modular, Walmart will eventually stop buying the item. This transition will lead to instock deficiencies until the item formally leaves the modular.
    *   **Validity (Walmart/Supplier)** – Item setup issues or replenishment settings are impacting availability. You should verify that replenishment settings align with Walmart’s guidance. Collaborate with your Replenishment Manager for any issues in this bucket.
    *   **DC DRP (Walmart)** – This is a “do not replenish” flag at the DC level. DCs will not order items with this status. If you did not expect this flag, collaborate with your Replenishment Manager for resolution or clarification.
    *   **Store DRP** **(Walmart)** – This is a “do not replenish” flag at the store level. Similar to DC DRP, stores will not order items with this status. If you did not expect this flag, collaborate with your Replenishment Manager for resolution or clarification.
    *   **DC CWO-DC (Walmart)** – The “Cancel When Out” indicator blocks flow from the DC to the store. Items in this status will not receive orders once the DCs are out of stock. If you did not expect this flag, collaborate with your Replenishment Manager for resolution or clarification.
    *   **CID Instock (Walmart/Supplier)** – The product is out of stock, but another item in the CID is in stock. If one supplier cannot fulfill orders, certain products can replace the out-of-stock item on the shelves. 
    *   **Prime Change (Walmart)** – The prime product changed within the lead time. This change occurs when there is more than one variation of an item. An example would be items that you might fulfill domestically for part of the year and via direct import channels for the remainder of the year. If the prime item changes while orders are in transit, you might see out-of-stock data assigned to this bucket.
    *   **Low Store Count (Walmart/Supplier)** – Less than a 15-store count is in the servicing DC. Low store count is a problematic root cause to troubleshoot. Since DCs can only order entire vendor packs, large pack sizes can prevent low-volume DCs from ordering even though some stores need the product. A potential solution to this issue could be a change in the vendor pack quantity, allowing DCs to order smaller amounts.
    *   **New DFU (Walmart)** –A new item store became effective within lead time. If new stores become effective during the transit of open orders, there might be temporary instock issues until the replenishment system has a chance to place orders for the new stores.
    *   **Recent Mod (Walmart)** – The modular recently went through a change. While Walmart typically communicates this change to suppliers prior, it isn’t uncommon for unexpected changes to occur. An example would be an expansion of modular linear feet, resulting in more facings for your product. In this instance, your item could experience sharp declines in instock until the replenishment system has a chance to place orders for the additional facings.
*   **Forecast** – Indicates how much out-of-stock is due to forecast factors.
    *   **Forecast (Walmart/Supplier)** – Walmart or the supplier under-forecasted the item, there was an unexpected sales spike, or there is insufficient safety stock. You should [monitor your sales forecasts weekly](https://supplierwiki.supplypike.com/articles/how-do-i-view-my-instocks-in-retail-link/) and communicate any discrepancies or concerns with the Replenishment Manager for resolution.
    *   **Low SS (Walmart/Supplier)** – The items sold more than forecasted because the sales of more than one unit occurred for low volume items that hold one unit or fewer of safety stock. This safety stock is a problematic root cause to resolve. Large, bulky goods have less space for safety stock. If only one item can fit on the sales floor at a time, any unanticipated sales can force out of stock issues. 
*   **Supplier** – Indicates how much out-of-stock is due solely to supplier factors. Several of the reasons listed above have accountability assigned to both Walmart and the supplier. However, the formal accountability for these reasons lies with the supplier.
    *   **In Full (Supplier)** – Walmart did not receive the order in full (according to the original order quantity for system-generated orders). You should align with both the [**Corporate POS Forecast and the Supply Plan**](https://supplierwiki.supplypike.com/articles/replenishment-301-avoiding-out-of-stocks/) weekly. Communicate any discrepancies or concerns with the Replenishment Manager for resolution.
        *   Monitor the [**OTIF Scorecard**](https://supplierwiki.supplypike.com/articles/navigating-walmarts-new-otif-scorecard-in-retail-link/) for more detailed information.
    *   **On Time (Supplier)** – Walmart did not receive the order on time (according to the original MABD for system-generated orders). Walmart strives to maintain just enough inventory to avoid out-of-stock situations. To achieve this, it relies on its suppliers to have the product available and delivered within the acceptable delivery window.
        *   Monitor the **OTIF Scorecard** for more detailed information.
    *   **Return to DC (Supplier)** – The product returned from the store to DC due to defect or damage. You should ensure that you ship cases in containers that are sufficient to prevent damage during transit.
    *   **Recall** **(Supplier)** – There is a recall for the product.
*   **Logistics** – Indicates how much out-of-stock is due to Walmart supply chain factors. These issues are primarily in Walmart’s accountability bucket, though you should work with your Replenishment Manager to address any concerns and potential solutions.
    *   **Collect On Time (Walmart/Supplier)** – Walmart’s supply chain delivered the order after the MABD. While this is in Walmart’s accountability bucket, incorrect lead time settings could be preventing inventory from arriving within the delivery window. You should conduct a Lead Time Audit to ensure that lead times are correct.
    *   **Import Collect On Time (Walmart/Supplier)** – Walmart’s supply chain delivered the import order after the MABD. Suppliers are only responsible for delivering direct import orders to the port. Incorrect lead times or force majeure events can lead to orders arriving outside of the established delivery window.
*   **Store Ops** –Indicates how much out-of-stock is due to store operations factors.
    *   **OH Adjustments (Walmart)** – A store associate or the phantom inventory management system created a [**negative phantom inventory adjustment**](https://supplierwiki.supplypike.com/articles/phantom-inventory-is-haunting-your-supply-chain/). On-hand adjustments can lead to sudden drops in instock until the replenishment system has a chance to place new orders.
    *   **Store Markdowns (Walmart)** – Store markdowns generated unexpected DC demand. While you can anticipate some markdowns, stores have wide latitude to control their individual markdown events. Sudden markdowns can result in either higher than forecasted sales or a sharp decrease in inventory.
    *   **Manual Orders (Walmart)** – Store manual orders exhausted the DC inventory. Unforecasted events like this can cause sudden drops in instock levels until the replenishment system has a chance to place new orders.

[![Avoid out-of-stocks and phantom inventory. Take a tour.](https://lh5.googleusercontent.com/B-sbRdo4ho-iWnQwvCVMAGQ8DJ2s8AFnNxtQPZ9fywQylUaNN2AAYRjto7Dau8naEHWi-KLbN_CZ9MVFHuPhFmOxPzi_gjXOepVv-A7MfHS2ilfgCKlxjQXiY6aL6GFEE4f6Xo83)](https://www.supplypike.com/analytics)

What’s next?
------------

While the Out of Stock – Root Cause Dashboard does provide insight into specific causes, the exact root cause might require additional research and understanding. Use the following tools to drill down further into specific root causes. 

*   **OTIF Scorecard** – Since much of the supplier-owned accountability centers around on-time and in-full delivery of purchase orders, the OTIF Scorecard is a great place to gain additional insight into specific areas of potential improvement.
*   **Decision Support Systems (DSS)** – Building a store-level query can show suppliers exactly where the deficiencies occur. This insight can help resolve the instock deficiencies on a more granular level rather than making changes at the DC level.

To resolve any out-of-stock scenarios, it is likely that you will need to enlist the assistance of your Replenishment Manager. Once you have done your root cause analysis, resolve what you can internally, and reach out to your RM with recommendations and the supporting research to help resolve any issues which require their intervention.

As a supplier, the easiest and quickest way to improve instock deficiencies is by concentrating on the actions that are within your control. Suppliers must focus on OTIF performance before engaging the Replenishment Manager for intervention. If, after resolving those actions within your control, out-of-stock issues still exist, you can then enlist your RM’s support.

Predict and avoid out-of-stocks
-------------------------------

With SupplyPike’s [**Retail Intelligence**](https://www.supplypike.com/analytics) app, you can predict and avoid out-of-stocks with ease. View reports like a traited versus valid map of stores, including which ones have no stock.

![](https://lh6.googleusercontent.com/qfqip0NcMoNgbrgpw51WcsYkG4NJ--wglDDK3cTlWrLzaHc2LHLUp66EQxdO_s5nGFaj0gOLZbIYjauHDiAmr5uROX7rglNEY0owVJAzShEYxyjfyQY6AvWWe2EJmc9fxnXS5NoC)

Retail Intelligence – Walmart Traited vs. Valid map

View on-shelf availability and track phantom inventory

![Retail Intelligence – On-Shelf Availability](https://lh5.googleusercontent.com/LAdfSfcCCCyrXsAbwUQ6e04LljXMiH46m11whXoDdZUY3JS1TTAcWofFfctCu_SpHgEu2Uy5gGrVDQlme3nvrWRmsBRUQk73ZQbo-Efqgotpd1LuHINnWCdqVRu1v4hhXKna7u8y)

Retail Intelligence – On-Shelf Availability

All reports are downloadable and easy to present. Take them to your Replenishment Manager and find your root causes. [Get started today **for free**!](https://www.supplypike.com/analytics)**

[![Replenishment without Retail Link. Get started.](https://lh5.googleusercontent.com/pHL2ykiABXY3-hZwDjDu23cqubvySyp_dvag9CcYn4ToJaTR2w3wJF2KHWLikme9iaRppdlxYco1eudPFD7E4xADdqMwVt4giScFoCDmS3O6AnyneG4Naj1yYU5gB9BAG7nROdzk=s0)](https://www.supplypike.com/analytics)

Finding Root Causes of Replenishment Issues

What is an SSO?
---------------

A **Store-Specific Order (SSO)** is needed to combat unexpected store out-of-stocks. It can also be used to stock stores in anticipation of promotional or seasonal events. An SSO is usually requested by the buyer or replenishment manager, but the analysis of which stores need inventory and how much is often left up to the supplier. Most requests for SSOs will be either type 03 or type 07 orders. The key difference here is the method of processing orders. **Type 03 orders** go to the distribution center (DC) as opposed to **type 07 orders** which go to the store directly. Walmart will let you know which one you need when they request an SSO or approve an SSO recommendation.

What needs to go on a Walmart SSO?
----------------------------------

Walmart provides a spreadsheet in Retail Link under Retail Link Documents ► Supplier Replenishment Information ► SSO Form. The template has different fields required for different circumstances, and you **must enable macros** for the spreadsheet to function. In addition to the store/quantity order combinations and standard item information (i.e. Department, Vendor Number, Vendor Name, etc.), for Domestic SSOs, you will need the correct PO type, event code, event week, and whether the order is prepaid or collect. Additionally, your SSO can be rejected if the form doesn’t contain the **must arrive by date (MABD)**, the **ship date**, and the **cancel date.** You must also complete the SSO Summary table for final approval.

![Walmart SSO Standard Form Screenshot](https://lh5.googleusercontent.com/TbSTe4NnzcU6qp3_zNfwZzQiYaZeU62UdJKL3KpHiFncJWHFlUlOVWMf4FzHBrhnR7ywNdFD2o8e-d7RbxFXyrwj2E5iejwp2HZVGAXPfZncbvCSVGqdS3n-hjIyy5I3NoFVpEA5)

[![Want Automated SSOs in your life? Get the tool. ](https://supplypike.com/wp-content/uploads/2020/01/sso_cta_1-1-1024x375.png)](https://www.supplypike.com/analytics/sso)

So when should I do an SSO?
---------------------------

There are many reasons for creating a store-specific order, but the main idea is that they are entered when a store needs more product than is currently in the pipeline. Here are some reasons for creating an SSO:

![Beverage aisle currently out of stock](https://lh3.googleusercontent.com/y1nx8Ci2HSF0muE1ibNBb8eAJTJa-6JHEu2tB-9007ZrngbO5Oq-zyVrX3SAoA8El6dJDxPSQeASR7bsCmjvMKh0CBt2ZUV-NGSONxbvHgNo_f-b5qOFi1getSiHFmVNhdlBsGe6)

### Short Supply SSO

The most common reason is **you simply ran out of product**. When this happens, you’ll likely need to check your replenishment strategy and stay on top of out-of-stock root causes. However, this can also happen for a number of reasons out of your control, such as a temporary lack of competition (e.g. _your competition_ was out of stock). So, if Fizzy Lifting Drink soda runs out because of markdowns on that product, then your product, Bubbly Delight soda, maybe someone’s next choice.

### Committed Buy SSO

A “committed buy” SSO occurs when **Walmart guarantees to buy a certain number of units**. For example, Walmart may want to buy your soda cans with post-season team logos printed on them, during the playoffs. They may want to put this additional product on an end cap or in action alley, so as to not take up space from other year-round soda. 

Typically, Walmart will provide a quantity that they are committing to buy for a set period of time. You are then responsible for submitting multiple SSOs throughout that period of time to exhaust the inventory. For example, if Walmart commits to purchasing 10,000 units of your soda over three months, you may be expected to submit three SSOs (once per month) with the “correct” store/order quantity combinations. You have to be careful calculating these SSOs, however. You don’t want to script too little at the start of the program and then run out prematurely, causing poor instocks early on. You may also be stuck with too many products at the end of the program. At the same time, you don’t want to script too much in the beginning and causing overstocks in the stores and possible markdowns later on.

![Beverage aisle stock out ](https://lh5.googleusercontent.com/WkiniDZmXceJGnGz0YDOK9Fa-JJtxJd1tOWcxb1WFxD9cZ_G2_l0OfXw_yAxkGoBPl4fuwXdfOVLQh6VzzFCrWBV1C9FwTReWwkdYwN-DHtH51DaECUJ3CLHJQtqvjlmwBcFfkPj)

### Seasonal SSO

Seasonal SSOs happen when you know **demand will increase more than what is represented in your forecast**. For example, your sales analysis shows that your brand is expected to be especially popular (more than usual) next month due to a recent viral video of a Heisman trophy winner drinking your soda on social media. Because this unexpected spike is likely unaccounted for in your demand forecast, you could recommend an SSO to Walmart for a number of units you believe you will sell in excess of the current forecast. The difference between a committed SSO and a seasonal SSO is that a seasonal SSO is a _recommendation_ to Walmart showing the number of units you expect to sell in addition to the forecast. Head’s up – Walmart may prefer to work with you to adjust their seasonal forecast, rather than accept an SSO. It is always best to work directly with your replenishment team to develop a strategy that works for everyone! 

### Promotional SSO

A promotional SSO is slightly different from seasonal SSOs in that it comes at a time when you want to **encourage sales of a particular product**. For example, selling a promotional product in Walmart stores. In this case, you may have a soda can with the championship winner’s logo, that Walmart has committed to placing in-store immediately after the game. Typically, you will work with the Walmart buying team before creating a promotional SSO on expected quantities, the number of stores, etc.

![Beverage exploding photo ](https://lh5.googleusercontent.com/yDUZdh-6qePc2u3fdAUduVFl4SiW6amzV5ihKBei_4rnJW2x5d_nffxtzzwkZJaQRJtR7Xi1lrx55YGcGhG3I--jwWbozYv9tHbOqY8Oxa7PyYXEXhXp5j_DRIpKKkzmHaWo6grW)

### Damage SSO

With this SSO, you may want to implement an order when your product has become damaged or otherwise unsellable, and you need to **replace the damaged inventory quickly**. An example would be that all of your cans of soda exploded due to weather changes. As before, your demand forecast likely does not take unexpected damages into account; thus, you will need to recommend orders to refill the pipeline and ensure your stores do not suffer from out-of-stocks. 

[![Get 2 hours back in your day. Find out how. ](https://supplypike.com/wp-content/uploads/2020/01/sso_cta_2-1-1024x375.png)](https://www.supplypike.com/analytics/sso)

Why are SSOs so hard?
---------------------

SSOs are definitely a pain! You need to work diligently in Retail Link to pull **relevant** **DSS reports**. Next, you’ll need to **manually combine them in Excel**. There are a number of factors that will go into prioritizing inventory that gets sent to stores; for example:

*   Forecast
*   Inventory in pipe
*   Historical sales velocity
*   Next four weeks’ average forecast
*   Inventory available at your warehouse

Additionally, you will need to do **conversions for units to warehouse packs to vendor packs** to ensure all stores in need get at least one warehouse-pack and all distribution centers receive orders that are incremented by vendor pack.

Finally, you have to “translate” all your work into the Walmart template noted above (filling in 3 tabs at the minimum), ensuring everything is input correctly and accurately. And if you have multiple items that need SSOs, you have to repeat the entire process again and again! 

How can SupplyPike help?
------------------------

We have created a [software solution](https://www.supplypike.com/analytics/sso) that allows you to create an SSO without the hassle of navigating Retail Link or the SSO template! Let our software do the math, help you prioritize stores in need, and finalize unit conversion, all while avoiding human error. Just input the number of units that you have available to ship via SSO and target weeks of supply. With a click of a button (really!), we generate the SSO template complete with store distribution that’s ready to send to your replenishment manager. 

![SSO Analysis Screenshot](https://lh6.googleusercontent.com/3QUKUf1s0mWjz50HwhvlQVQ9bgpT-_3qAUepwZxdmpXyQAGoqSV1iQ5F9RYg4i1T8irHe_U21n5b9_tj6Wtg1CRkRS2msZAASRW6u161tNvk9Uv5WNozs8pZghTbx0tbBmpds98a)

Here’s what we look at: 

*   Store-level inventory pipeline and current weeks of supply
*   Forecasted units at the store level and previous sales trends 
*   Product-level information, such as vendor pack and warehouse-pack (yep, we take break packs into consideration too!)

Finally, using all the information above, we analyze the data to provide order quantity recommendations **by store**, based on your target weeks of supply. 

Once the math is done, the SSO template is generated, and voilà! Just download and send to your replenishment manager or buyer. **Touchdown!**

[![Write SSOs in seconds not hours. See it here. ](https://supplypike.com/wp-content/uploads/2020/01/sso_cta_3-1-1-1024x375.png)](https://www.supplypike.com/analytics/sso)

When To Do SSOs (Store-Specific Orders)

Learn about:

*   What steps to follow when your consumables are out of stock
*   What to do as a Collect or Prepaid supplier
*   Avoiding out-of-stocks before they happen

* * *

Whether you’re a big or small-time supplier, organization is everything. Walmart is continually updating its suppliers’ guidelines, so you must have a plan of action to follow when the retailer runs out of stock. While all the regulations can be overwhelming, we’re here to clear the air on what to do when confronting [**Walmart’s out-of-stock**](https://supplierwiki.supplypike.com/articles/replenishment-201-monitoring-store-level-inventory/) for **consumables**. 

Here are some questions to ask yourself to help understand the Walmart replenishment guidelines when your items are below your instock goals. 

Is the item below the on-shelf availability goal? 
--------------------------------------------------

Is the item below the [**on-shelf availability**](https://supplierwiki.supplypike.com/articles/measuring-on-shelf-availability/) goal? Your answer to this question will determine how you should proceed when Walmart runs out of stock. If the **fill rate** was **under 95%** during the previous week, you should follow the following steps. If it was **above 95%**, you can skip these steps and move to the next heading. 

### Did the out-of-stock item ship In Full this week? 

The first question a Walmart supplier should ask when Walmart runs out of stock is whether the consumables shipped In Full during the current week. If the answer is yes, the solution is relatively straightforward.

You’ll need to ensure the fill rate and recovery are on the weekly performance recap. If your answer is no, you’ll need to follow the following steps based on the time frame. 

### Review the Consumables Fill Rate for the last four weeks 

You’ll need to determine how many weeks the out-of-stock consumables’ fill rate has been under 95% to move forward. If the fill rate has been under 95% for **less than two weeks**, you only need to ensure the fill rate and recovery are on the weekly performance recap, as you did when determining whether the out-of-stock item shipped In Full during the past week.  

If the **replenishing rate** has been **under 95% for over two weeks**, take the following steps: 

1.  Contact the production team for an estimated delivery date.
2.  Send an alert email to the replenishment manager with information and recommendations to cover sales.
3.  Complete the “**share of ship**” recap and send it to the replenishment manager.

[**_Related Reading: How Do I View My Instocks in Retail Link?_**](https://supplierwiki.supplypike.com/articles/how-do-i-view-my-instocks-in-retail-link/)

Was the On Time rate under 90% last week?
-----------------------------------------

If the out-of-stock consumables’ fill rate was _not_ below 95%, your next step is to determine whether the **On Time rate was under 90% the past week**. If the On Time score was below 90%, your next step is determining whether it was prepaid or collect. If the On Time score was above 90%, you can skip these steps and move to the next heading. 

### Collect orders

For **Collect orders**, you’ll need to ask whether there was a **request for routing** for the last four weeks. If there was, determine if the carrier has been **100% On Time** for the previous four weeks. 

If you answer yes to these questions, the next step is to provide a recap email to the replenishment manager, including a weekly performance recap. 

If the answer is no to whether there was a request for routing for the last four weeks, examine the internal process to ensure compliance. Next, ensure the root cause and recovery are on the weekly performance recap. 

### Prepaid orders

For **Prepaid orders**, you’d have to follow a more involved series of steps. Start with the following question: Do you have your **current lead time settings by lane**? If you answer yes, determine if you are receiving orders too late to process them to ship in time. If this answer is also yes, follow these steps: 

1.  Check Retail Link or Slack for order delays.
2.  Contact EDI at 479-273-8888 to check for EDI times and delays. 
3.  Contact your RM via email for order timing review. 
4.  Provide a recap email to the RM.

If you are _not_ receiving orders too late to process them to ship in time, follow these steps: 

1.  Will your orders be ready to ship by the end of the last process day?   
    If the answer is yes, go to step #2. If the answer is no, review the **processing time versus performance**. 

2.  Are your orders being picked up on-time?   
    If the answer is yes, move onto step #3. If the answer is no, review your **carrier lane performance**. 

3.  Review whether orders are delivering on-time per your carrier.
4.  Review your carrier lane performance. 
5.  Does the delivery time vary from the [**OTIF**](https://supplierwiki.supplypike.com/articles/walmart-otif-metrics/) reporting?   
    Whether the answer is yes or no, go to step #6. 

6.  Provide a recap email to the replenishment manager.

Did you receive orders to replenish stock last week?
----------------------------------------------------

If you did receive orders in the last week in this replenishment scenario, you’d move to the next heading. If you didn’t receive orders in the _last_ week, your next step would be to determine if you’ve received orders _this_ week.

If you answer yes to this question, include a weekly performance recap and expedite the order if possible. If your answer is no, you should email (Subject: _Urgent_) and immediately call your RM. 

Did the traited/valid count change by >5%?
------------------------------------------

If your **traited/valid count** change by more than **5%**, you can skip these steps and move to the next heading. If you answered yes, take the following steps: 

1.  Determine whether you have a **planned modular update** within the next two weeks.   
    If the answer is yes, go to step #2. If the answer is no, compare **valid** stores to **traited** stores and determine whether there was only a validity change. 

2.  Did the **traited** store count change by more than 5%?  
    If the answer is yes, go to step #3. If the answer is no, compare valid stores to traited stores and determine whether there was only a validity change. Then go to step #4.  

3.  Include explanation in the weekly recap. 
4.  Do you have a modular update in the **next six weeks**?  
    If you answer yes, go to step #3. If you answer no, go to step #5. 

5.  Email (Subject: _Urgent_) and call your RM immediately.

[![See your traited and valid counts instantly. Get Started.](https://lh4.googleusercontent.com/yK86SxifiXhps1ijQJ26teCXEbnZd1HHGFegXxgc--qz8gjleKrCGO76ZmPHw-OHUb5l_zr8ksSxcBYu6Q1ucUir7Z5mle7To6OqONYgujJuYRuoRxIH34BKnLwpJZPlJzdrjhnH)](https://www.supplypike.com/analytics)

Did the out-of-stock item’s demand increase from four weeks ago?
----------------------------------------------------------------

Your answer to whether an item’s demand increased will determine the best course of action in this scenario. If there was no surge in demand for the out-of-stock consumables, asking the following question: Is the point-of-sales forecast off by more than the category threshold? 

If the answer is no, you should email your replenishment manager with information about your concerns and findings. 

If the demand has increased from four weeks ago, follow these steps: 

1.  Did supplier-initiated activities impact demand last week?   
    If the answer is yes, go to step #2. If the answer is no, go to step #3. 

2.  Analyze settings and performance for evaluation and include an explanation in the weekly performance recap. 
3.  Did Walmart-related activities occur (like a price rollback) that impacted last week’s demand?  
    If no, go to step #4. If yes, include an explanation in the weekly performance recap. 

4.  Did external demand activities occur (such as a blog post or celebrity endorsement)?   
    If no, go to step #5. If yes, include an explanation in the weekly performance recap.

5.  Did the item have pent-up demand from a previous availability issue?   
    If no, provide a recap email to the replenishment manager, including a weekly performance recap. If yes, include an explanation in the weekly performance recap.

[**_Related Reading: How to Create a Demand Plan in Retail Link_**](https://supplierwiki.supplypike.com/articles/how-to-create-a-demand-plan-in-retail-link/)

Final thoughts
--------------

It’s not surprising many suppliers are unsure how to proceed when Walmart’s consumables inventory is out of stock, especially considering the countless regulations governing what to do in these scenarios.

Whether you’re dealing with health and wellness or other types of consumables, following the [**guidelines on avoiding out-of-stocks in this article**](https://supplierwiki.supplypike.com/articles/replenishment-301-avoiding-out-of-stocks/) will ensure you can effectively deal with the many out-of-stock scenarios you’ll face as a supplier.

Avoid out-of-stocks before they happen
--------------------------------------

With SupplyPike’s [**Retail Intelligence**](https://www.supplypike.com/analytics) software, harness the power of machine intelligence to predict and curtail out-of-stocks.

![Retail Intelligence – Walmart Replenishment](https://lh5.googleusercontent.com/iXQc6sQUDYaYFW4ts0nz-qIrsuzeIjnzq4yS0RXPTAlI2pM7vi2LehZSSONJixnLNyrU0QUwuJ2pmDh2Y6EfRWEE9IXyoJOla5r8DO7-UlQ7x8twGrZOGmLvLfTjmfQefXO-QIQ9)

Retail Intelligence – Walmart Replenishment

[**Schedule a demo today**](https://meetings.hubspot.com/supplypike/demo?__hstc=152691302.4f79c467bfb74445ee490b5d6ae83f19.1613492810889.1614610729628.1614614019617.27&__hssc=152691302.4.1614614019617&__hsfp=421518373) to see how we can halt out-of-stocks!

[![Stop out-of-stocks before they happen. Sign Up Now.](https://lh3.googleusercontent.com/1idOtOVnEwoFuVfTQ3rojLrywNvtx3DEh4OUMyXP-nusxNDZGHB5Q4jXsR6iP8ytkaeuVeEQyArjxqSqvch583EjUDamz8EYzp9t-XdEqb-37r52oYvJFu5kNL6GlVHg2f1EYjwA)](https://www.supplypike.com/analytics)

What To Do When Walmart Runs Out of Stock

Learn about:

*   The benefits of backorders
*   The challenges of backorder processing
*   The best ways to manage backorders in retail

* * *

Successful suppliers can still sell their products to customers even if they don’t have the inventory. To do so, they use [**backorders**](https://www.investopedia.com/terms/b/backorder.asp)**.**

Backordering is the process of giving your customers the facility of placing orders even when you have insufficient stock. This technique is applied by companies when a spike in sales indicates that products are being sold quicker than they can be replenished. It is a great way to deal with rising demand.

Suppliers that use a just-in-time inventory management strategy utilize backorders, as a routine. These are companies that receive goods only on-demand, thus lowering their inventory holding expense.

It is therefore important for these suppliers to precisely forecast the customer’s demand within a specified period. Such suppliers consider backordering as a basic and necessary part of business sustenance.

[![Take control of your inventory, schedule a tour. ](https://lh4.googleusercontent.com/t37HzkMi8_D2apOwhGU7EiZUnu4fP8DcGMhjLyEvw2F3KVDfIsuK6Z-m8oZ2jaXspPpO8CE5lK8kaslYrVhCj38ZV8GcGgw7Hjk4WFpiWFZmvcGGWj17XWpalYQj0g)](https://www.supplypike.com/analytics)

**Benefits of Backorder Processing**
------------------------------------

For suppliers going through tough times, especially now during the [**COVID-19 pandemic**](https://www.supplypike.com/covid19), a shortage of supplies can be disastrous. Shortages have damaging, long-lasting effects on businesses. These negative effects include weakening market presence because of unhappy customers, loss of sponsorship, and adverse word-of-mouth publicity.

[Backorders can rescue your business](https://www.tradegecko.com/inventory-management/introduction-to-backordering). Besides retaining customers, they can help you save plenty of time and money. This business format can seamlessly work for suppliers that deal with high-priced, hand-crafted, or perishable goods. 

All you need to do is let your customers know that the delivery dates are not the same for all items. It is a good idea to keep small amounts of the most popular products in stock to continue to attract buyers. This technique results in substantial savings on storage and servicing costs.

**Challenges in Backorder Processing**
--------------------------------------

Inventory management is one of the primary issues that are related to backorder processing. In your [retail business](https://erply.com/the-best-way-to-manage-retail-backorders/), you may be eventually dealing with a huge number of orders, as much as thousands of backorders in one day. Here are a few of the real issues that are likely to arise when backordering merchandise:

1.  Clubbing all out-of-stock products from multiple sales orders into one purchase order
2.  Checking for accurate recording of every sales order with backordered products
3.  Registering an order for the unavailable items with the supplier
4.  Once re-stocked, tallying the sales order of received items with the purchase order.

**Best Ways to Manage Backorders**
----------------------------------

What may work as a backorder solution for one business may not work for another. However, there are two key methods of managing backorders:

*   Inform your customers upfront that the product is out-of-stock and will be backordered. Also, tell them when it will be back in stock. This will help you retain your customers. Make them feel individually attended to until their order is fulfilled. This can be done via email, calls, or any other available means of communication that make it possible to assure the customers that they are being served.
*   Try to do most of your business deals on backorders. This keeps your company in demand. Remember “demand attracts more demand”. You just have to keep your customers informed about when the deliveries of the product will happen. This method helps you cut down on your storage costs, warehouse expenses, and inventory bottlenecks.

[![Analyze and prioritize. Try it for free. ](https://lh3.googleusercontent.com/GYsITydhoAsXdrXdUwSsm4m5sc28wBva8e0CLGeIc7CF-vkzjR1FLcaN3rQ4jqUhGZTAPQff3erlgYEG3b8Fbv7yPaDOifK1x3nhrFx_T9_uR7UoRMaGSJf1C0qycQ)](https://www.supplypike.com/analytics)

Finally, backorders can either be profitable or can cause issues for your business. It all depends on your course of action and your business turnover.

Provided that you’re systematic in managing your backorders and communicating well with your customers and [supply chain](https://www.easyship.com/blog/how-to-manage-backorders), this is the best thing that can happen for your business!

If you’re struggling with getting your inventory to Walmart, you may need to [**generate a store-specific order (SSO)**](https://supplypike.com/blog/when-to-do-ssos-store-specific-orders/). SupplyPike has an easy-to-use tool that allows you to do just that, in a matter of seconds instead of hours.

![SSO Analysis](https://lh3.googleusercontent.com/JQo9H9wFBpjamJLaO_cgsLgKJH6-1mkFRqWqXcizC4FGXj0utcYmCy2MN3kTKN_z09GV0NgVVkfjg3ghhsa7Y07gZqoz-ayI7FUTQA2vZOua1VSaCxRlI0lfgdqJlw)

[![SSOs in seconds. Get the tool. ](https://lh4.googleusercontent.com/1lRNYKnCnTWRbxtlDJK5KNqaBiJj-GHjnMTSL3pGKRxEdLlrmLmjuhurpq3Fi2lBqKlIjb1r6CeZsHybZVIcogQnzWbYCDmpyNKWSmBT9PiHG47wW7vZRfXFhC0LXw)](https://www.supplypike.com/analytics/sso)

Backorders And Their Effect On Supply Chain

What To Do with Out-of-Stocks

Learn about:

*   What a supply plan is 
*   The differences between supply and demand planning
*   Why a supply plan is important
*   How to calculate a supply plan

* * *

Maintaining a well-oiled supply chain is challenging. You need to follow the links to discover pain points and what is impacting your sales and inventory. Mapping out your supply chain can be a game-changer. This process is called **supply planning** (also known as **supply chain planning** or **SCP**).

What is a supply plan?
----------------------

A supply plan is a forecast of how much product you will need on your stores’ shelves. It forecasts the steps it takes to create a product, warehouse it, ship it, and stock it. Supply plans focus on production, procurement, and logistics.

You would use a supply plan in your warehouse and manufacturing strategies to determine how much product you need to create and store according to your previous sales data and forecasts. Supply plans are useful for predicting how much your customers will order from you.

Supply planning takes a long view of your supply chain. Supply plans should look six to twelve months in the future, although some supply chain experts recommend creating supply plans that extend as far as five to ten years. 

That said, some retailers, such as Walmart, keep a rolling supply plan of only 13 future weeks. The reasoning behind this is that with a shorter timeframe, you can create a far more accurate supply forecast. Indeed, forecasting tools, such as machine learning, are often the most effective for short outlooks.

[**_Related Reading: Replenishment 101: What Is Replenishment?_**](https://supplierwiki.supplypike.com/articles/replenishment-101-what-is-replenishment/)

What is the difference between a supply plan and a demand plan?
---------------------------------------------------------------

[**Demand planning**](https://supplierwiki.supplypike.com/articles/demand-planning/) takes historical sales data and combines it with sales forecasts to create a cohesive supply chain model. Demand planning takes wild variables, such as regional preferences and viral marketing, into consideration, not just automated point-of-sales analyses.

Supply plans are typically a part of good demand plans. Demand planning sums up the data from a demand forecast (i.e., historical sales data matched with base predictions) and the data from a supply plan (i.e., individual product sales matched with customer demand) and combines the two into a fluid model for predicting future sales.

Demand planning looks at the larger picture of creating a cohesive supply chain, while supply plans focus solely on ensuring that products are available for stores at the right times and for the amounts they need. Supply plans consider production constraints and raw materials availability.

Supply planning also gives more granular insight into your supply chain. For example, production planning shows you how much you can manufacture, given your current capacity and circumstances (which is different from demand planning in that it has little to do with consumer behavior).

Demand plans can affect supply plans by looking at consumer purchasing behaviors. Higher demand for a product will necessitate more production and procurement of that product, which may change your supply plan.

Why is a supply plan essential?
-------------------------------

Creating an effective supply plan can solve a great deal of inventory and replenishment issues. Supply planning can decrease production costs due to fewer changes in manufacturing methods, procurement costs due to fewer last-minute purchasing, and logistics costs due to fewer expedited orders.

Without a supply plan, production planning may place your focus just on your inventory levels, meaning you may be missing the bigger picture. Low inventory levels can lead to out-of-stocks, which will increase expediting costs. Additionally, focusing on inventory levels alone can increase logistical costs as your stock moves from one warehouse to another.

Supply plans reduce [**the bullwhip effect**](https://supplierwiki.supplypike.com/articles/the-bullwhip-effect-and-how-to-prevent-it/)**.** Sudden supply and demand changes near the consumer level can cause significant changes to production. Even a small bullwhip event can have a massive impact on the supply chain, as far upstream as the manufacturer. 

Having a proper supply plan allows you to put the right amount of inventory into the right place at the right time. Supply plans, consequently, increase customer service and, by proxy, consumer happiness.

A good supply plan will also lead to better compliance with customer standards. In Walmart’s case, the retailer now requires suppliers to be [**on time and in full for 98% of all cases ordered**](https://supplierwiki.supplypike.com/articles/new-2020-walmart-otif-changes/). Without a supply plan, these OTIF goals can be daunting and seemingly impossible.

A supply plan helps you get your inventory ready to go so that you can meet collect ready appointments, ship products within the delivery window, and deliver all of the items ordered. Supply planning allows you to be proactive with your compliance. 

How do I create a supply plan?
------------------------------

First, **create a target**. Determine whether you are planning for a number of weeks’ supply or a number of units to keep in inventory. There are other targets you can use, of course. Look into calculating how long your stock will last in the stores and go from there.

Then, **decide how far you wish to forecast**. 

*   A further forecast horizon may increase your safety stock, as a longer view on your procurement strategy can lead to uncertain forecasts and, therefore, a need for a buffer against stockouts.
*   Looking more deeply into your supply chain leads to more variability and less accurate forecasting because there are more links in the chain to consider, especially if you are shipping to a distributor, who ships to a wholesaler, who ships to a retailer, who sells to a consumer. 
*   It is critical to assess how much each level in your supply chain is holding in stock and compare that to how much the consumer ends up buying.

Next, **determine how much inventory your stores have**. Calculate the number of items “[**in pipe**](https://supplierwiki.supplypike.com/articles/replenishment-201-monitoring-store-level-inventory/#in-pipe)” (on hand, in transit, in the warehouse, and on order). 

Then, **create a store-level demand forecast** to estimate how many units each store will order in a particular period. Again, there are two forecasting methods: **weeks of supply** versus a **static number of units or cases** per store. You can do select a forecasting method by analyzing the historical point-of-sales information for each store.

Finally, step through each store’s demand forecast and **subtract the store’s inventory from the number of units that you have forecasted** the store will sell. When that number drops below your target, you’ll know it’s time to create more inventory. 

[**_Related Reading: The Basics of Walmart Replenishment_**](https://supplierwiki.supplypike.com/articles/the-basics-of-walmart-replenishment/)

Sound complicated? SupplyPike can help.
---------------------------------------

SupplyPike has created a tool within our [**Retail Intelligence**](https://www.supplypike.com/analytics) app that generates dynamic and customizable supply plans without digging through spreadsheets. This tool leverages your forecasts and point-of-sales data to show you how much inventory needs to go where based on your weeks’ of supply input.

![Retail Intelligence - Supply Plan](https://lh6.googleusercontent.com/BYJ5xPaxR2U-gBc4sztQ-lBG6l65TVVHKfj7H1pAOjKf3IVPUojiylwNcuhBThnc_15b5fi6ajrO-oW7Wdm-H5nUQgazDyqHgRRInBJoWmJFOL9y8INDtX2OZndKcHrfw3JxelGU)

_Retail Intelligence – Supply Plan_

Supply chain management depends on forecasts, such as demand plans and supply plans. Accurate forecasting leads to effective supply plans, meaning fewer out-of-stocks and better compliance. 

![Plan your supply chain.](https://lh3.googleusercontent.com/bEWZftjQBld6-GWY2hCal1pImD9C92t5GwI4nH8qqb0-Rchl6Q1ptCEPeavqz4NSfEjA5-wa6E-Wf0fdUBxKIqhDOrf9MZ5VvTdC1JcDefIOOpVqldLNKHLUTgJDdYDwceAJMmJC)

What Is a Supply Plan?

What is a demand plan?
----------------------

Demand planning tells you how much inventory you can expect to sell, down to the regional level. Armed with point-of-sales data, knowledge of inventory issues, and accounting for anomalies, you can plan on how much product to manufacture, store in your warehouses, and ship to each region.

Demand planning helps identify **potential expansions** to your product line or supply, as well as **potential threats** to your sales. Demand planning helps you cut costs by avoiding things such as **overstocks** and pricey **expedited shipping**. With proper demand planning, you can solve problems with your **warehouse logistics** by predicting how much product should be shipped, where it should be shipped to, and when it should be shipped.

More importantly, your customers require plans to nearly match actual sales. For example, Walmart requires you to be within a 20% error margin between your forecast and your sales before they apply chargebacks. It pays to have a good demand plan!

[![Want to make Demand Planning easy? Get the tool. ](https://supplypike.com/wp-content/uploads/2020/02/1-1024x390.png)](https://www.supplypike.com/analytics)

The differences between a demand forecast, a supply plan, and a demand plan
---------------------------------------------------------------------------

In an ideal world, a demand forecast, a supply plan, and a demand plan would be the same. However, in the complex world of supply chain, there are some key practical differences:

### Demand Forecast

Demand forecasts start with **historical data** to predict how sales will look in the future. This creates your **demand forecast model**, which represents your past and future sales data. A demand forecast indicates how much each customer expects from you. For Walmart suppliers, this is represented in Retail Link in the [**Global Replenishment System (GRS)**](https://blog.8thandwalton.com/2012/10/the-global-replenishment-system/).

### Supply Plan

A supply plan is used in **warehouse and manufacturing** settings to determine how much actual product should be created and stored. Supply plans also predict how much product your customers will order from you. These are not based solely on historical sales data, but also take into account seasonal sales highs or lows, discounts, and similar changes.

### Demand Plan

Demand plans attempt to tie demand forecasts together with supply plans to create **an intuitive, cohesive model**. Demand plans are more fluid than demand forecasts or supply plans. They take historical sales data and account for spikes and dips in sales due to variables that you input, such as abnormal weather changes, promotions, viral or guerrilla marketing, and other factors that simple automated point-of-sales analyses cannot identify.

[![Graphical representation of the differences between demand forecast, a supply plan, and a demand plan. ](https://supplypike.com/wp-content/uploads/2020/02/Untitled-design-3-1024x683.png)](https://www.supplypike.com/analytics)

A graphical representation of the differences between a demand forecast (based on historical sales), a supply plan, and a demand plan.

To sum up, a demand forecast asks, _“How much does my customer want?”_ A supply plan asks, _“How much product should I make?”_ And a demand plan seeks to answer both questions, as well as _“What should I expect?”_

What is needed to create a demand plan?
---------------------------------------

To accurately forecast, you need a **historical blueprint** of your products and **detailed point of sales** information broken down by order number, region, season, or any other variable inherent to increasingly complex supply chains. If you are a Walmart supplier, GRS is helpful in determining your future demand, and it also helps understand Walmart’s expectations.

When receiving POS data from a customer, there will generally be a process to clean and standardize the data so that it will reflect expectations more closely. For example, products with different sizes will need to be appropriately grouped, and inner packs will have to be considered in order to calculate actual units.

What is Machine Learning, and how can it help?
----------------------------------------------

Machine learning is a type of **artificial intelligence (AI)** that uses complex mathematical techniques to **train** a **model**. As more data is provided for training, the resulting model will become more accurate. “Learned” models are different from traditional statistical models of historical sales because they take into account [**complex nonlinear relationships**](https://sciencing.com/non-linear-relationship-10003107.html) within the data. 

As an example, a machine learning model might be trained from historical sales data, and then the trained model might be used to predict future trends in the data. Machine learning can serve as an efficiency booster for suppliers and goods manufacturers. It is a tool that gives industry professionals the power to make more informed decisions and shift efforts to tasks machines cannot perform.

[![Stop stressing about Demand Forecast. Start for free. ](https://supplypike.com/wp-content/uploads/2020/02/2-1-1024x390.png)](https://www.supplypike.com/analytics)

While standard approaches usually only take into account historical and seasonal sales, machine learning can incorporate **non-historical data** such as weather changes, one time promotions, and even social media. For example, a **machine learning model** can predict how your next promotion will likely affect sales, taking into account next week’s big game, the cold front moving into high-selling regions, and the buzz around your customer’s Twitter feed. Armed with all of that data, machine learning calculates how all of these factors interact and creates a model to help you forecast future demand.

[![Screenshot of SupplyPike's Forecast in action. ](https://supplypike.com/wp-content/uploads/2020/02/Forecast-Screenshot--1024x388.png)](https://www.supplypike.com/analytics)

A screenshot of the SupplyPike Forecast in action

What does SupplyPike offer?
---------------------------

SupplyPike has a dedicated machine learning team who have created algorithms that are constantly being updated with new data in order to learn better and gain more insight into sales currents. We take regional POS data, weather forecasts and trends, regional population trends, promotional spikes, and seasonal changes, and create an advanced model for your demand plan.

Once we have that data, we use our [**Retail Intelligence software**](https://www.supplypike.com/analytics) to display the trends in an easy to understand graph comparing the data to your GRS expectations. You can also download the data into a comma-separated values (CSV) file to share with your team. The metric is easy to use and very customizable. Start [**your free trial today**](https://www.supplypike.com/analytics)!

[![Machine Learning + Demand Forecasting = Magic. Find out how. ](https://supplypike.com/wp-content/uploads/2020/02/3-1024x390.png)](https://www.supplypike.com/analytics)

Demand Planning

Learn about:

*   Building a Decision Support query in Retail Link to forecast weeks of supply
*   How to use this report to create a demand plan
*   How to adjust a demand plan

* * *

We’ve discussed [**demand planning**](https://supplierwiki.supplypike.com/articles/demand-planning/) before and the importance of using machine learning to gain insights. If you recall,

> \[A\] demand forecast asks, _“How much does my customer want?”_ A supply plan asks, _“How much product should I make?”_ And a demand plan seeks to answer both questions, as well as _“What should I expect?”_
> 
> From “Demand Planning” by SupplierWiki

We also went over how to use Walmart’s point-of-sales forecast and supply planning to help [**avoid out-of-stocks**](https://supplierwiki.supplypike.com/articles/replenishment-301-avoiding-out-of-stocks/). This article will walk you through how to use Retail Link to create a demand plan.

The essentials of a demand plan
-------------------------------

While there is no hard-and-fast method for demand planning, most will include the following components:

*   **Accurate data**: Historic sales performance and forecast accuracy are essential in predicting future production demands. 
*   **Collaboration**: Suppliers must collaborate with their Replenishment Managers to determine what supply levels each party can reasonably maintain, typically expressed in **weeks of supply**. Without this target, suppliers cannot develop an effective demand plan.
*   **Data reduction tools:** Unfortunately, Retail Link cannot provide a comprehensive demand plan. Suppliers must use tools such as Excel or [modeling software](https://www.supplypike.com/analytics) to turn the raw data into an actionable plan.
*   **Implementation and monitoring:** Demand planning is not a “set it and forget it” task. It requires constant monitoring and adjustments to new data or insights. At a minimum, suppliers should review and update their demand plan weekly.

A demand plan is just a guess if it does not begin with accurate historical data. Two main pieces of data are historical sales and sales forecast. In other words, **what Walmart has sold, and what it is forecasting to sell**. 

While suppliers can extract two years of sales data from Decision Support, suppliers should base demand plans on recent sales history. A standard time frame is to include the last four weeks of sales data. 

For forecast data, the **Global Replenishment System (GRS)** only provides access to 17 weeks of data. With this limited viewpoint, demand planners must review the data weekly, as lead times can be significant, especially for direct import suppliers.

Building the DSS query in Retail Link
-------------------------------------

The data reduction for a demand planner can take many forms, but suppliers can best extract the relevant data from DSS with the following general report recipe. Rather than following this example verbatim, suppliers should carefully consider their requirements and adjust the details as needed. 

The easiest way to build the report is to use the Store Detail report template. This template is in the **Sales and Margin** folder in DSS. Click on **Store Detail** to open the Report Wizard.

In the **Columns tab,** select the report columns in the following screenshot. Remember, you can right-click on any Report Column to see a brief description of that selection. If you are unsure which folder contains which column, use the **Search** feature at the top of the report columns list.

![DSS Report Wizard – Columns tab for a demand plan](https://lh4.googleusercontent.com/bx86qehs3r0-OAFuxEiokNy3iPTp11AzaedN4sM7xCtmkBogFbUtTJaWJvNRsctk8byB-IkZUdVCcdbEHJ-L-MxHRtLxpCYx3VG_R1QnpeGNIyz0g-JcLIsmchPQv8fauMDnlXew)

_DSS Report Wizard – Columns tab for a demand plan_

**Columns:**

*   Prime Item Nbr
*   Prime Item Desc
*   Vendor Stk Nbr
*   POS Qty
*   Curr Repl Instock %
*   Curr Str On Hand Qty
*   Curr Str In Transit Qty
*   Curr Str In Whse Qty
*   Curr Str On Order Qty
*   Curr Whse SS Order Qty
*   Curr Whse On Hand Qty
*   Select the future 17 weeks from the **Store Weekly Forecast** folder.

On the **Items tab**, we define the “pool of data” for our query. In our report, we will ask DSS to return only items for which we need to build a demand plan. You can use different Item filters based on your specific needs.

Use the following screenshot as a guide for the Items tab selections.

![DSS Report Wizard – Items tab for a demand plan](https://lh4.googleusercontent.com/KZZpCfA3TMAbJNK-xqH1158bDfZn_jCJ2EcPDL39FQZWD7f1ONw4EdGNXAQH-R8kWcg8Bktkn7Qd5oFCOYel0dtftXLtwVyxkwyg2L5jDadXqMV38Ut8JtVQA7Fs-Yaok6jPwSIs)

_DSS Report Wizard – Items tab for a demand plan_

Select **Item Nbr > Is One Of** and add the relevant item numbers.

On the **Locations tab**, we define the “geographic pool of data.” Generally, a demand plan would include all replenishable stores, which we are selecting in this exercise. However, you can adjust this pool of data to include a subset of stores, depending on your specific needs.

![DSS Report Wizard – Locations tab for a demand plan](https://lh5.googleusercontent.com/B75C3G947HY1QwBpbKPgIqwOU_Edg5UrrXbOH5Y2YoG1BMgiWLtM5FIffgUUmgAgmtpuOQ12kdrUOJuHnzHPYMh5Ive4P4zGXvsIJkBTRwb_97c3gUSSfsIHIqshRG52x-uSUi2I)

_DSS Report Wizard – Locations tab for a demand plan_

Select **All Stores (Without Dotcom)**.

The **Times tab** is where you can define the time range for this report. For demand planning, the best practice is to use a recent snapshot of sales data. This range will help when estimating forecast accuracy during the data reduction stage. The preferred time range is the **Last 4 Weeks**.

![DSS Report Wizard – Locations tab for a demand plan](https://lh3.googleusercontent.com/nCeGtDjM-IUanYnE9pte7Q0VOiLGgr5MljsvfXDvDIfXgGsfAH5hpGrx9qObvxfsJ8XGyHFLdXyg0iRnz6_7rfQRl6CacJxozoflGfv-zK3TrdrELtzuYAUitOAwNKGmnt7SbDz5)

_DSS Report Wizard – Locations tab for a demand plan_

This report requires no selections on the **Options tab**.

The **Submit tab** is where you can name, run, save, and schedule this report. 

*   **Title** – The heading that appears above the data results in the Excel document.
*   **Run Now** – Tells DSS to submit the request to the database for processing. In essence, “Go get the specific data I asked for in this query.”
*   **Save** – Adds this report template to **My Reports** for use in the future.
*   **Schedule** – Instructs DSS to run this report on a recurring basis (weekly, monthly, quarterly, etc.).

![DSS Report Wizard – Submit tab for a demand plan](https://lh4.googleusercontent.com/dl_07KteAHQWtcZc2AP68hZSpQRBHVNtKkTJtX0IVWqBYpInSO3ataCCq4fXXKmGSlBwP0mdalilIZ4cQkaJC4HeZRMJbDuyBqf24zpHuX7BOsPy3bn0jc_OsAgY_jTJ3Mkl9Gpe)

_DSS Report Wizard – Submit tab for a demand plan_

[**_Related Reading: How Do I View My Instocks in Retail Link?_**](https://supplierwiki.supplypike.com/articles/how-do-i-view-my-instocks-in-retail-link/)

Data reduction
--------------

Once downloaded, the Excel sheet contains several aspects required in a demand plan: recent sales history, current inventory ownership, and future sales forecast. However, the DSS report will not return a viable demand plan. There is still plenty of work to do!

The goal of any demand plan is to maintain target levels of supply in three areas: at stores, distribution centers, and the supplier facility. The supplier should calculate these supply levels in terms of weeks of supply and determine the actual targets in concert with the Walmart Replenishment Team. 

To begin analyzing the data, we need to determine a few key metrics:

*   Forecast accuracy
*   Current total ownership
    *   Stores
    *   Warehouse
    *   Supplier facility
*   Target weeks of supply

### Forecast accuracy

**Forecast accuracy** will help the supplier determine the confidence that it can place in the future sales forecast. To calculate forecast accuracy, suppliers need to compare a four-week sales history with the same period’s forecasted sales rate. We obtained a four-week sales history from our DSS report. However, DSS does not provide a historical sales forecast. This data comes from the supplier’s internal reporting.

Many accepted formulas suggest simply dividing the difference between forecast and actual sales by the forecasted sales to calculate forecast accuracy. However, this method does not treat all situations equally. The correct way to calculate forecast accuracy is with the following general steps:

*   Determine the absolute value of the difference between forecast and actual sales using the **ABS() function** in Excel.
*   Divide this result by the larger of either the forecast or sales values using the **MAX() function** in Excel. 

This procedure results in a percentage, or **confidence level**, that we can apply to the future forecast values as a safety factor. 

### Total ownership

Walmart bases purchase orders on sales projections as well as inventory position. If a store sells ten units but has 50 units on hand, the store likely does not need to reorder products from the supplier. Therefore, suppliers must keep track of total corporate ownership when creating a demand plan.

For a demand plan, suppliers should consider three distinct points: **stores**, **warehouses**, and the supplier’s **facility**. Demand planners can calculate the first two data points using the data extracted in the DSS report. The demand planner will need to manually enter the last data point from internal inventory availability reports. The report should only include inventory that is available to ship the next day.

Use the following calculations:

*   **Store Ownership** = 
    *   Curr Str On Hand Qty +
    *   Curr Str In Transit Qty +
    *   Curr Str In Whse Qty +
    *   Curr Str On Order Qty
*   **Warehouse Ownership** = 
    *   Curr Whse SS Order Qty + 
    *   Curr Whse On Hand Qty
*   **Supplier Ownership** = 
    *   Manual entry from supplier data

### Calculate weeks of supply

Calculate actual weeks of supply by using one of the following methods:

**Historical Methodology** looks at recent sales history when determining levels of supply.

*   **Store** Weeks of Supply = 
    *   Store Ownership ÷ Last Four Weeks POS
*   **Warehouse** Weeks of Supply = 
    *   Warehouse Ownership ÷ Last Four Weeks of POS
*   **Supplier** Weeks of Supply =
    *   Supplier Ownership ÷ Last Four Weeks of POS

**Forecast Methodology** looks at future forecasts when determining levels of supply.

*   **Store** Weeks of Supply = 
    *   Store Ownership ÷ Next Four Weeks Forecast
*   **Warehouse** Weeks of Supply = 
    *   Warehouse Ownership ÷ Next Four Weeks Forecast
*   **Supplier** Weeks of Supply = 
    *   Supplier Ownership ÷ Next Four Weeks Forecast

Choosing the correct methodology is dependent on the supplier’s specific situation. There are times when a historic methodology is more appropriate. However, if the demand plan is for highly seasonal items, it might be more appropriate to use forecasted sales data to calculate weeks of supply.

Armed with actual weeks of supply, suppliers will need to collaborate with their Replenishment Team at Walmart to determine optimal inventory levels as a function of weeks of supply. These two data points, actual and optimal, will allow the supplier to move forward in the demand plan process.

[![Analysis, not paralysis. Get started.](https://lh5.googleusercontent.com/JRRzF45QmloPSVkA5anv3BFDNh13-Y7bPgA7vz1wepx2BAmHdMi3LbPh0iouU4aPNk_IKFu5xbKgP_p2VivhlEVX8DzcD2PYeB-8bORv-PHpM7ymEQxBX4CqCpu4_YPxMRhjs_sk=s0)](https://www.supplypike.com/analytics)

The demand plan
---------------

Recall that the purpose of a demand plan is identifying when the supplier needs to have inventory **available to ship** and in what quantities. In the previous section, we determined current ownership levels as well as target weeks of supply. We can now move forward, comparing each future week’s projected inventory, sales, and receipts to the target weeks of supply. 

Follow these steps to calculate future weeks of supply every week:

**Ending Inventory** = _Starting Inventory – Forecasted Sales – Feature or Promo Projections + Projected Receipts_

*   **Starting Inventory** for the first week of the demand plan will be the total current inventory obtained from DSS and supplier resources. For subsequent weeks, the starting inventory will be the ending inventory from the previous week.
*   **Forecasted Sales** are straight from the DSS report for the future 17 weeks.
*   **Feature or Promo Projections** will need to come from manual entries, as the GRS forecast does not include this data.
*   **Projected Receipts** are where the supplier gets to play around with the demand planner. Manually entering values here will automatically update the estimated weeks of supply for that same week. Suppliers should aim to have enough receipts to maintain the total weeks of supply targets established by the Walmart Replenishment Team.
*   **Ending Inventory** is the result.

Knowing the approximate ending inventory every week is a good start. However, suppliers should be thinking of inventory in terms of weeks of supply. To calculate estimated weeks of supply weekly is simple:

![ Ending Weeks of Supply = Ending Inventory ÷ Weekly Forecasted Sales](https://lh3.googleusercontent.com/Jtvt9y3p7g9tyr9CleNfR0yboeOneBGJMh3Q-L9ndcZqah9cJ1RDWUrMbdh5-KHS1qbCqN6jlscVzN9sHv1aiNr8-ErUoCJMr6ilk-AlZg3ItBl8bfFtEloTb_4Euq02yl5zw7DG)

 _Ending Weeks of Supply = Ending Inventory ÷ Weekly Forecasted Sales_

This last data point, **ending weeks of supply** is precisely the value we are interested in maintaining!

[**_Related Reading: What Is a Supply Plan?_**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/)

Working example
---------------

OK, that was a lot. Suppliers need to understand the theory behind the development of a demand plan. There are many ways to perform data reduction, whether in Excel or via a [software solution](https://www.supplypike.com/analytics). However, failure to understand the fundamentals behind the data could result in negative consequences and a failed plan.

Let’s look at developing a demand plan with some real numbers:

Total Ownership

8,000 units

Next Week Forecast

2,300 units

Promo/Features

1,200 units

Supplier Receipts

_Unknown_

Target Weeks of Supply

3.5 weeks

_Sample data for illustration purposes._

Here, the goal is to calculate the weeks of supply at the end of each week, comparing that value to the target weeks of supply. By playing around with the Supplier Receipts, we can see the impact on the final weeks of supply. By adjusting the Supplier Receipts until the actual weeks of supply are greater than the target, the result is the estimated amount of inventory that needs to be available to ship from the facility during that week.

Let’s look at two examples of supplier receipts:

**Scenario 1:**

Total Ownership

8,000 units on hand

Next Week Forecast

2,300 units

Promo/Features

1,200 units

Supplier Receipts

100 units

**Ending Inventory**

**4,600 units**

**Ending Weeks of Supply**

**2.0 weeks**

_Scenario 1: Supplier Receipts of 100 units_

![Scenario 1: Supplier Receipts of 100 units](https://lh5.googleusercontent.com/jRkzq9e_mFzx_6xTLWP6bvs5k829cJB00ZHsyTULawoxxppki88PQ_-c8i6_e1oOCtyGfegowBB9XohkXuP1_B3ZEJ-AqreQeq41A8cg8xhSDiZ5QJVEGbabvuyf2kZNTxIVXx_U)

In this scenario, the supplier only receives **100 units**, which results in only **two ending weeks of supply**. Since the target weeks of supply is 3.5, the supplier needed to receive more than 100 units that week to maintain minimum levels of supply throughout the supply chain.

**Scenario 2:**

Total Ownership

8,000 units on hand

Next Week Forecast

2,300 units

Promo/Features

1,200 units

Supplier Receipts

4,000 units

**Ending Inventory**

**8,500 units**

**Ending Weeks of Supply**

**3.7 weeks**

_Scenario 2: Supplier Receipts of 4,000 units_

![Scenario 2: Supplier Receipts of 4,000 units](https://lh3.googleusercontent.com/YzKdr5Gy5Lv6DzyRxyI83t56OVikyAeSTeHy3ZkZ7TXOmTFcBA6WBHdbSUN9uB8ItCUxNoeZkox_S3ZuuLzOjNdzcwLLyM9yH_q6ZdXTk1n3jejX3rkUDs9bDsjhWSTyvLVbtqcb)

In this scenario, the supplier receives **4,000 units**, which results in **3.7 ending weeks of supply**. Since the target weeks of supply is 3.5, this is more than enough inventory to maintain the minimum acceptable inventory without burdening the supply chain with excessive inventory loads.

The demand planner should repeat the same steps for each week for which a sales forecast is available, ensuring that the supplier receipts each week are sufficient to maintain minimum acceptable inventory levels.

In Summary
----------

Quite a bit goes into demand planning. Developing a demand plan is conceptually simple. However, the many steps involved can make the task seem daunting. 

Suppliers should monitor their demand plan weekly, adjusting receipts based on new information or adjusted targets. Constant communication with the Walmart Replenishment Team can significantly reduce store out-of-stock issues due to improper demand planning.

Let SupplyPike do the heavy lifting
-----------------------------------

With SupplyPike’s analytics solution, [**Retail Intelligence**](https://www.supplypike.com/analytics), we do the heavy lifting of demand planning for you. Using advanced machine learning techniques, we take Walmart’s GRS forecast, compare the data, and create an actionable plan.

![Retail Intelligence – SupplyPike Sales Forecast](https://lh3.googleusercontent.com/Zu97zRz0me1O5LYY6z5uJjDZ1TEjDQ3YSnae86lKPWW1j5T5YWWKYJbaEk_HARKDuYa0em_x2zeYOtH9H-oNiMwdOKDvyVqSokG21jY7dWMnin0Q1KFyqCX91Zryhrophx8lVAxX)

_Retail Intelligence – SupplyPike Sales Forecast_

Adjust your weeks of supply and create an accurate supply plan in seconds:

![Retail Intelligence – Supply Plan](https://lh3.googleusercontent.com/EVewl9uFZiFP44ufVEUGl__-ko4B6w8QxiDYYmjnp7AF_JlwgcDacHceTA9Cp1SrmbJx6AH_ysUgB0rQHhM3-xovY0ce2EBm0eYYOMkgJc-RTh_ql_oO41NwLfBoc-Wou3UvD71F)

_Retail Intelligence – Supply Plan_

And you try it with your data [**free for 14 days**](https://www.supplypike.com/analytics)**!**

[![The power of machine learning at your fingertips](https://lh5.googleusercontent.com/56gs6NrReRxMiACv8jzHIaT6kMgJuAqB2ddt2wT72RaeJ_iUWlqx0AonqRCJwiJmXjpuP99j9mj1choRVnNvZMp99Yr3SmKJZoD0jm0bA9JwQSrvH1a5yqxyW_C49WkoTbtMx9DA)](https://www.supplypike.com/analytics)

How to Create a Demand Plan in Retail Link

Learn about:

*   Planning your production for the Lunar New Year
*   Meeting your customers’ demand
*   Demand and supply planning

* * *

During the Chinese New Year, production can be problematic for many business owners and vendors within the supply chain. Items that are routinely available will likely have a delay during the holiday. The Lunar New Year typically has workers out of the factories for **a minimum of one month**. Therefore, it is necessary to **plan ahead** to have the appropriate supplies needed from Chinese and other East Asian factories. 

Without proper planning and implementation of appropriate [**safety stock**](https://supplierwiki.supplypike.com/articles/the-supplierwiki-replenishment-glossary/#stock), there is no guarantee that a supplier will have the **necessary materials to operate and send to customers** during this extended time. With that possibility, some strategies worldwide are essential to put into practice to help businesses, retailers, and vendors account for **proper supply chain acquisition** to ensure an appropriate amount of materials throughout the year, even with disruptions.

How do I forecast my production around closures due to the Lunar New Year?
--------------------------------------------------------------------------

There are two primary ways to **plan for appropriate safety stock during Lunar New Year production times** that are both effective and common. Both options allow vendors and suppliers to analyze their **present and future output** and make proper plans to accommodate the amounts needed during the holiday.

### Demand planning

When suppliers use [**demand planning**](https://supplierwiki.supplypike.com/articles/demand-planning/) to account for production during the Chinese New Year, they look at the **historical sales data** they have compiled from previous months and years of business. It is essential to take the time to look at trends in supply orders and compare them with current demand. 

After this step, vendors should consider the sales forecasts they have for **the coming months** and take the opportunity to **compare them with growing or decreasing demand in the industry**. This comparison allows suppliers to **identify product demand** by observing increased marketing initiatives for items that include particular supplies or by monitoring news outlets for reviews and studies of certain materials and products, among other things.

A demand plan helps suppliers more reliably establish how much inventory they need to keep up with the demand they need to meet.

### Supply planning

The next step to plan for closures is to create a [**supply plan**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/). When identifying needs for production during Chinese New Year, suppliers need to take the information obtained during demand planning and develop actionable steps to acquire **the required items for future orders**.

Vendors have to **plan for a pause in routine deliveries** during the Lunar New Year production times. If a supplier runs out of the necessary materials for its orders, that supplier will find it challenging to obtain them promptly during the observance.

How do I continue to meet demand?
---------------------------------

Suppliers must incorporate **strategies within their organization that address the gap in supply acquisition**. This act will allow suppliers to continue meeting the need of their customers. For newer companies, it is harder to gauge adequate levels of stock due to limited historical data. However, businesses that have been around for a longer time can refer to trends and sales to more accurately prepare for the Lunar New Year.

Suppose a supplier does not have adequate information to make a solid plan. In that case, it is vital to create a **six-week minimum safety stock of the average supply and material amount** used in the months of operation that a vendor has had. 

It is vital to note that **many retailers will place large orders with vendor factories right before the holiday**, causing a massive uptick in the amount of work the factory has to complete before the month-long holiday begins. Due to the larger than average amount of work and the compressed timeline, quality control can start to slip. Therefore, it is in suppliers’ best interest to place their orders for additional materials well before the shutdown occurs. 

**Suppliers should place their orders a minimum of three months before the holiday**. Placing orders earlier will allow for a higher quality product or material and peace of mind in that the supply will be at the needed level.

**Vendors must be mindful in researching any potential shortages in raw materials** that may contribute to an issue within the supply chain. If the materials are not available, the rest of the supplies will be unavailable as well. Holes in the supply chain will cause even longer delays in acquiring the necessities for products. 

One way to avoid a potential bind is to **establish a relationship with a regional emergency vendor** to work with on a dual basis with the international supplier. Although this source will not be the primary vendor, suppliers can use it if they run into a supply shortage and need additional resources.  

Lunar New Year production insights
----------------------------------

Although there is difficulty associated with a lapse in production, there are strategies to **alleviate the situation’s stress**. When suppliers take the steps to **accurately define the necessary stock levels** that they need to operate efficiently, it reduces the amount of pressure on the organization.  

The Chinese New Year is a big holiday to plan for in terms of supply. **However, there are other issues and events that an organization can encounter as well**. These can include weather issues, political unrest, staffing shortages, and even health disasters. The COVID-19 pandemic has brought such problems to light just recently. With this in mind, it is critical to plan for Chinese New Year production and other extenuating circumstances that can arise. 

With a **set plan to manage supply and demand**, you will have peace of mind fulfilling orders that come your way. Not only will your inventory be **stable**, but orders will continue processing as usual.     

Use machine learning to plan your supply chain
----------------------------------------------

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Use the [**SupplyPike Sales Forecast tool**](https://supplierwiki.supplypike.com/articles/the-supplypike-sales-forecasting-tool/) to configure a demand plan and get ready for holiday closures.

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Use the **Retail Intelligence Supply Plan dashboard** to view your weeks of supply and update your sources.

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How to Plan Production Around Chinese New Year

Learn about:

*   What demand sensing is
*   How demand sensing improves supply chains
*   How to use demand sensing to create better models

* * *

Added knowledge about customers’ needs and wants enables supply chain managers to make sound decisions, manage inventory better, and increase profits. Lately, there has been a lot of focus on improving forecasting within the supply chain, which has led to the extra emphasis on demand sensing. 

Demand sensing is all about detecting what customers want when they want it and comparing that want to the supply of the product. Demand sensing differs from demand forecasting in that it attempts to leverage short-term trends rather than long-term plans.

**Supply chain deficiencies** 
------------------------------

Supply chain malfunctions are a result of the issues in supply and demand management. Highs and lows of customer orders give rise to increased shelf-life for items in warehouses. 

There is such a massive demand for an item in peak season that may result in short supply and, ultimately, total depletion. Unfortunately, a cause for extended lead time for items is excessive ordering, so in this forward and backward movement, shipping fees continue ungoverned. 

Though long-term prediction is still highly critical to supply chain management, supply chain leaders must fine-tune their short-term forecasts in a matter of 56 days to consider the practical demand of items. 

Simultaneously, a large number of SKUs, plenty of sellers, and globalization have rendered manual monitoring of inventory and forecasting outdated. Here is where demand sensing becomes a vital factor.

[**_Related Reading: Demand Planning_**](https://supplierwiki.supplypike.com/articles/demand-planning/)

**Demand sensing improves models**
----------------------------------

Demand sensing makes the prediction process automatic and powers in new technologies, including automation in the warehouse, and the accuracy and speed of forecasts, inducing shorter processing time. Demand sensing uses calculations and operational data to compute high precision forecasts. Otherwise stated, it is the use of analytics to learn the customers’ choices.

However, demand sensing emanates from supply and demand variability. In contrast to conventional demand forecasting, demand sensing can be traced back to using up-to-date information to create more precise, near-future forecasts. 

These forecasts are meant for purchase and procurement, helping the warehouse replenish and reorder goods to fulfill customer demand. Using this, enterprises can deal with the fallout of variation without foregoing long-term plans and success. 

When used together with inventory and [slotting optimization](https://www.manh.com/en-in/products/slotting-optimization#:~:text=An%20Optimal%20Approach%20to%20Optimization,fulfillment%20cycles%2C%20and%20maximizes%20throughput.), businesses can implement a just-in-time inventory management model. JIT inventory works efficiently in reducing transport expenses and makes the supply chain more receptive. By all means, supply chain leaders still should be aware of using the power of demand sensing to function in the contemporary supply chain.

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**Making the most of demand sensing**
-------------------------------------

Debating on the value of demand sensing makes it less opportunistic than other enhancements within the supply chain. Unfortunately, that concept is nothing short of a farfetched dream, and a few retail giants have maximized demand sensing to shorten lead times to 50% and reach a two-digit growth, according to [Supply Chain Dive](https://www.supplychaindive.com/news/Nike-demand-sensing-next-frontier/538484/).

Nike’s interpretation of demand sensing utilizes swift prototyping and interlinked systems, making the most of real-time data to refine refilling and adding flexibility in the supply chain. Nike’s example teaches executives through these principal measures:

*   Run warehouse management systems with other supply chain systems.
*   Collate real-time data from every operation and channel.
*   Dwell upon product lead-time.
*   Understand the essentials of demand sensing, mainly automated, real-time forecasting, and ongoing improvement of forecasts, in screening vendors that present demand sensing.
*   Collaborate with suppliers and buyers for data-gathering  
    and standardize refilling operations.

**Using demand sensing**
------------------------

The concept of demand sensing foreruns analytics; however, it is a precious resource and a means to manage inventory and refill in supply chains. Managers must use technology and software so that demand sensing can move other inventory optimization processes further.

**Forecasting made easy by SupplyPike**
---------------------------------------

With SupplyPike’s **[Retail Intelligence](https://www.supplypike.com/analytics)** software, you can create and compare customer demand and forecasted sales. Using machine learning and artificial intelligence, Retail Intelligence senses when you need to procure more products and helps you plan better.

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Understanding Demand Sensing

Learn about:

*   How demand impacts supply chains
*   Methods for accurate demand sensing
*   Turning demand insights into actionable plans

* * *

Present-day supply chains face challenges in the form of mushrooming product-lines, contracting product lifecycles, complications, and vast quantities of data. Supplementing this, suppliers have demanding and irregular customers; the fluctuation of trends driven by the internet is rising, and promotions and sales depend on the weather, new launches, and the economic system.

To prepare for tomorrow’s challenges, brands must be clear about the effects of supply chain fluctuations on demand. This knowledge is how they can ascertain that they fulfill customers’ needs at the right time.

**[Demand sensing](https://supplierwiki.supplypike.com/articles/understanding-demand-sensing/)**, true to its name, is primarily the sense and sensibility of being quick to catch the drift of short-term trends and create better forecasts about customer wants. Brands cannot come up with a precise prediction of demand for the simple reason that there is an unlimited number of variables in play. 

Some of these variables are identifiable, and others are not. [A study by KPMG and the Economist Intelligence Unit](https://assets.kpmg/content/dam/kpmg/pdf/2016/07/forecasting-with-confidence.pdf) revealed that only 22% of companies surveyed could make predictions within five percentage points. On the whole, forecasts deviated by 13%, causing a significant influence on the share price.

The best part about demand sensing is that it promptly integrates short-term trends with the long-term forecast. Rather than depending on the same forecast within a 60 or 90-day window, planners get a better understanding that enables them to perpetually calibrate predictions with the help of the most recent sales data. This data allows supply chain managers to respond quickly and more often to fluctuating demands, resulting in enhanced profits, increased service quality, and waste reduction.

**Methods to sense demand**
---------------------------

There are many methods to sense demand, and each new understanding can quicken response time and lift profits. Three domains primarily draw the most significant returns from demand-sensing operations:

### **Short-term predictions using sell-in data** 

The best means that firms can use to start sensing demand is with the help of the most granular past data at hand. Often this comprises analysis of everyday sell-in/ship-to demand data using short time frames and consequently fine-tuning the forecast.

The shipment history considers this type of demand-sensing easily accessible in much supply chain planning or enterprise resource planning (ERP) systems. A few of the planning tools comprise short-term statistical forecasting for better forecasts’ responses to the demand changes in progress.

### **Include sell-out data** 

During demand sensing, one must consider every possible data source that can help in improving the forecast. Downstream sell-out information like customer, point-of-sales, or channel data, for instance, can help recognize the patterns of demand, give early alerts of any trouble, and bridge the gap between the plan and the actual scenario within the supply chain.

### **Include demand causations and outside data** 

Demand sensing must blend demand-associated variables to generate a forecast vigorous enough to respond to a broad spectrum of upcoming eventualities, both identified and unidentified. Among these are stock market ups and downs, rival promotions, viral social media trends, new product launches, climate, and other external elements.

Collating the sell-in data, the sell-out data, and the appropriate demand causes results in the most thorough possible depiction of need imaginable. Collating this data also provides a basis for straight-through demand sensing. With this, planners can use their entrepreneurial competencies to even better forecast and enhance consumer services.

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**From insights to profitable activities**
------------------------------------------

A few instances in which demand sensing is helping companies convert insights into lucrative operations are as follows:

*   **Fine-tune against-the-stream planning by directly pulling out PoS data.** With the help of demand sensing, brands can extract requirements from point-of-sale (PoS) data. Using this, manufacturers do not have to wait for distributors and retailers to do more accurate sales forecasting.
*   **Boost production-planning performance**. Using demand sensing inputs to production and supply operations allows for easy modifications to the production plan by accelerating or slowing down orders.
*   **Consistent streamlining of upstream inventory.** Using demand sensing, it becomes possible to make dynamic improvements to your inventory and offset the network by including the stock at local storage facilities and forecasted customer demand in specific locations.
*   **Bridge the inbound/outbound gap.** The inbound staff aims to fill warehouses; the outbound staff, on the other hand, aims to exhaust them by deliveries to retailers and customers. Demand sensing combines these two sections by displaying one global demand scenario.
*   **Forecast highly precise seasonal demands.** Consolidating the distribution network visibility is critical to improving supply chain response capacity. Improved visibility helps in getting to know which seasonal items are likely to sell each year. Using demand sensing, planners can instantly know when key retailers are out of stock. At the same time, when an item fails to perform, manufacturers can promptly modify production.
*   **The proper volume of inventory for launching new products.** With shrinking product lifecycles, replacing items becomes more and more difficult. With demand sensing, companies can get the needed support to decide the best amount of inventory of new and previous variants of products to fulfill customer service expectations.
*   **Improve promotion functions.** Demand sensing can take into account sell-in data like promotion features, merchandise, and market information so that planners can perceive the characteristics responsible for the boost. Planners can make better forecasts about the impact of future promotions armed with this information.

Innumerable inner and outer variables affect demand variability, resulting in scaling up of change yet to come. Inventory is the best means to deal with changes and to ensure superior service quality. 

Using demand sensing, brands can make the most optimum use of inventory. It segregates the significant indications from the commotion, thereby offering better and more accurate forecasts, enhanced short-term demand visibility along with reduced inventory, better customer service, and any future eventuality.

**Better insights with SupplyPike**
-----------------------------------

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How Does Demand Sensing Work?

Learn about:

*   The importance of demand sensing
*   How Walmart implements demand sensing in its supply chain
*   The changes to supply chains wrought by the coronavirus pandemic

* * *

When enhancing the supply chain, assessing potential is among the most challenging trials. Forecasting demand is not sufficient. If there would be a possibility of synchronizing the demand and supply lifecycle with real-time data, would that ease the process of forecasting?

Of course, that is what the largest retailer in the world, Walmart, has implemented successfully.

The secrets to Walmart’s capability to reign supreme in the market are its proficient and hassle-free collaboration of suppliers, manufacturers, warehouses, and distribution centers in its supply chain. 

**Why is demand sensing important?**
------------------------------------

We have discussed the importance of creating a [**demand plan**](https://supplierwiki.supplypike.com/articles/demand-planning/) to create a well-oiled supply chain. The addition of a [**supply plan**](https://supplierwiki.supplypike.com/articles/what-is-a-supply-plan/) also helps. Walmart uses demand sensing to supplement its suppliers’ forecasts.

If suppliers value the demand beyond what it is, this inaccurate forecast can cause excessive inventory, which in turn causes a hike in labor and storage expenses. For consumer packaged goods companies, it increases waste and acts to reduce profit further. On the other hand, if suppliers undervalue the demand, they run the risk of failing to fulfill customers’ needs.

Sensing demand is one of the most challenging parts of supply chain optimization. Apart from doing demand forecasting, suppliers must also organize operations to satisfy needs within the company. Suppose coordinating the supply and demand cycle with real-time data would promote the process of forecasting. Walmart is beyond doubt among the most efficient enabler of this strategy.

**How does Walmart do demand forecasting?**
-------------------------------------------

Walmart has become the market leader because of its efficient combination of suppliers, manufacturers, warehouses, and DCs. Walmart makes optimum use of technology in its supply chain. 

Take, for instance, its application of the first across-the-organization Universal Product Codes (UPC), which instantly collate and analyze store-level data. Using this data, Walmart store managers know which items are performing well. Thus, the store manager can send orders to the supplier. 

To enhance demand sensing, Walmart created [**Retail Link**](https://supplierwiki.supplypike.com/articles/retail-link-how-does-it-help/). This application is a real-time center for the information, paperwork, reports, and apps used by suppliers to manage their business with Walmart. Retail Link offers suppliers a means to manage their merchandise by enabling them to track their data, including sales and inventory volumes, in-stock percentage, gross margin, and inventory turnover. 

Retail Link makes it possible for suppliers to sense inventory risk and keep linked expenses at a minimum. Using a satellite network, analysts make use of the Retail Link databank and convey future customer demands to the supplier network. This network displays real-time data from cash registers to Walmart’s supply units. 

With the help of an effective CPFR (Collaborative Planning, Forecasting, and Replenishment) strategy, suppliers and manufacturers who are part of the supply chain can accurately and adequately sense their demand in coordination. 

Walmart has also established a system to connect with its suppliers, known as the [**VMI (Vendor Managed Inventory)**](https://logisticsmgepsupv.wordpress.com/2017/03/13/walmarts-vendor-managed-inventory-model/). In this system, the accountability to manage merchandise at Walmart’s warehouses lie with the manufacturers. The suppliers send the merchandise straightaway to the respective store or DC.

At the basic level, demand forecasting works with the analysis of historical information, creation of statistical forecast for existing and upcoming items, and the data from suppliers and internal managers. It omits the issues concerning instability within the system, unforeseen markets, or social situations giving rise to a demand change.

**In the pandemic scenario**
----------------------------

With the pandemic disrupting forecasts, Walmart’s supply chain managers need to ensure that stores and warehouses are replete with the products that cater to customer needs and demand. COVID-19, nevertheless, has wholly destabilized the digital program that provides Walmart with a forecast on how many items need to be on its shelves.

Usually, the system is dependable enough to review factors such as inventory, historical shopping patterns, and discounts to suggest the quantity of an item to order. However, when the COVID-19 pandemic unleashed chaos worldwide, the program’s guidelines began fluctuating. The guidelines are ever-changing, and the frequency of changes has risen.

Walmart is a perfect example of a flourishing retail business that has adapted to and absorbed flexible supply chains and has dominated all the shades of responsive selling.

[![We do Walmart right](https://supplierwiki.supplypike.com/wp-content/uploads/2020/07/Walmart-Right-CTA-1024x374.png)](https://www.supplypike.com/)

Demand Sensing in the Walmart Supply Chain

Forecasting and Planning

Learn:

*   What the Economic Order Quantity (EOQ) is
*   Why retailers use the EOQ
*   How the EOQ can change
*   How to calculate the EOQ

* * *

How do retailers establish the best performing quantity of goods to buy, according to ordering and carrying costs? What is the ideal amount of inventory that retailers need to order every time so that cost is at a bare minimum? The answer is the **Economic Order Quantity (EOQ)**.

**What is the Economic Order Quantity?**
----------------------------------------

The Economic Order Quantity (EOQ) is how replenishment managers and buyers calculate a reduction in inventory expenses while maximizing profits. RMs and buyers can use this calculation to find out precisely the best time to place an order and how much to order, thus enabling regular production and a reduction in inventory costs.

To put it mathematically, the EOQ is the point at which both the ordering and holding costs are equal. According to the following graph, the annual ordering costs and holding costs change as the reorder quantity rises:

![Graph of Annual Cost versus Order Quantity](https://lh4.googleusercontent.com/08cz6XS_9TV4OoU0NvKm-SfGoeQkVJLIL9YqfhlNCaylvIKETenJ6Zp0iN6IpLg9t5tPPtOvVsjIPNA8nkQAiA9-wnwDbgj-P_-ZtWfHQpq8aETQwS_-EJ-cr4U5YA)

_Graph of Annual Cost versus Order Quantity_

The EOQ is the lowest point of the **Total Cost** curve. 

**Why should retailers use the EOQ?**
-------------------------------------

Inventory comes at a high cost. It is costly to produce or acquire stock, and it is also expensive to have it in the store. Whether it’s raw materials, Work in Progress (WIP), or final products, retailers can use the benefits of the EOQ as a proficient ordering benchmark to avoid problems and prevent the need to maintain surplus stock. 

Order quantity is a critical matter — if a retailer orders too many items, it will raise holding costs. On the other hand, if a retailer orders inadequate amounts, an out-of-stock situation may arise. Both have their disadvantages for every business, and retailers and suppliers should avoid them to retain the feasibility of their business operations.

The EOQ is usually among several approaches to manage inventory that retailers can use within an inventory control or ERP solution. Other methods comprise Reorder Points, Period of Supply, and others. 

Additionally, the EOQ serves to keep storage and holding costs to a minimum, benefits the company in minimizing wastage, and allows for cash flow planning by keeping the cost of inventory at a bare minimum. It also helps figure out the precise reordering level, i.e., the level that is just appropriate to place an order for more inventory.

[**_Related Reading: Replenishment 101: What is Replenishment?_**](https://supplierwiki.supplypike.com/articles/replenishment-101-what-is-replenishment/)

**Considerations when Calculating EOQ**
---------------------------------------

According to most demand planners or supply chain managers, getting the optimum EOQ for every item in stock seems to be the ideal way to administer inventory. However, retailers need to consider several factors before beginning to define the EOQ for each product.

### **Purchasing cycles**

Let us assume that the EOQ establishes that a warehouse would be placing orders for toys at an annual frequency of 17 times – more than once a month. Though this number may be ideal for keeping costs at a minimum, do stores and the workforce have the capacity to manage the high frequency of orders and supplies? Can retailers place more frequent orders with suppliers? Will it cause clashes in the supply chain? Practicability is a challenge with the EOQ.

### **On-hand and in-pipe**

It could be that the supplier’s demand has fluctuated, or perhaps the need for a specific product is different for every store. In any case, reordering items based on the EOQ alone without giving careful thought might result in a poor distribution of resources if the products are already “[**in-pipe**](https://supplierwiki.supplypike.com/articles/replenishment-201-monitoring-store-level-inventory/#in-pipe).” 

This is a scenario where redistributing those products to the store with the most demand is a more lucrative way to use resources instead of reordering. It also removes those products from shelves where they are not in much demand, making room for higher value items.

### **Lower demand versus capacity loss**

Placing orders for the EOQ for every product in a supplier’s warehouse, irrespective of their value to sales, can cause a deficiency in higher-value products. Is valuable space being squandered on goods that do not always have to be in stock? Giving priority to higher demand and higher-valued products can ensure that customer service levels are superior. [**ABC analysis**](https://supplierwiki.supplypike.com/articles/what-is-abc-analysis/) makes it possible to define the highest-value items and to prioritize SKUs. Additionally, suppliers should assess the optimal warehouse set-up to keep high-demand products within reach of packers and collectors.

### **Minimum order quantity**

With more frequent smaller batch orders, inventory managers get higher flexibility to match purchasing behavior with actual customer demand. However, many suppliers must have a [**minimum order quantity (MOQ)**](https://www.lokad.com/minimum-order-quantity-moq) before shipping an order. In case of the receipt of orders without a MOQ, the suppliers’ profit margins per unit dip low, and shipping costs increase. 

Even though this isn’t a comprehensive list of what to take into account while deciding EOQ and placing orders with suppliers, these points indicate that to manage inventory accurately, EOQ alone is insufficient.

**Changes in the EOQ**
----------------------

In a scenario where both the cost per commodity and the demand for each commodity are constant, and the number of commodities is small, it would be effortless to find and maintain the EOQ. 

However, while the commodities traverse the product lifecycle and demand changes, calculating the EOQ can encompass hundreds of SKUs. In this case, finding and managing the EOQ becomes a very tedious task.

As demand per year is an essential part of the EOQ, it becomes even more challenging to calculate the EOQ with fluctuating products’ market. The EOQ for each item must be re-established consistently to absorb alterations. 

To account for this situation, it is not likely that the demand for a product is constant for the entire year. Retailers and RMs also need to take seasonal demand into account. Likewise, the market for an item may go down during other parts of the year. If a large number of these items in stock during times of low demand, the holding costs increase, and low-demand products take up valuable inventory space.

[**_Related Reading: Demand Planning_**](https://supplierwiki.supplypike.com/articles/demand-planning/)

**Economic Order Quantity techniques**
--------------------------------------

To have the right amount of inventory in stores, retailers must receive the optimum quantity at the designated time to properly maintain stock, corresponding to the product’s depreciation and costs with the EOQ. The EOQ formula calculates the optimal number of units to order to make the transaction the most economical and keep the number of units ideal.

Calculating EOQ starts with the annual demand of the product, per order cost, and the cost of holding each unit of inventory. The circumstances that frame the EOQ formula are:

*   constant and known lead times,
*   constant and known demand for the product,
*   no quantity discounts,
*   no stock-outs and shortages, and
*   an assumption of prompt receipt [**(On Time, In Full)**](https://supplierwiki.supplypike.com/articles/how-to-explain-otif-to-your-5-year-old/)**.**

### **The ad hoc EOQ formula**

There are many vital elements of the ad hoc EOQ formula: holding cost, ordering cost, annual ordering cost, annual holding cost, and total cost.

#### **Holding cost**

The cost of keeping inventory in storage is the holding cost. Calculate this cost to find whether a product should remain in a store’s inventory or if the store should send it to another store – under the assumption that demand is constant.

**H = I \* C**

Where:

H = Holding cost

I = Carrying cost

C = Unit cost

In this case, demand is constant, inventory will reduce with use until it reaches zero, and the retailer will order the item again.

#### **Ordering cost**

When a retailer places an order requesting inventory with the supplier, there is an ordering cost. To calculate the number of orders, divide the quantity demanded per year by the volume of each order.

**N = D / Q**

Where:

N = Number of orders

D = Quantity demanded per year

Q = Volume per order

#### **Annual ordering cost**

Annual ordering cost is the cost of ordering inventory over the course of a year. To calculate the yearly order cost, multiply the number of orders by the ordering costs.

**AO = (D \* S) / Q**

Where:

AO = Annual ordering cost

D = Quantity demanded per year

S = Ordering cost

Q = Volume per order

#### **Annual holding cost**

Annual holding cost is the sum product of volume per order and holding cost. To calculate the annual holding cost, multiply the volume per order by the holding cost, and divide by two.

**AH = (Q \* H) / 2**

Where:

AH = Annual holding cost

Q = Volume per order

H = Holding cost

#### **Total cost**

The total of the holding costs and the ordering costs is the per year total cost of an order. Add the annual ordering cost and yearly holding cost to obtain the total cost.

Or,

**Total cost = \[ (D \* S) / Q \] + \[ (Q \* H) / 2 \]**

To find the ad hoc EOQ, differentiate the total cost by the volume per order:

![Ad hoc EOQ formula](https://lh5.googleusercontent.com/GhqZrp5nHry-YIloniqWgkgfuCwhMM-2byCVhCf460QKxdTVVrwOz1yHFJ3iUBiYwzViFfw34PXwmNaGsDb-d5_kEmRosKFW6e-irW9P4EyZN2LEF5cwB2MdZuCAyw)

_Ad hoc EOQ formula_

### **The principle of Wilson’s Formula**

The inventor of Wilson’s Formula actually was not Mr. Wilson but Ford Whitman Harris, who framed the mathematical principle. Then came Mr. R. H. Wilson, who was an industrial consultant and a specialist in inventory management. He used and implemented this formula to optimize inventory.

Wilson’s Formula calculates the EOQ by calculating the quantity of inventory directly proportional to its cost (more the inventory, higher the expenditure). 

If there is no stock, there are no holding costs. However, the more inventory there is, the higher the expenses of possessing it. At the same time, the higher the number of orders, the higher number of incurred costs. For instance, if a retailer sells 1,000 items, rather than creating 1,000 orders of the item, it will be more profitable to place one order for 1,000 items.

Wilson’s Formula has three benchmarks:

1.  Demand or consumption (D)
2.  Order placement cost (CO)
3.  Stock ownership cost (SC)

To calculate Wilson’s Formula, take the square root of twice the demand multiplied by order placement cost (or ordering cost) divided by the stock ownership cost (or holding cost).

![Wilson’s Formula for EOQ](https://lh4.googleusercontent.com/SAw0I9XM3_gwEVRmbbP3o0J07VsF5h7eobDCT22y3v0wuHvSf_JMdgkkhNdlL0TdsF-9c2MSOnCy9V8GwUnlp5vaXQSLeSb8O7Zd2QHUK7HUrskw9pzdp6CIiNP8DA)

_Wilson’s Formula for EOQ_

In the case of retail or wholesale, the ad hoc EOQ formula (above, utilizing the total cost) is the most appropriate and lucrative compared to the Wilson formula. As for manufacturers, it can depend on the situation, especially if the order calls for a new production. If so, there is a chance of substantial ordering costs (production configuration) and minimum or zero benefits in marginal unit cost subsequently. These are the circumstances when the Wilson Formula is better suited.

**Methodologies for inventory management**
------------------------------------------

Retailers planning to build the reordering process exclusively according to the EOQ should ascertain that: 

*   they are consistently tracking and upgrading the EOQ of all products,
*   warehouses and suppliers can receive recurrent orders, and
*   they achieve MOQ for any orders with the most profitable goods given high priority.

Manually computation of EOQ for possibly thousands of SKUs takes a great deal of time. It also is more vulnerable to refilling errors. Additionally, running inventory management completely according to EOQ can cause valuable opportunities to fall through the cracks and create stock issues. To optimize inventory management, continuously track the quantities ordered and reorder levels, as well as frequencies, demand fluctuations, emergency supply levels, supplier waiting periods, order timelines, and more.

Inventory optimization ensures that suppliers and retailers trim inventory to release capital and maximize margins while retaining superior service quality. Small and medium firms use this technique to establish themselves in their industry. However, it is crucial to monitor and analyze all factors that form inventory optimization consistently. The best way to do so is to automate this process.

Inventory optimization helps bring down inventory levels, meet MOQ at the time of placing orders with suppliers, reorder the exact quantities to fill the demand with lead time explained, and perform timely deliveries to customers, among other things. 

In the end, the EOQ is the mathematics of deciding the quantity of material to order from suppliers and hold back inventory considering specific aspects such as demand, production, and inventory cost. In short, it’s the perfect quantity of an item that a company must purchase at a given date.

[![Analysis the way you need it](https://lh5.googleusercontent.com/WR5v7aDPAa-pZtPSlVoMKqfqY0IMU354kMp6hJJQYK9A3rdPbhTNcR9DGhmdVIZ8gIumoKawpJsQTpA9dINW31l3hpL2UKIKgRk2rRKL3o7JsNTL3bIeXPP82Kp3Ug)](https://www.supplypike.com/)

What is the Economic Order Quantity (EOQ)?

Learn about:

*   Measuring on-shelf availability
*   New technologies for measuring OSA

* * *

Shoppers visit stores to get the products they require. If these products are not available on the shelves, 12% of [surveyed consumers](https://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2014/aug/2012_CEU_POV_Getting%20Availability%20Right_ENG.pdf) stated they would make a beeline for a competitor’s product to cover their needs, while 32% said they would leave without buying anything. In either case, it’s a loss for all those involved: the supplier, the retailer, and the consumer. 

Scarce on-shelf availability (OSA) and consistent out-of-stock (OOS) events greatly influence retail behavior. Conventional approaches of OSA management are no match for current technology that can report live tracking of shelf space.

**Why do current measurement methods fail?**
--------------------------------------------

Not having visibility into on-shelf activities can cause problems with measuring OSA. The modern measurement methods are just not successful in providing real-time and comprehensive data critical for quality decision-making and remedial measures around OSA.

1.  **Manually checking inventory** is the baseline method for maintaining OSA. However, physically counting all items in stock and comparing that number to what is in the database is costly and not easy to measure. Also, manual store checks are highly vulnerable to human-caused error, take considerable time, and fail to scale sales loss.  
      
    Physical audits do not differentiate between OOS situations caused by, say, theft versus high sales. Retailers must often perform these inventory counts, typically during restocking, and compare OOS rates with loss prevention reports and point-of-sale data.
2.  **Inventory systems** make it possible to track sales promptly. Inside Walmart’s [**Retail Link**](https://supplierwiki.supplypike.com/articles/retail-link-how-does-it-help/), suppliers can view how many units they have on-hand in-store, which should help determine if an item is out of stock. However, this analysis can lead to a phenomenon known as [**phantom inventory**](https://supplierwiki.supplypike.com/articles/phantom-inventory-is-haunting-your-supply-chain/), where the inventory system will say that there are items in stock. Yet, a SKU will go weeks on end without being in a single store. Phantom inventory is typically a good indication that an item is out of stock, and suppliers need to call the store manager to check to see if an item is, in fact, on the shelves or in the back by doing a manual check.  
      
    Inventory systems’ failure to provide on-hand precision continues to be a big challenge. [One study by the Auburn University RFID Lab](https://cybra.com/average-retailer-inventory-accuracy/) showed that the average U.S. inventory accuracy rate is only 60%. Most of this is due to inaccurate tracking of sold items, theft, and untracked breakage.
3.  **Point-of-sale (POS) data** assesses OOS rates according to historic sales. This data doesn’t always work for SKUs that are slow to sell, such as non-consumables like furniture. The accuracy level of POS data is similar to manual audits, at times, even lower.  
      
    Additionally, suppliers can only assess POS data at a consolidated scale, and not individual store counts. This assessment does not allow evaluation at a granular level.

Because all of these conventional techniques have their shortcomings, suppliers and retailers need to leave aside proxy sources and look for better avenues for monitoring real-time store scenarios.

**New technologies reduce out-of-stocks**
-----------------------------------------

With image recognition (IR), suppliers and retailers can access specific shelf data digitally by scanning through the store. IR solutions capture the images of products on retail shelves in real-time. These images then undergo processing and analyses resulting in significant in-depth knowledge of OOS rates, product availability, stock activities, and conformity. This technique provides unhindered access to in-the-moment data for every SKU in the store. This method offers suppliers advance notice of an OOS event or when there is a possibility of a compliance issue.

Correctly determining and measuring OSA by acquiring a shopper’s perspective of the shelf is essential for maintaining sales. [A study done by Quri](https://pointofsale.com/quri-reveals-keys-to-merchandising-success-for-big-brands-ahead-of-labor-day/) found that OSA levels lowered by up to 50 percentage points just after Memorial Day and Fourth of July store promotions. Moreover, according to the data, “inadequate monitoring strategies” sunk OSA levels lower than the recommended 98% rate by as much as 20 percentage points. 

A 2% fall in OSA, by and large, creates a 1% loss of sales, according to [PointOfSale.com](https://pointofsale.com/). Maintaining healthy levels of OSA is a must, especially for seasonal items, to better understand the return-on-investment for these products during their peak. With timely reporting indicating what shoppers see on the shelf, prominent retailers are increasing their OSA levels on a per-store basis by fixing routine stocking problems and evaluating forecasting issues.

Retailers such as Target and Walmart have a better chance of implementing brand-specific promotion plans to predict ROI better. Brands with more in-store visibility generally see greater profits from promotions.

The first step to making the most from each shelf’s value in every store is ensuring over 98% on-shelf-availability at all times. Retailers and suppliers may accomplish this goal through image recognition technology in conjunction with physical store audits, inventory systems, and point-of-sale data.

**Predict out-of-stocks accurately**
------------------------------------

[**Retail Intelligence**](https://www.supplypike.com/analytics) by SupplyPike allows you to predict out-of-stocks at individual stores by analyzing your on-hand inventory daily. View your weeks of supply, store on hand, store on order, and store in transit. Get up-to-the-minute instock percentages. View maps showing locations of low stocks.

![Retail Intelligence - Out of Stock Predictor Map](https://lh6.googleusercontent.com/_lQfNSeAjioZO-W9Eio0Wq-MVitICeRWa6x7rZmUx2DAK76wTNBPLsFhNhGJD23j7ctE5QR0rKPzodne6VO10YjkF7OpFoEdkxTaxMbl2v5y6Oiy1K_P2bGzgzf1IQ)

Re_tail Intelligence – Out of Stock Predictor Map_

Get started today with your [**free 14-day trial**](https://www.supplypike.com/analytics)!

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Measuring On-Shelf Availability

Learn about:

*   What market segmentation is
*   The different types of segmentation
*   How to implement segmentation

* * *

Have you ever wondered how to target your market with ad campaigns better? Perhaps you have a broad, diverse market but **lower-than-average sales**. Or maybe you are looking for a way to **generate more leads** with a truly effective marketing campaign.

Either way, **segmentation analysis** can help. This type of **retail analytics** is essentially studying the customers and consumers in **specific categories**. To understand and use segmentation analysis, we need to start with **market segmentation**.

What is market segmentation?
----------------------------

**Market segmentation** is the art of understanding the target market and is an essential part of successful sales. As suppliers understand their **ideal buyer persona**, they can use more specific advertising methods, create more leads, and ensure they become customers.

Once the supplier has sufficient data on who the target market is – whether through surveys or tools like [**Google Analytics**](https://analytics.google.com/analytics/web/provision/#/provision) – the supplier can use market segmentation to prepare future marketing strategies. 

Market segmentation is simply dividing – or **segmenting** – the intended market into smaller, more specific groups so that suppliers can design targeting marketing plans.

The different types of marketing segmentation
---------------------------------------------

The ways to categorize target markets are endless – vendors can create groups as broad or as specific as they wish. However, each potential category generally falls within one of **four main types of market segmentation**. 

*   Demographic
*   Geographic
*   Psychographic
*   Behavioral

### Demographic

One of the most popular segments is **market demographics**. Who are the customers? How old are they? What is their yearly income?

Numerous vendors and companies use this line of questioning to divide their market into groups that generally have **similar buying traits**. 

For example, one demographic subcategory is **age**. Customers that fall in the 20-30 age range have different buying habits than people in the 40-50 age range. Suppliers may benefit from an online or social media ad targeting younger buyers, while a physical newspaper ad or more personable communication may draw in older buyers. 

Some standard market segments for retail suppliers include:

*   Age
*   Income
*   Family size
*   Education
*   Gender
*   Occupation

[**_Related Reading: Analyzing Store of the Community Demographics_**](https://supplierwiki.supplypike.com/articles/analyzing-store-of-the-community-demographics/)

### Geographic

Another way to categorize the consumer is by **geographic location**. Whether suppliers consider various countries, cities, or regions, the people in these areas have different needs to think of in marketing campaigns.

For example, if the supplier sells clothing, it would need to consider the weather in various locations. People living in seasonal areas will be interested in goods that can last through weather changes, while those living in warmer climates may need products that can adapt to the heat. 

Plus, people living in rural, suburban, and urban areas all have **unique needs and buying habits**. These marketing segments also have different channels or media available. For example, outdoor signage in urban areas ensures high visibility, while rural regions will typically see fewer billboards. 

### Psychographic

**Psychographic segments** don’t have any specific metrics that to follow. Instead, they center around understanding **the customer’s personality**. 

Suppliers should **do extensive research** about their target market, including exploring the following areas:

*   Lifestyle
*   Buying priorities
*   Interests
*   Purchasing motivation
*   Personality
*   Beliefs
*   Values

For B2C businesses, it may be more challenging to create psychographic segments. However, suppliers can learn to **target multiple areas** or create a customer survey to understand their market more.

### Behavioral

The **behavioral segments** require in-depth research to create since they depend on the supplier’s customers’ **purchasing habits** within their brand. 

Suppliers need to look at the data concerning **repeat buying patterns**, **product ratings**, and **brand interaction**. For example, a supplier may want to create a target segment for people who made a purchase one year ago and have not repurchased. 

[**_Related Reading: How Do I Do Segmentation Analysis in Retail Link?_**](https://supplierwiki.supplypike.com/articles/how-do-i-do-segmentation-analysis-in-retail-link/)

Two main types of retail markets
--------------------------------

While there are four types of market segmentation, retail vendors need to consider the **types of retail markets** specific to their industry. 

As vendors choose which type of segmentation to use, they need to keep in mind what target market they have: **organized** or **unorganized retail**. Then, they can utilize segmentation within that particular retail market to best suit their needs.

### Organized retail

**Organized retail** refers to stores with a large scale of operations. They usually have chains of stores all across the nation – or even the globe. 

The merchandise sold in these large stores usually comes **directly from the producer or manufacturer**. Plus, each location often has an impressive variety of products, not focusing on just one brand or item category. 

Since the stores in organized retail are so large, the companies usually have professional supply chain management and distribution systems. Some common examples include **Walmart**, **The Home Depot**, and **Kroger**. 

### Unorganized retail

**Unorganized retail** consists of smaller, local stores. Most stores in this market have only one to three locations, all in the same area. 

Because the physical locations are smaller, these stores’ products usually focus on one category, whether that be hardware products or children’s clothing. As such, these retailers generally have **wholesale suppliers**. 

Also, unorganized retail usually doesn’t need complex distribution chains or management systems. They often have a sole owner or are family-run businesses. To find an example of unorganized retail, think of **small, locally-owned stores** in the area.

Why you should use segmentation analysis in retail
--------------------------------------------------

Once suppliers create their segments, they need to take some time analyzing them. If suppliers keep accurate records, they can see and learn a lot about their marketing strategies, products, and branding. 

Suppliers must use the information they find in the segmentation analysis to improve **product development** and **lead generation**.

### Product development

The more a supplier knows about its customers, the more it can learn about its products’ success. Suppliers can see which products various demographics prefer, what goods people are interested in, and which items specific segments are likely to buy again. 

Suppliers can take all the information from their segments and apply that to developing new products – or improve upon the ones they already have. 

### Lead generation

As suppliers understand their market better, they can create more specific ads and campaigns. Instead of just creating promotions that advertise the overall product, vendors can target the particular needs of each segment. 

For example, by understanding the audience’s interests and needs, vendors can incorporate them into an ad. The more effective the campaigning approach is, the more it will generate leads and, consequently, conversions. 

How to implement segmentation analysis in retail
------------------------------------------------

To get started improving upon sales and marketing strategies, suppliers should just follow these steps:

1.  **Research:** Suppliers must spend time **analyzing the data and statistics** surrounding their target audience. If they already have the information available, they need to dissect it. If they are just starting, they’ll need to set up methods to track the audience’s **buying habits** and **demographics**. 
2.  **Create segments:** Suppliers and vendors should use the data they collected to **pinpoint potential successful segments**. Perhaps a supplier wants to target buyers looking for holiday deals or maybe want to create campaigns for customers who value efficiency. Either way, suppliers should **mark their potential segments** and get working on ads and campaigns. 
3.  **Test the segments:** Suppliers should then send out ads, campaigns, and marketing material that targets each segment. They’ll need to **analyze the interaction with each ad** and the percent of leads generated. Next, they must **compare these results with previous campaigns** and see if the new segmented marketing technique worked. If not, they should create new segments and do the same.

Once you start implementing segments into your marketing strategy, you’ll begin to see considerable changes in your lead generation and conversions. Take your retail business to the next level and begin segmentation analysis!

Study your store analytics
--------------------------

With the help of SupplyPike’s [**Retail Intelligence**](https://www.supplypike.com/analytics) software, you can instantly see which items are doing well in what stores. Use the Quartile Report to see how well certain products, categories, or [**finelines**](https://supplierwiki.supplypike.com/articles/what-is-a-fineline/) are doing in individual stores or stores within an area.

![SupplyPike Retail Intelligence – Quartile Report for One Product](https://lh4.googleusercontent.com/H5MJHeKUgYSG6EzAUTx1aQ4U2gxzsLbQgiouSdo37lT42qO_NxyNf8Sr7rb1fg8iNrAZ5rdLc-yBarqJe4-lYxINtXpKatbMlmvVd0avxaTY3VQYZva48vA6I2yREYvIutWAesiW)

SupplyPike Retail Intelligence – Quartile Report for One Product

[**Take a tour today**](https://www.supplypike.com/analytics) and see your data in action!

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What Is Segmentation Analysis in Retail?

Learn about:

*   The basics of segmentation analysis
*   How to perform segmentation analysis in Retail Link
*   Analyzing the Retail Link Excel report

* * *

Imagine this scenario. You are reviewing your supply chain data and notice that an item has low instock levels and high weeks of supply. How can this be possible? How can an item be out of stock and overstocked at the same time?

You can find the answer at the store level with a “**segmentation analysis**” that can quickly identify the details of such an anomaly. 

The basics of segmentation analysis
-----------------------------------

Think of a segmentation analysis as a compromise between analyzing an item at the item-level versus store-level. Instead, this analysis divides your store data into distinct groups or segments. A typical scenario is to divide stores into groups of ten percent each. By analyzing each segment, you can identify microtrends much more quickly than drilling down to individual store-level.

Segmentation analysis is ideal for determining groups of stores that are outperforming the average, underperforming stores, and any potential inventory imbalances. Once you’ve identified these segments, you can capitalize or improve upon each segment’s performance.

As you might have guessed, we need to gather some store-level data from Retail Link to group stores into segments. The metrics we will be looking at in this example are sales, store inventory, and forecast data. However, you can use this same analysis to analyze other metrics like sell-thru, markdowns, customer returns, or any metrics at the store-level.

Building the segmentation analysis in Decision Support
------------------------------------------------------

Below are the screenshots detailing the necessary steps to build the store-level report. Keep in mind that you must perform this analysis on one item at a time. This is partly due to the sheer volume of data you are gathering and because you are typically doing a segmentation analysis based on some insight gained for a specific item at the item-level.

From the Decision Support homepage in Retail Link, select **Sales and Margin** from the list of Report Templates. Open the template called **Store Detail**. The resulting template should look like the following screenshot.

![Retail Link – Store Detail report template](https://lh4.googleusercontent.com/Pq3kmRm1luGXXNFQgelGFPBCpheSdUsLuSyeUPghCPJXykrgSoIWuv0JezYLtg4LfTrKH_dxP9OrX2nr94e6OrLAAh0Lvvdc3UWpLfCZ2pcVqTC2t5l7IUCgOeIUW7V4SwK983VU)

_Retail Link – Store Detail report template_

**Columns Tab** – Select the following report columns:

*   Prime Item Nbr
*   Prime Item Desc
*   Store Nbr
*   City
*   State
*   POS Qty
*   Curr Str On Hand Qty
*   _From the Store Weekly Forecast tab:_
    *   Select the future 17 weeks

![Retail Link – Store Detail Columns tab](https://lh4.googleusercontent.com/L7THty62Ho9qAZ8inwIpMyQ-iJPnawJZB2D3k6iaVJrR6vVj5FP5Ww94E-6w3gr10_gdxsYp7Rvd7oEdS18tsMpux7fJG4X1I7rHJYfkjNO7zxD9T0bgeDaNaU7eFgT6b8tUJfAc)

_Retail Link – Store Detail Columns tab_

**Items Tab** – From the left menu, select **Filters**. In the list of folders, scroll down and open the folder titled “**Item Nbr**.” In the input box on the right, enter the 9-digit item number you are investigating and click the **AND** button.

![](https://lh4.googleusercontent.com/QVf-HkLboRygh9xtAav1df0cCj_biMkiGLdmKelTELisveka_srWkoIbAXPH-3W4UNh_QaJ-rtkJzojMXwaPKNGS0H7LLloigAkSbUnuWqLgRADNDhiwDIBHOdCzCcNqRV_C_wJZ)

_Retail Link – Store Detail Items tab_

**Locations Tab** – Select **Stores** from the left menu, then open the folder names “**Store Type Breakdown**” and click “**All Stores (Without Dotcom)**.”

![Retail Link – Store Detail Locations tab](https://lh3.googleusercontent.com/RuTIS5RuQE3f-VJlqiU2nMmkpyNP-lTz0QEfQn0s7Mwwg23KtIdAunbgDtIeu_AAM2pbKiBU9nUHkqUitc7Ns7gnpw0_w30wUeEkB7xui2RCeAmcm_4q9-OaHGQ0BBDIpxIg0AxD)

_Retail Link – Store Detail Locations tab_

**Times Tab** – From the left menu, select **Time Range 1**. Open the folder titled “**By Fuzzy Dates**,” then click on “**Time Range 1 Last 4 Weeks**”. 

![Retail Link – Store Detail Times tab](https://lh5.googleusercontent.com/0lHQUa4P6xIkdYaFv3sT58xZZ9VukSzxEeP-gL7Hj87T0Y1FnnI8-tf0zPTbpJdCOx0NS3AYE7cplj3okgrsqmmI0w44Ssg1TMyJH_Gw6FgSaTP0iqAxnVeDtvXGsoXIb3H0rbrH)

_Retail Link – Store Detail Times tab_

**Submit Tab** – Like all Decision Support report templates, the Submit tab is where you can title, name, schedule, and save the segmentation analysis. By saving this template, you can always return to My Reports and simply change the item number to run the same analysis for a different Walmart item.

![Retail Link – Store Detail Submit tab](https://lh5.googleusercontent.com/zZGC1jSAKCvCHiHaUIiCk7HA8Bo9sa4U-Sa8L_f-m4_Q0Frx9EwpncAhmOfuODjH303oTNkTuGwuwyIJxITXYdR5fc34Ye6na9ZQV6LbQt2HahR3mj3C0c03EHPRkzjzYnVl_Abv)

_Retail Link – Store Detail Submit tab_

Segmentation analysis results
-----------------------------

A partial screenshot of the results is below. The report lists each store along with the chosen metrics: sales, inventory, and forecast. However, this data is by store, not by segment. We will still need to do some data reduction to see this data by segment.

![Retail Link – Segmentation Analysis in Excel](https://lh3.googleusercontent.com/wsVFN8CU_34LPmJEoDODbLjVfdkAesGW_oJB0mTpMMPAOHfkbGNZ71V7_2pWlnlfhi581EsaU_77NDdBsw5BkwW4rF2kTcwtq_HAYfnV-K0zVcUjeS_64ingzp6u2iPnDQODujp-)

_Retail Link – Segmentation Analysis in Excel_

There are multiple data reduction techniques to accomplish the same result. We aren’t going to concentrate on specific Excel formulas in this lesson. Instead, we will discuss the conceptual data reduction and what each step accomplishes.

In short, the ultimate goal of the segmentation analysis is to group this store-level data into distinct segments. Typically, each segment contains ten percent of the total store count. To accomplish this, we will need to add a few formulas and do some sorting, subtotaling, and a few other simple Excel tasks.

### Step 1: Sort by point-of-sale (POS) quantity

By sorting this entire table by point-of-sale (POS) quantity in descending order, we will see the highest-selling stores first and lowest-selling stores last. Simply highlight the whole table and sort by the column “**POS Qty**” in descending order.

![Excel – Sort by POS Qty in descending order](https://lh5.googleusercontent.com/MnqUBo9YdKoHaLUSswL1TbOIAw2EAFxH-Hy1gtG0jylLR75-JBm3TIcfM6WMqit4BNeLIf1r_3x-wKUSz0d8zW0XFGBmkayRqYMdvw1jcX3QAmdpu9QkU-RxXPTmtaZPFBNkOQDo)

_Excel – Sort by POS Qty in descending order_

### Step 2: Calculate the total store count and create segments

To determine how many stores will be in each segment, we need to find the total number of stores into which this item is selling. Using the **COUNT()** function in Excel, add a field to determine the total store count for this item.

![Excel – Calculate the total number of stores in this dataset](https://lh5.googleusercontent.com/DDIhDnZGdVpoksxDsnBnf8eEBghziVtfdFHUV_W5W1WcHzm5rxArMnz3ca9jV6N_rfjh11W9Gwh-c_2FG6ti933kECKmki2d3e7CuqXR3KppccRL7mtug6L8fCSItdeSaqbG_AYt)

_Excel – Calculate the total number of stores in this dataset_

In this example, our item is selling in 3,209 stores. Since we are looking to divide this total store count into ten distinct segments, we can determine that each segment will have roughly 321 stores. 

We have sorted this dataset by top-to-bottom selling stores, so the first 321 stores in this dataset represent the top-selling 10% of all stores into which this item sells. Similarly, the following 321 stores would represent the 10-20% store sales ranking.

By subtotaling each segment, we can determine the total sales, total inventory, and total forecast for each segment. There are many ways to accomplish this in Excel, so we won’t get into each method’s specifics.

Below is a screenshot of the dataset, divided into ten segments:

![Excel – Group data by segments](https://lh6.googleusercontent.com/VEHLeEF4QujXwknU0CMHf_i4L08G8b-fINgNyJQVm6T9LEngeRNGtpYOQT2VVEeErOY-fYiTwosh5f8f2UNlxKSv9gv5Y-EVGVbfx0vGlXxag3nA0ORaETuQuMOPbvfPoz5Ki-cp)

_Excel – Group data by segments_

You might have noticed the highlighted columns that we added to the dataset. The purpose of these columns is to see each segment’s contribution to the total for the various metrics. 

For example, Segment 1, which represents the **top** 10% of store sales, makes up 26.6% of this item’s total sales. However, it only has 11.8% of the total inventory, and the forecast is 29% under in the past four weeks. 

Conversely, Segment 10, which represents the **bottom** ten percent of store sales, makes up roughly 0% of store sales. However, this segment has 7.4% of the total store inventory and forecast that is 100% over. 

This asymmetrical distribution suggests a classic inventory imbalance. Remember the original scenario where this item had low instock but high weeks of supply at item level? Here is how this data shows why:

*   The top segment makes up **26% of store sales** but only has **11% of the total inventory**. This discrepancy would likely explain the low instocks at the item level. 
*   The bottom segment has **0% of the sales** but **7% of the inventory**. This is dead inventory and accounts for the high weeks of supply at the item level.

If we were able to work with the Replenishment Manager on forecast adjustments, we could likely align the inventory distribution to correlate with the sales distribution by segment. In other words, Segment 1 should have 26% of totals sales and roughly the same percentage of the total store inventory. 

In summary
----------

There are many different ways to perform the data reduction in Excel. Just keep in mind the end goal, which is to see each segment’s contribution to the total and hopefully identify both root-cause and growth opportunities.

Ditch the spreadsheets
----------------------

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Replenishment Boot Camp

Overview

Replenishment 101: The Basics

Upping Your Instock Game

What To Do with Out-of-Stocks

Forecasting and Planning

Measuring Replenishment

The SupplyPike Team

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