PG Web Extra: Experts Weigh in on Out-of-Stocks

Unsaleable goods sometimes result in out-of-stocks, a persistent challenge that continues to be a work in progress for the industry. Progressive Grocer called on a few experts to get their thoughts on the latest strategies to improve on-shelf availability.

Michael Falck, president, U.S. of Atlanta-based Relex Solutions, in Atlanta, notes that out-of-stocks cost North American food retailers $37.9 billion in 2016, according to data from Franklin, Tenn.-based IHL. “Beyond lost revenue, out-of-stocks result in dissatisfied customers, which can lead to poor financial performance in the long run,” he notes. “From my perspective, on-shelf availability is critical to grocery retailers’ survival in today’s hypercompetitive environment. Making products available on the shelf for customers to purchase is the result of a complex chain of events. First, buyers must forecast and order accurately; then suppliers need to deliver the right quantities at the right time, and distribution ensures products reach store shelves. When an out-of-stock occurs, many retailers struggle to understand the root cause. If the cause is at the supplier or distribution level, it tends to get increased attention, as it impacts multiple stores. However, when the cause is at the store level, the effort to resolve it is often far less.”

He encourages retail executives to develop a comprehensive picture of the root causes of their out-of-stocks, and to use accurate day-level store forecasting, as well as promotional forecasting for cannibalization and halo effect, if they aren’t already doing so.

Ed Dupee, VP of demand chain management for Dayton, Ohio-based Teradata, describes some of the newest solutions to reduce out-of-stocks. “The latest developments we’re seeing include smart shelves, RFID beacons and chips, the use of POS-consumer demand data in forecasting for both regular turn and promotions, adjustments in store-level scheduling for continuous stocking, supply chain analytics, vendor collaboration and data sharing, and automated ordering based on consumer demand and inventory,” he says. “The cutting-edge companies are looking at multi-echelon, time-phased replenishment to tie the inventory and demand plans together for stores, DCs and suppliers.”

He also notes that retailers are reconfiguring their stores to handle logistics involved with buy-online/store-pickup models and are adding labor for in-store selection of online orders, additional stocking shifts, back-room selection areas, curbside pickup, and curbside pickup order staging. Meanwhile, improved statistical algorithms are being used to drive their forecasting and replenishment tools.

Mike Anthony, a consumer marketing and shopper marketing consultant, speaker and writer who serves as CEO of Engage, notes that on-shelf availability is clearly a “global issue,” as evidenced in his travels and observations around the world. As a marketing expert, he’s particularly concerned about the lost marketing impact from out-of-stocks, as well as the negative shopping experience felt by consumers. In one of his recent blog posts, Anthony noted that slotting fees sometimes play a big part in overstocking product or carrying too many SKUs, or even overdoing promotions.

He urges retailers to “readdress the balance of listings” by providing the product range that shoppers want, rather than just carrying products to get a fee. He also advises them to reduce the level and frequency of deals.

Read the article on unsaleable goods in the July 2017 issue of PG.