Morrisons has said today that it is hoping for a bumper Christmas despite a gloomy outlook on the economy. Having worked with many retailers on inventory control projects, will they run out of stock leaving empty shelves, lost sales and unhappy customers? Let's quickly look at the impact of this and how to avoid getting into a situation where you run out of stock, but do not overstock.
One of the top 3 supermarkets came to me 2 years ago with the following statements:
1. "We spend £1 billion per year in staff costs to replenish our shelves".
2. "We often have goods arrive that need to be on the chilled shelves within a certain time, otherwise we cannot sell it".
3. "Our replenishment team are constantly pulled to help on the tills in order to hit metrics of maximum queue times, but they are coming out of my budget".
4. "Where we have run out of stock of an item such as Corn Flakes on the shelf in one store for 1 hour peak time, this can cost us thousands in lost sales. You see how that multiplies across our estate of stores!".
With this all said, they asked can you help increase our sales by helping us not run out of stock, but not over stock, and ideally reduce the £1 billion cost at the same time. With the surge in Internet shopping, it is even easier to 'go next door' where the products are in stock. Below are some of the starting steps recommended to prevent the out of stocks:
1. The replenishment team are constantly filling the shelves as well as scanning items that need replenishing. This is typically performed with a handheld device, such as an Motorola MC75 or MC3000. Scan item barcode, scan location (if required) and enter quantity (if required). The 'replenishers' constantly have live data of what needs replenishing from back of store.
2. This assumes that they have not run out of stock back of store. The complex systems that exist to replenish from distribution centre (DC) to store is another challenge. This tends to work reasonably well. It is the time it takes to check goods into stock when delivered, making it available for 'replenishers' to move onto the retail shop floor. Companies like Marks & Spencer use RFID (radio frequency identification) for quick check in and therefore quicker replenishment to shop floor. This is good way to speed up delivery check in as well as what companies like Costcutter do with advanced shipping notices to stores from DC so a simple scan on arrival makes all this stock available.
3. Do not let your replenishment team be pulled into other areas to satisfy other metrics like queue time, because a people counting system has said that cashier 23 queue needs busting! Ikea is a case in point. Now they run out of stock less often, but the queues still exist as they realise people prefer to have shelves stocked up as they have taken the time to travel to store even if they have to wait a bit to pay for it.
Reality is, bumper trading periods are great for the retailer, but they tend to lose so much in lost sales as they have run out of stock. When you shop at Morrisons, have a think about this when walking the aisles.