he average supermarket has tens of thousands of SKUs. But shoppers are most likely
to remember the ones that aren’t there.
Out-of-stocks are among the most frustrating—and alienating—experiences a grocery customer
can have. They’re surprisingly prevalent, averaging 8%,
according to a recent study by the Food Marketing Institute. Not finding the product they want, in the size they
want, is something that can sour a shopping trip—and, in
the extreme, drive shoppers to another store.
Ensuring that items are on the shelf when shoppers want
them, while keeping inventory manageable, is one of the
most daunting challenges in grocery. It requires keeping
track not only of what’s in the store but also what’s available
up the supply chain. Proper forecasting requires accurate
data about sales trends measured against a host of factors,
including price, promotions, seasonality and much more.
“Supply chain managers are responsible for customer
satisfaction and value, which includes both quantity and
price, so they need to track sales, inventory and, ulti-
mately, cost to serve,” says Patty McDonald, global solu-
tion marketing director for the retail software division of
Dallas-based Symphony RetailAI.
Software applications in both stores and the facilities
that supply them can help optimize product flow. The central apps are warehouse management systems ( WMS) for
warehouses and distribution centers and inventory management systems (IMS) for stores.
These systems often are parts, or modules, of more comprehensive ones. Many enterprise resource planning systems have WMS modules, especially for warehouses owned
by food processing companies. On the store level, inventory
management often is a part of point-of-sale (POS) systems,
allowing inventory to be tracked in near real time.
When it comes to warehouses and distribution centers
that are owned by grocery chains—as opposed to food
processors, wholesalers or third parties—they’re more
likely to use an in-house WMS, says Phil Schaafsma,
owner of Wyoming, Mich.-based D.L. Neu & Associates,
an integration firm for warehouse automation.
“A lot of grocers’ WMS are homegrown software that
they’re going to continue to use and update as needed to
add automation,” Schaafsma says.
But whether in-house or purchased, stand-alone or
module, WMS and IMS apps need connectivity. To optimize efficiency, warehouse and inventory management
systems have to be able to communicate up and down the
supply chain, with operations software, transportation
software, ordering systems and more.
The ideal would be to have orders generated and fulfilled
with as little human intervention as possible. That’s why
connectivity between the WMS and the IMS is important.
“The easiest would be [for the WMS] to work with the
POS system, which would delete inventory,” says Tom
Becker, CEO of St. Paul, Minn-based NorthStar Automation, a provider of WMS software mostly for distributors
and third-party logistics companies. “And then from there,
the system would know when to actually provide transfer or
fulfillment scenario to say, ‘Hey, the next time you’re going
to deliver product to this location, you’re getting near fulfillment levels based on what’s coming off the registers.’”
The more automated this process becomes, the easier
it will be for grocers to keep their stores properly stocked
on an ongoing basis.
“We strive to enable real-time data and better forecasts
from the edge, where the sales transactions occur,” says Bill
Kimler, inventory management and forecasting product
manager for NCR Corp., Atlanta. “These in turn have a ripple effect upstream to optimize inventory and production
levels for storage and manufacturing concerns.”
To Infinity and Beyond?
But there’s a danger in putting too much trust in auto-
Taking Stock of
Properly integrated, the right warehouse and inventory
management systems can help drive down out-of-stocks.
By Pan Demetrakakes
Average out-of-stocks in grocery
Operations & Supply Chain