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- On-shelf availability
- How do shoppers react to out-of-stocks (OOS)?
- Availability reduces through the chain
- The in-store challenge
- Collaborative working through ECR
- The ECR UK Availability Survey
- Next steps
On-shelf availability (OSA)
On-shelf availability is quite simply providing the desired product, in saleable condition, when and where the shopper wants it. In practice, it is a complicated process with many interdependent factors throughout the whole supply chain linking suppliers with retailer warehouses and stores. Ensuring good availability is an industry issue that affects retailers and manufacturers both large and small.
In this context, it is important to understand the elements in the modern supply chain to see how they must interact to ensure availability.
The modern supply chain
Source: IGD Research
How do shoppers react to out-of-stocks (OOS)?
ECR UK estimated that businesses lose the equivalent of £2.4 billion annually, or nearly 2 weeks’ expenditure for the average UK household*. This figure only takes into consideration the 9% of shoppers who do not purchase when faced with an out-of-stock (ECR Europe 2003), and so the true picture could therefore be even higher, because shoppers also react by buying products elsewhere, postponing purchases, buying alternative sizes or moving their entire basket elsewhere.
Availability reduces through the chain
Availability is seen to reduce as product moves through the supply chain. Even if manufacturers succeed in providing 97-98% availability to the retailer’s Distribution Centre (DC), and the DC’s get 95% delivered into the store, by the time the product actually reaches the shelf, it is possible for availability to have dropped to 90% on certain product lines.
“Hot spots” where availability can be particularly affected will include the following areas:
- Data accuracy – replenishment calculation errors, ordering errors, inventory mis-alignment at store and DC.
- Physical accuracy - delivery discrepancies to the retailer DC, pick discrepancies at the retailer DC, in-store execution.
The in-store challenge
In-store execution in particular is a key area of focus for retailers, as it is not uncommon for large quantities of stock to be left in the back-of-store storage areas. There are many reasons for this, but availability of sufficient replenishment staff, back-of-store warehouse management, fixture space, pack-sizes, and easy-to-use packaging will be among the most important elements in stopping a product getting to the shelf in a timely manner.
Collaborative working through ECR
As a result of these challenges, and concerns over customers’ decreasing retailer and brand loyalty, retailers and suppliers are increasingly working together collaboratively to improve availability throughout the supply chain, and satisfy customer needs. The ECR movement has been researching availability at an industry level to provide direction, benchmarking and best practice case studies for a number of years. ECR Europe research has identified seven critical levers to improve out-of-stocks. These levers are directly related to the importance of more co-operation within the retail industry supply chain.
The seven improvement levers
Source: ECR Europe
ECR Europe concluded that one lever by itself will not lead to desired improvement. Only by the careful orchestration and integration of all seven will the expected on-shelf availability improvements be achieved. Measurement and management attention are the two prerequisite levers for this model and must always be present.
The ECR UK Availability Survey
ECR UK has addressed these two prerequisites by providing, through their Availability Workgroup, a common industry measure via the ECR UK Availability Survey, launched in 2004.
The survey is conducted on a bi-monthly basis across 200 products in eight departments in store. The products have been identified as the fastest selling lines throughout a typical store and represent an average family weekly shop, covering both branded and private label ranges. The surveys are undertaken throughout mainland UK with 160 stores visited on each occasion. The stores, which range in size are from the leading UK food retailers: Asda, Morrisons, Sainsbury's, Tesco and Waitrose.
Management attention is galvanised through internal and collaborative reviews between retailers and suppliers, and the sharing of information via a dedicated web-site. Key messages and results are disseminated throughout the industry in media articles, conference presentations and publication on the ECR section of the IGD website.
Next steps
As the retailing environment becomes more competitive and consumers become ever more demanding, improving availability will continue to be essential. Companies will need to work together through the complete supply chain in order to maximise sales, retain customers and deliver the required in-store experience every visit.
* Figures based on ECR UK Availability survey during 2004
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