- Summary
- Top Tips
- Explanation of topic
- Weaknesses Identified
- Best Practices

Summary

The demands placed on store managers to achieve success during promotions are becoming an everyday occurrence. Juggling the following factors is all in a days work as they strive to ensure that their in store processes are being adhered to- staff, consumer demands, promotional space, stock holding limitations, order processing and more besides. All of this, whilst also ensuring that exceptional customer service is delivered consistently.

Ensuring that best practice is followed and adhered to in store around On-Shelf Availability (OSA) during promotional events is a tough nut to crack. But the role does not sit exclusively with the store manager. It requires the buy in - not only of every store colleague - but at head office too, in order to achieve the overall result as a team and to meet the shoppers ever increasing demands/expectations in store.

In store processes can be fundamental to the ability to reduce out of stocks outside of promotions, but when you add the additional demand pressure that promotions bring (run down on the shelves amongst them), promotions seem only to exaggerate the need for attention in this area.

Top Tips

• Allocate experienced store colleagues to place the orders and empower them to minimise staff turnover and loss of category and product knowledge.
• Create a collaborative process which facilitates flexibility in DC to store lead times. One size does not fit all
• Standardise promotional displays across all stores within the estate
• Use up to date EPOS data to analyse how the promotion is performing in early stages, in order to make any necessary amendments sooner rather than later
• Make promotional plans as detailed, visual and descriptive as possible to facilitate store ops and to allow decisions at store level to be optimised
• Provide guidance on how promotional space is to be used and what flexibility exists around it
• Get out to store to see the issues first hand. If field sales teams are an option – engage them, if not empower yourself to make changes.

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Explanation of topic

One of the major issues cited as creating out-of-stock situations during (and outside of) promotional periods were in store processes. Many factors influence the way in which store management and colleagues are dedicated to the promotional On-Shelf Availability and the extent to which they have the ability and knowledge required to comply with the processes in their totality.

Promotional out of stocks (OOS) have a greater impact on customer loyalty, especially if the promotion has been advertised heavily. In some categories, the lack of product on shelf can mean the difference between the customer choosing to continue their shop or choosing to go elsewhere. Stores need to manage the OSA process pro-actively to guarantee all promotions are available for all customers all of the time, and can do so by focusing on how the products get to store.

It’s a difficult balance to strike between the ability to ensure the shelves are fully stacked to meet the promotional demand but at the same time ensuring that wastage (particularly on chilled and fresh produce) is limited.

The size of the store can also be a relevant factor in the ability to ensure that OSA during promotions is maintained to the level it should be. According to most respondents...

It is much more complex to manage promotional OSA at micro level, small stores format.     Source: Retailer

Lack of space in the back store can mean stores are unable to hold significant levels of buffer stock. Coupled with this, is the fact that shelf space is limited in its ability to hold sufficient promotional stock and as a result require a high replenishment frequency for fast selling promotions.

The study also revealed that convenience stores were not the first priority of retailer head office where issues are encountered with promotions – as a result they take longer to be solved. Another important issue for these “curfew “stores, are the road and geographical restrictions where deliveries are limited (like no evening deliveries so if promo perform well it can be OOS for most of the day).Emergency deliveries are not an option. Even if they were, traffic may not permit timely replenishment of stock to meet demand.

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Weaknesses Identified

Forward Buying

Manufacturers’ planning departments mentioned forward buying as one of the key factors and biggest issues of in store process failure.

The store management may do some forward buying to take advantage of the temporarily lower price; this may create an OOS situation. If all store managers act similarly, it can create ripples in the initial forecast estimations at supplier and retailer level.
 

Forecasting

The study also highlighted some inconsistency between requested volumes in orders placed daily vs. forecasted volumes. This carries with it, the risk of causing unnecessary additional pressure on the suppliers to meet the increase (or decrease) in demand and to manage the deviation from initial volumes and timelines agreed and deemed achievable between supplier/retailer and head office.
 

Book Stock accuracy

Retailers enabling the system to place orders automatically require an irreproachable book stock accuracy. In data analysis carried out by one manufacturer, book stock errors across the top three retailers accounted for, on average 26% of out of stocks in store.

Inventory inaccuracy can be generated by many factors amongst which stolen stock or damaged product feature, but also by process negligence. During the ordering process, store colleagues may not follow the entire process for two main reasons

1. Lack of or limited process buy in/dedication to the carry out the process as required
2. Lack of training or suitable skill set to carry out relevant tasks

As a result, the process for finding stock out the back of store may be neglected. This can cause a knock on effect on ordering accuracy- be it through not visibly seeing the stock is already present and choosing to order or, on the other extreme, over-reacting to wastage figures on very short lead time products such as bread (order day one for day one delivery) and cutting the orders to zero. In doing so, at the end of a day of a well performing promotion, stores may end up OOS at a key times when demand may be at its highest (afternoon, evening and weekends).

For products where stock is ordered by store and delivered directly (milk, bread) it was stated that a frequent source of ordering inaccuracy is where ordering deadlines are missed and suppliers are contacted directly to make a manual adjustment. However, an omission by the retailer to communicate and update the system accordingly can be a source of errors in future ordering and generate OOS during the promotion.
 

System adjustments

Closer to when the promotion is due to start, the shelf fill in the system needs to be adjusted so the system knows the quantity to deliver to keep the two displays filled to meet demand (promotional space and shelf).

Most retailers adjust the total shelf fill centrally but leave the stores a few days to update it if they require a different total shelf fill (displays sizes not standardised). The stores may update it incorrectly or forget to update it. Hence, once the promotion kicks off, the store has only the quantity to fill the normal fixture and not the end, and as on retailer stated -

One of the main promotion OSA problems is when the stores fail to update the shelf fill capacity so they don’t receive the stock and end up OOS.     Source: Retailer

It should not be forgotten that the rate of sale during promotions vary dramatically. Shelves do not magically get deeper or have the ability to suddenly hold more products, the space remains constant. Despite knowledge of this, and of the fact that uplift in demand differs in some cases 2,3 or even 4 fold (likely more in some categories), increased attention to replenishment is not correlated accordingly and as such does not provide the opportunity to maximise sales and to reduce OOS situations.
 

Lead times

Post ordering process, the lead time from distribution centre to store is a contributing factor to out of stocks. For most ambient promotions, the store ordering lead time is 48 hours, decreasing the stores ability to react and respond to frequent unexpected fluctuations of the promotion sales. Hence, if a promotion over performs on day 1, the store may experience one full days OOS whilst stock is deployed. As a consequence the ends remain empty and the lost sales result. This can sometimes be further complicated by the strict rules/guidelines around stock holding targets, not only at store level but at retailer DC too.

Coupled with a current trend to push suppliers to deliver with shorter lead times, it can be a challenge between having a flexible supply chain that can react quickly and efficiently to promotional demand in store and at the same time ensure that inbound supplier to DC service levels do not decline causing OOS at key stages in the promotion.

It is no longer sufficient to assume that promotional uplift will follow previous activity levels and order based on historic sales data. The potential sales that could have been achieved had OOS been minimal must be factored in and orders placed accordingly.

Whilst outside of promotional activity the use of stockless or flow through replenishment (where products arrive direct from the supplier to retailer DC and are cross docked to store) allows for fast turnaround of products - during promotion the use of stockless can cause issues unless store processes allow for all stock to be placed out on shop floor almost instantly, since there is no buffer or reserve stock in store.

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Best Practices

Order Processing

Order processing should be carried out by experienced empowered employees. One retailer adopted a more formal approach and invested in store colleagues’ empowerment in order to drive down turnover. By investing in the category knowledge of their order writers an excellent knowledge of the category and the customer behaviour towards the promotions was achieved (over some years).

When applied, it enabled the development of valuable expertise on the local and store specifics enhancing accurate ordering and excellent promotion OSA. This approach seemed to work well for this retailer but other retailers enabling stores to order, experienced inefficient ordering which in turn resulted in escalating stock holding. See area above for ordering as a weakness.

Tight controls and requirements to reduce working capital (specifically stock holding) in retailer and supplier operations are forcing both sides to consider carefully how much stock they hold at any one time. For retailers the need to hold promotional stock to meet demand is difficult given the space constraints. For manufacturers the need to minimise waste and obsoletes but still maximise opportunity to sell whilst sourcing product from global locations generates its own stock holding challenges.

Front end weighted promotions (i.e. those where most promotional stock is delivered earlier to retailer DC/store than normal) have shown that by having easy access to stock in stores in the first 4 days of promotion can allow for the initial promotional incremental demand to be met more effectively than a normally weighted promotion of equal stock holding throughout the 3 weeks. This does of course depend on the type of product on promotion.

This may be something that you want to discuss with your retailer/supplier in order to agree shared objectives and targets.
 

Vendor Managed Inventory (VMI)

As part of the study, the practice of checking and making suggestions around orders placed by the retailers was discussed. In doing so, any potential issues/errors will be picked up sooner than they might otherwise have been. Some manufacturers operate with retailers using VMI. This is not always a feasible option for all businesses, and would need to be agreed between supplier and retailer based on joint objectives, but can provide the opportunity to get closer to the targets in place around stock holding and truck fill.
 

Phasing of inbound stock

Additional suggestions around best practice for back room operations include the phasing of inbound promotional stock to depot, and then its onward movement from depot to store. When managed effectively this should facilitate the management of space constraints that are relevant to so many stores.

By including a flexible process that allowed for differing lead times to be achieved depending on the product and its supplier location, also facilitated the flow of goods through back rooms. For example, if standard lead time from DC to store is 48hours for all products, there is limited flexibility available to deal with fluctuations in demand caused by promotional activity. However, allowing for the 48 hrs to be flexible and not generic could provide better opportunity to get stock to store quicker and as a result onto the shelf sooner than would have been if “one size fits all” approach had been taken.

All retailers adopted cross-docking combined with pick-by-line of most chilled lines but also some ambient fast moving lines (crisps, soft drinks...). Some retailers collaborate with manufacturers to develop promotion merchandising units on wheels (dollies) for example. Retailers could set up a process where if the stores are flagging OOS, the delivery LT from DC to stores could be reduced to 1 day.

Some retailers have already this process in place but if next day, the store does not receive this emergency order and place same order again, double quantity. These practices enable them to reduce the store ordering (24 hours instead of 2-3 days) and store replenishment lead times. Thus enabling improved reactivity to sales fluctuations and as a result reducing the duration of stock being OOS on shelf.
 

Decisions around Promotional activity

Some retailers follow a less centralised approach than others vis-à-vis how the promotions are set up in stores. In order to limit stores making physical or system changes that would potentially result in OOS situations, these retailers issue to all stores rules and standards on what stores are allowed to do with promotional space without compromising promotion OSA. Allow stores some flexibility but not at the expense of OSA.

	Planograms should clearly show promotions

By involving different areas of your business (i.e. Marketing), store Planograms can be more detailed and visually descriptive of how the layout in store for promotional activity should be. In the past retailers’ planograms showed only the list of products going onto gondola end illustrated by one end type if at all. After the improvements of marketing, most if not all retailers’ planogram show all the ends and their different display unit types (different store size will use different end sizes: single, double pallet, side stack, high shelving etc). Marketing and merchandising work together to design the new planogram with pictures in 3D software, with the objective to make it more store friendly. If this is not something that you are already doing you may want to consider how this could be applied to your business and what the process would be to get it operational.

Some stores demonstrated a positive best practice that involved securing printed copies of the Planograms to the corresponding relevant ends prior to promotion. Most stores receive only one or maximum two “proper” planograms. If they are lost, stores are left with no indication of physical set up. One idea that the researcher suggested was a form of reference database. Available at store level (to overcome the variance in store size and plans that may not be relevant) the document would detail the planogram relevant to each of the ends and the action expected and would be available for all colleagues to print quickly and easily.
 

Field sales agents

All manufacturers are conscious of the principal supply chain weakness that the last 50 yards represents. Some of the larger manufacturers indicated how the use of in store field sales agents can be beneficial in this area. Using territory managers to check promotional set up in store, the OOS that may have been generated and the potential interpretation for their being, can provide valuable insight into how to avoid the same issue on a re-occurring basis. The frequency and indeed the number of stores that are called upon can and should be determined and reviewed on a regular basis to ensure that the focus in the store remains on the area with biggest potential for improvement.

With issues being highlighted in store, collaboration with store managers and store colleagues can provide opportunity there and then to fix an issue on that product and see an immediate impact. Said field teams identified many causes, but by far the most recurrent ones were registered as being: promotion stock in the back room not replenished and incorrect ordering because of book stock inaccuracy. Whilst a field sales agency operation may not be option for every size business, the benefit of frequent visits to store by any member of your teams should not be under-estimated.

The standardisation of all the promotional display units across all stores would improve promotion space allocations. Sometimes, stores allocate high selling promotions in normal fixture because of insufficient space in ends so the replenishment frequency of these promotions is too high to ensure uninterrupted OSA.

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