- 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.

Processes around getting product onto the shop floor 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, promotions seem only to exaggerate the need for attention in this area.

Top Tips

• Optimise back of store operations by empowering members of staff to oversee promotional stock
   
• As a supplier make it as easy as possible to replenish your products e.g. Descriptions, packaging, symbols, colours, images
   
• Implement a KPI to check and monitor stores compliance to shelf fill and communicate the results
   
• Engage man not machine to consistently achieve better promotional OSA
   
• As leaders, focus your teams on having OSA at the forefront of their minds daily
   
• 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 can impact loyalty

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.

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.

In addition the same colleagues, who are responsible for replenishment, are accountable for customer services. When needs must, resource is pulled from one activity onto the next. There is an acknowledged trade off - the queuing customer was quoted as having priority for resolution over replenishment in the study.

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.

Promotional activity means the shelves are shopped harder. By allocating the same amount of resource to the replenishment of a fixture that is on promotion to one that is not, will not engender low levels of OOS on the shelves.

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Weaknesses Identified

Back Room Operations

The processes followed in retailer back rooms (the area dedicated to storage of stock in store but not on shop floor) differed by retailer depending on the policies that were being rolled out by head office and store specific initiatives. Some adopted a less is more approach and encouraged stores to hold no stock out the back (if it’s in store it should be on the shelf), whilst other retailers approached the dilemma of limited space but the need to hold stock to meet expected and unexpected demand differently and ensured dedicated areas and cages were allocated to promotional codes only, in order to facilitate the speed with which promotional shelves could be replenished.

	Back room operations will effect promotional  replenishment

Some retailers demonstrated the use of racking, however it was noted that in doing so, visibility of the promotional stock was actually adversely affected. The impact was felt by colleagues replenishing the promotional displays and their inability to get to the stock they needed when then needed it. Not helped by limited forklift operators in store (most suggested 1 driver per store). If the driver is busy unloading, the colleague cannot access the stock which may find itself on the top level of a 10M high racking system, leaving the ends OOS. Also promotions may involve large volumes of stock to be stored out the back which in turn can hinder the ease of finding the stock for replenishment or at the very least - delaying it getting to shelf.

In a situation where stores are not at 100% compliance with the promotional activity [see Promotions Process] that is due to take place, some retailers in the study suggested that initial allocation of promotional stock can sit in back room.

Other reasons why promotional stock can be found out the back instead of on shop floor are based on decisions taken at individual store level. For example if one of the three promoted lines set up on the gondola end was not selling as well as expected, a decision may be taken to remove it in order to leave more space for the other two faster-selling lines and decreasing replenishment frequency need. Another factor that was discussed was around how to ensure store colleagues replenish the shelves and the gondola end or vice versa. Often time constraints in store mean that dual located promotions are not always given equal amounts of replenishment attention.

Once the promotion is completed, stores are then faced with the decision around what to do with any exit stock they may have. Lack of a clearance plan can mean that old promotional stock is taking up much needed space and hindering the ability to find the stock that is actually needed for current promotions. With limitations in place around the number of deliveries that can take place on certain days, stores are often faced with this dilemma.
 

Merchandising units

Other factors that were noted during the study regarding back of store operations were the increase in “non standard” merchandisable units that have to be managed through. With the various different promotional mechanisms that are in operation, the use of free standing display units, merchandising units in the form of plastic wheelie dollies or wooden pallets, all require a certain amount additional resource in the form of space/storage and knowledge in terms of siting in store, frequency of replenishment etc.

The back room can be viewed as the cogs of the store. They need to be well oiled and maintained to ensure they keep turning effectively.
 

Training needs

In store processes can only be as effective as the people carrying them out and the tools with which they are provided. Be those technical skills (forklift drivers), systems skills (order management) or people management skills. It may seem obvious, but how much of an impact does this have on Promotional OSA? The study suggested that this was one of the key factors that should be considered. If sufficient time and effort is not invested in store colleague training around the importance of an increased eye on replenishment during promotions, we will always get what we’ve always gotten- poor availability during promotions.

Store ordering was cited as a classic example of where improved training could really help to lessen OOS. For example, most of the retailers have adopted automated ordering processes (many use a hand held terminal). Orders are based on the stock on hand so book stock accuracy is crucial to ensure order accuracy and to avoid promotional OOS.

The store managers interviewed in the study quoted the following “Some colleagues might do their gap scan of the shelves with the hand held terminal for the system to raise a picking list in the back of house. If when the colleague doesn’t find that code, they will update the available quantity to 0. As a result the system will order more when actually there might be sufficient stock sitting up in the back room racking.”

Colleagues must be trained on how to follow the replenishment process and find the stock in the back room. This also highlights the need to ensure that the outer casing into which some products may be placed is presented. Making it as easy as possible, to identify, with the clear use of symbols and wording that meets the need of a multi-cultural, multi-lingual workforce.

Tell me and I will forget, Show me and I might remember, involve me and I will understand.     Quote from Benjamin Franklin

The adage above summarises this issue - if you tell someone what they need to it will be forgotten. Show them how to place the orders and check stock out the back of store and they will understand. But to truly get to a position where it becomes second nature, the store colleagues need to be trained, involved and empowered on a daily basis in order to maximise their potential to influence this key measure.

Among most of the stores visited, experienced store management professionals were aligned in terms of how critical an issue training of the colleagues on the replenishment process (specifically around the importance of carrying out accurate checks in the back room before they update the system with order needs) really is.

You would be surprised to see the number of colleagues who were doing the processes wrongly only because they were not shown.     Source: Retailer

But the buck does not and should not stop with the store colleagues. Management and their leadership skills were also raised as part of the weaknesses identified in this area of the study.

The leadership skills of store management are essential to exert a positive impact on colleagues and enhance the process buy in.

The processes are in place, but the problem is the people not trained or not following the process correctly to avoid errors and system inaccuracies creating OOS. Depending on the store manager leadership skills, the dedication and the training on the process will be more or less important influencing indirectly but certainly on promotional OSA. You need to go in a store with a different store manager not focused on the processes to see where the problems are.     Source: Retailer

A different stance was pointed out by the manufacturers field sales teams. They suggested that retailers who choose to control all the promotion processes centrally at head office, were actually compromising store management empowerment and as a result the ability of stores to maximise promotion OSA. This will not be helping to motivate store managers to take ownership for this complex issue.

Do more with less is a common phase used across many industries these days and as soon as it’s said we all cower away in fear of how many staff will be left to actually do the job in hand. With the added pressures that retailers and manufacturers face in light of the current economic climate, it is something that has to be managed daily. In total seven retail stores were visited. Without exception, all store managers and other store functions interviewed agreed that the key weakness impacting promotion OSA was the low number of hours authorised centrally by the head office and dedicated to the replenishment activity. As an example, the researcher visited one larger format store and noticed that only one colleague was in charge of the totality of the ambient lines replenishment. This represented several thousand lines spread across a large surface area of the store. The risks then become evident:

Training and providing the skills and resources needed to carry out the job in hand will always reap rewards. In the case of OSA during promotions, the more awareness that can be raised the more attention and time in store that is dedicated to ensuring it is optimised.

Shelf Mechanics

All of the weaknesses that we have talked about so far have not ventured out onto the shop floor as such. The biggest impact on poor out of stocks during promotions is heavily affected by what actually happens on the shelf itself.

In the run up to the promotion we have seen how arrival of promotional stock in store, the storage of that and access to it, differ across the board, but certain checks should be standard. One of which is the adjustment of shelf capacities to incorporate the additional space onto which promotional codes will be faced.
 

Planograms and Promotional plans

With the increased demand to promote from the consumer and from the retailer, the investments for some suppliers into promotional space and fixture can be significant. It is therefore vital that any agreements around promotional plan are executed as agreed. Lack of compliance to the promotion plan featured amongst the reproaches of the majority of retailers and manufacturers in the study.

Promotional plans or planogram/promotional brochure are as a rule, sent to stores prior to kick off. The design and features of this booklet differ from one retailer to another. Generally, it shows

1. Products on promotion
2. Space allocated to that promotion and where
3. Details of item codes

These brochures are designed by the merchandising team taking into account many varied aspects to support the stores in the promotion set up. The store colleagues should follow the set up indicated, the shelf fills, keep the same organisation of the products in the shelves, not changing the promotion display. The non- compliance of display set up can create replenishment issues and OOS. One manufacturer suggested that part of the role of visiting field sales teams to store is to ensure that agreed space is ready,stock is available and that the promotions are compliant.

Another key weakness that was observed involves “cherry picking “ i.e. decision made by store management as to which promotions to run. From the shopper perspective, if the promotion is not in store it will be considered as an OOS and will impact customer loyalty. This is especially true if the promotion was advertised. Similarly, from a manufacturers perspective, promotions can involve financial commitments which if a promotion does then not perform as well as expected (possibly for the fact it wasn’t run in that store) is equally as frustrating.

Again the need for balance and collaborative behaviour remains – the researcher came across scenarios where store managers had seen an interesting promotion listed for the upcoming period and had ordered a huge quantity of stock. Which as a consequence meant that all available stock was pulled from the DC leaving all the other stores OOS and impacting back room operations as we discussed earlier.

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Best Practices

Back Room organisation

The back store organisation and layout are essential to optimise the promotional On-Shelf Availability and the inventory accuracy. All retailers organise their store back rooms by storing the products by category, to enhance visibility of the stock and speed up the replenishment process.

Most retailers organised the storage on modular shelved roll cages rolling under medium height shelving to improve the flexibility, modularity and speed of physical flows within the back store. Some retailers segregate the promotional stock required for gondola ends in one area or confine it to a pre-determined roll cage that is labelled accordingly, in order to accelerate the replenishment process of promotions.

Other suggestions included the idea of delegating to a colleague (on a rolling basis), the responsibility of constantly checking and replenishing the promotional ends and ladder racks. By including this as part of a day to day task list, the focus on On-Shelf availability becomes more of a key focus.
 

Shelf Ready Packaging

As part of the suggested best practice in the area of shelf mechanics, the use of Shelf ready packaging can help to achieve improved OSA. At an industry conference during 2009 one retailer referred to the replenishment process needing to be as close to “one touch” as possible. Other factors that are often quoted as being important in this area were the ease of which

	Shelf ready packaging can improve OSA

1. A product can be identified out the back of store (use of images and wording, colour and impact)
2. Ease of opening the outer casing SRP (time available to open SRP is limited, making that job harder only adds to the likelihood of product being damaged in the process generating unnecessary waste)
3. Ease with which the packaging can be recycled and flat packed out on shop floor (to minimise store colleagues time)
4. How easy it is for the shopper to actually get to the product
5. And finally how easy it is to get the product to the shelf

Recent advances in Shelf ready packaging within the frozen category now have the ability to present frozen pizza in a 90° angle, many similar changes can be seen in the supermarket in the chilled area.
 

Shelf Mechanics

The last 50 yards of the supply chain (i.e. from back of store to shop floor) can be quoted as the most difficult to get right, yet can have so much impact on how effectively a promotion runs and how often a customer is able to find the products they are seeking.
 

Shelf Capacity Settings

The researcher found that some areas of the study demonstrated good practice in this area, amongst them the idea of a store process compliance check around shelf fill settings and corresponding key performance measures.

Some retailers developed a process by which a team in HO carries a “store process compliance check” with a scoring system. This process enables the retailers to make certain the stores updated the shelf fill capacity in the ordering system in order to receive the correct volume (in fixture display volume + end display volume + daily forecasted demand) and ensure promotion OSA.

One key opportunity to alleviate the issue of high OOS during promotional activity is to ensure that the shelf capacity settings are managed and maintained throughout and correctly reflect the capacity required to meet the demand. Failure to incorporate the promotional fixture capacity with the normal shelf capacity can mean that rate of sale during promotion leaves shelves empty for long periods of time.

Ensure that the shelf fill capacities are adjusted to take into account the extra stock requirement and that the corresponding orders are placed accordingly.

Another area of suggested best practice is a formalised internal process of communication regarding what promotions are active at any one time and where they are active in store.
 

Human Vs system investment

Different retailers demonstrated very disparate visions on how to ensure promotion OSA. Some focused on people and implemented a direct communication process to communicate OSA from store replenishment staff (shop floor) to directors and it worked very well. Another Retailer invested in expensive systems, but instead of empowering stores they centralised all operations. This approached was deemed to work but not as well as the retailer who empowered their staff. Depending on distinct retailers’ culture, to achieve better promotion OSA, the choice seems very “personal”. Subsequent to long term business relationships, (based on facts) manufacturers believe that retailers investing in people empowerment through engagement (retailers 2 and 3) are constantly achieving better promotional OSA.
 

Leadership Skills

In order to get store Directors to follow the promotional plans, requires first-class leaders and good leadership skills. During the site visits, the researcher spoke with a well respected and experienced professional who had in the past opened dozens of stores successfully and identified leadership skills as a key enabler to his success. By getting store management buy-in to the subjects of On- Shelf availability and promotional activity he was able to drive process optimisation.

Setting up store specific training to help colleagues know what they will have to deal with and to manage on a daily basis will enable them to do so more effectively as they are armed with required tools and knowledge to do so.

Be aware of the constraints that stores face- store hours are not something that can be chopped and changed with no effect on budget. Nor can you suddenly have access to 3 forklift drivers who have the ability to access the pallet of promotional stock that finds itself at the top of a 5m racking unit. Resources in store are limited and have to be used to their best potential and allocated to the areas where they add most value. However, the researcher was aware of one discussion that took place which highlighted the balance needed between serving the customer at till and replenishing shelves so they actually had product to take there.

It is therefore suggested as best practice to enable the stores to have a more flexible budget of hours dedicated to the replenishment, particularly during times of high promotional activity.
 

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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