Monday, May 28, 2012
Automated Store Replenishment – Volume X
Typically, grocery stores require the person in charge of inventory to order-up to the amount printed on a shelf tag. This may be a store employee or a supplier’s representative. Oftentimes, retailers do not receive what they order; instead, they receive something else they did not order and they have to go and find a place to put it, or it simply stacks up in the storeroom until the store manager throws a fit and delegates the responsibility to someone. Unordered inventory is a large contributor to carrying costs and clutter in the store.
In the majority of stores, the fallback solution is to assume the supplier will not allow us to run out of anything, as in the case of rack jobbers (sometimes referred to Direct Store Delivery) who are the front-line troops in the ‘Inventory War’. I cringe when observing these people operate, as they determine the numbers of bags of peanuts and cracker sandwiches the store needs through a well thought out exercise of using the ‘push and shove’ method of inventory replenishment. Their philosophy seems to be, “If there’s space, the store definitely needs it.”
We have come a long way using computers for bookkeeping and reducing costs, while for the majority, forecasting and serious analysis are not even a consideration.
There are three basic prerequisites for creating an ASR environment: Bar coding at the retail level, a device that recognizes the bar code (POS), and some form of electronic communications with the supplier. With these prerequisites in place, a basic level of ASR is possible.
We advise customers to avoid buying products that are not identified by an eight or twelve digit barcode. However, we are seeing more and more European bar codes entering the market. Mostly, these products are coming from Asian markets and their mere presence cheapens the overall quality of merchandise in the stores. Larger vendors rely on electronic data interchange (EDI) to transfer data to and from trading partners; however, as we move to an environment of Cloud Computing, it is only natural to expect at some point, EDI will give way to total integration. The technology is here to support integration today, and by the end of this year, I believe we will have removed most of the roadblocks that have stood in the way of integration in the past.
At this time, most of your suppliers are not interested in your data. They ARE interested in your ability to tell them, with some degree of accuracy, how much to bring to your store on the next delivery. We provide a service where suppliers can peer into a store seconds before the items are to be picked and create their shipments accordingly. We are currently working with a customer in California who does business with one of the nation’s largest grocery suppliers to do just that. This is a new environment for both of them, but so far, the results are proving to be well worth the effort.
Keeping in mind, the three prerequisites identified above, one more element is required to be successful with ASR, and that missing element is an on-going perpetual inventory system that is continuously maintained with the highest degree of accuracy—the higher the accuracy, the greater the value of the system.
In most of the studies I have read, the effectiveness of preventing Out-Of-Stocks (OOS) has been ambiguous; however, if done properly, we have found OOS is the easiest problem to solve. The majority of OOS problems are all but eliminated by comparing actual store levels with inventory turns. A backup is provided for monitoring these turns, and if they should unexpectedly stop, or the disposition of a product falls to or below zero, the store manager is instructed to do an immediate audit of that particular item. Most of the time the problem is traced back to failure to replenish the inventory from the stock room.