Its encouraging to see the ISI (In-Store Implementation) work group start to talk about in-store implementation and the need for the CPG industry to improve on execution at the store.
I think it important that the group define its tasks appropriately so that the solutions sought do not yield “point” solutions only or limit the scope of the “fix” to corporate “silos“. This narrow definition would potentially exclude funcitons that contribute to what might appear to be in-store implementation issues, frustrating solutions.
One of the focal points of the ISI group and a good example of an expensive, stubborn issue is the out-of-stock “symptom”. This issue has generated consistent study results in 52 studies, for 17 years:
- 8% overall out of stock levels in grocer, drug, mass and c-stores, here and abroad
- Mid-teen percentages on promoted products
- 4% lost sales for retailers (3% for manufacturers)
- 70+% of cause is viewed as in-store
Lets examine some of causes contributing to the ”in-store root cause” in the study, but which actually occur as part of some other “silo” of responsibility.
One of the real out-of-stock causes is “shrink” some of which is caused by theft. According to the Industry’s leading expert on shrink, Dan Raftery, the depletion of product from shelves “unencumbered by either payment or POS records” represents 2+% of all “sales”. Some categories are effected much more than others (batteries, Infant formula, medical devices, spices, family planning) with the impact ranging as high as 10%. In many high-priced item categories such as medical devices, only one is stocked on shelf so if it disappears it is OOS and there is no record to trigger reorder. If this issue isn’t dealt with with technology that can detect theft at the shelf then the “labor triggering” that is referred to in the ISI study will be only partially effective.
Case packs are another real contributor to OOS. 35% of the products stocked in a typical supermarket move one item per week or less. 86% of the products in-store move far less than the shelf “load” for that item. That means a huge amount of product is taking up space that might better be used by faster moving items that run out of stock often. The “simple” answer is to drop the slow moving assortment in favor of more space for the consumer favorites. However, as category management professionals know, assortment is critical for shoppers and the reason that that very loyal, heavy shopper may stay loyal might just be that slow moving item. The real culprit here is the supply chain efficiency gains over the last 10 years. Small case packs, partial pallets etc. fly in the face of big cube and filled trucks. However, until we can fit single facing case pack-outs on the shelf we will have to use valuable shelf space and or back room space (and expensive labor re-touches) at the expense of more space for fast movers.
Product data (the lack of it or the inaccuracy of it) is a substantial contributor to this issue (as it is to almost every demand chain and supply chain problem today.) Dave King, now with Nielsen and I co-authored A Study on Data Accuracy in the CPG Industry in 2006. We specifically looked at over 1,000 category plan-o-grams that were in effect across dozens of retailers (large and small) involving about 200,000 products. We found errors in dimensions, sizes, UOM and other data in over 90% of the products checked (vs. the syndicated database we were using), with significant errors affecting about a fifth of the products. What that translates into is that the data used to drive the shelf management software which is preparing the POG’s is flawed most of the time. That means that in-store labor needs to make adjustments to facings in that carefully laid out POG on shelf after shelf, category after category, set after set, store after store. Further, the syndicated product database suppliers are almost never Silver Bullet Solutions for the Category Manager because so many products are never recorded by these suppliers. Until we deal effectively with the PIM issues, we will continue to have in-store labor making decisions about how to change the facings so that products in the POG actually fit on the shelf.
Again, I believe the ISI work group is going to do some very important work in helping to solve some long-standing and expensive trade-friction issues. Their success will in part depend on examining closely the root causes of many of these inefficiencies and stitching together technologies and practises that yield a total solution.