“Doing the Same Things Over and Over Again . . .
. . . is the definition of insanity.” The quote, attributed to Albert Einstein, might well describe the situation, at least from a results standpoint, faced by the CPG & retail businesses. For years we have been quoting the same statistics about in store merchandising conditions. At the store shelf P&G’s “first moment of truth” consumers are faced with:
· 8% out-of-stock rates.
· Slow new product speed to market. · 17% of new items disappear from the store shelf within 8 weeks of initial placement.
· Less than 50% of promotion execution reaches stores and when it does, the out-of-stock rate of those promoted items is 15%.
· Of the last 12 blockbuster products the average display presence/compliance during promotion was less 10% of ACV according to IRI.
· Most POG’s are not implemented according to plan, and once set, drift from that set at a rate of 10% per week. That is not to say that the industry hasn’t tried new solutions or different approaches to these long standing problems. However, it is widely acknowledged that most of the “solutions” attack points in the demand chain that are NOT the primary source of the problem. That primary source is the store itself. Either the store execution of the plan has gone awry or the plan itself needs tending. To date few solutions offer any view into the in-store conditions. Sample based, syndicated studies and self-reporting task management systems are simply not viable answers and have produced no discernible improvements in results. I was reviewing some NARMS (National Association of Retail Marketing Services) studies and ran across some interesting statistics that make the points above. Eighty-four percent of MSO’s use some sort of advanced technology to report in-store conditions and provide status about assigned tasks. Most of that reporting occurs the same day. That figure is up from just under 70% two years ago. All of the technology and self-reporting should show improved results with lower out-of-stock rates, faster speed to shelf for new items and higher display levels; however, this has not been the case. Recent studies in the CPG industry cite the same alarming rates first recorded in the early 90’s studies.
· In 2007 Procter & Gamble released an OOS study yielding 8+% out of stock levels
· IRI’s 2007 study for NARMS showed distribution voids added another 5-10 points to the OOS issue. This study also reported the cross channel display compliance rate is a dismal 9% for the most successful new item introductions. · In April 2008 the ISI Share Group released their study listing the same poor in-store compliance results discussed above and further added:
o Compliance is largely unmonitored and, therefore, unmeasured.
o The industry suffers from the inability to measure ROI on in-store activities and a lack of visibility into actual in-store conditions.o In general, the industry has no systematic process in place to measure store-level compliance
o When accurately measured and recorded shelf conditions rarely match the plan or the forecast . . . and we rarely accurately measure or record shelf conditions in the first place.
o Greater ability to see into the store must be enabled for in-store implementation to improve. New technologies are emerging which yield more clarity into in-store conditions and provide store by store plan vs. actual shelf condition comparisons. Marrying these new technologies with task management systems helps answer the question “Is the problem the plan or the execution of the plan?”