There are many processes required with a CAO (Computer Assisted Ordering) system to insure the accuracy of item inventory levels in each store. Data cleansing is critical in making accurate forecasts in inventory levels, the axiom “garbage in –garbage out” always applies. Other processes require store personnel resources to take into account damaged, mis-picked and store shorted merchandise. This process, while deemed necessary, attributes to a diminishing return on payroll investment. Other factors like a shift in demand due to an internal or an external promotion of one supplier’s line will affect the demand on other suppliers within the same category.
Too often we get wrapped up in the minutia; instead we need to look at the big picture and the quick wins. Out-of-stocks are the curse of retailers yet their time and investment is on ordering holes and not understanding the implications of shelf space and inventory levels of those SKUs that drive each stores sales.
Based upon the 2007 out-of-stock research study by Dr Thomas Gruen and Dr Daniel Corsten, we know that 86% of all items on the grocery shelves have more than a one-week supply of inventory! When you couple that with the fact that you’re fast moving items have six-times the out-of-stock rate than your slower moving items; the questions you must ask is: what drives my business and what would insure that my shoppers will return to my store(s).
If a retailer would identify their fast moving SKUs; they could systematically reduce unnecessary inventory levels on the those slower moving items thereby reducing the valuable space these SKUs take up and allocate this space to the faster moving items. The focus must always be on those categories and those items that shoppers routinely purchase and are more susceptible to shop elsewhere if they experience an out-of-stock.
About the author:
Principal Consultant with NextOrbit, thought leader with extensive experience and expertise in the Retail and Consumer Products industry.