Punishing retail suppliers for poor service levels is lazy. We need a new focus on fixing on shelf availability. I was a Tesco buyer. I used to bollock suppliers for short deliveries. It didn’t achieve a lot. Buyers see reports showing that a supplier has missed a delivery, and the reaction is to pick up the phone, and even threaten them with fines. It’s lazy, and it misses the point. Don’t forget that suppliers want to sell stuff too.
The objective of both the supplier and the retailer is to maximise product availability i.e ensuring the product is on the shelf when a customer wants to buy it. Effective management of your ‘flow-of-goods’ from production line to consumer is much more nuanced than “did a supplier deliver what I ordered last month?”.
That said, most suppliers still focus on supplier-to-retailer service level - ie did I deliver exactly what the retailer ordered? It makes for a nice KPI report, or at worst a ‘name and shame’ of worst offenders.
Q: Why is ‘depot to store’ service level a more relevant measure?
A: Simply put - it affects shelf availability more directly, and hence lost-sales (of your products).
Yet many suppliers don’t look at it, or think that they can influence it. I have heard suppliers say “Depot stock service level is the retailer’s responsibility” (seriously?). They often assume that the retailers have fantastic, all-knowing systems that produce perfect forecasts (They don’t).
A supplier’s job does not end at the point they drop their stock off at depot. It is a mistake to assume that the retailers are going to get it right, and be looking at your products on a daily basis. The reality is that many supply-chain managers in retail have several thousand products to look after (across multiple depots). That’s tens of thousands of things to check each day.
Retailers will inevitably focus on the key volume lines, products on promotion, or fire-fight the ones that have already gone out of stock (backwards looking).
Worse still, many suppliers look at aggregated (eg weekly or monthly) reports, or averages across many products - “my depot to store service level was 98% last month”. Great. So what?
The reality is more complex – you need to be managing demand at a SKU / depot level, daily, with good quality forecasts of what ‘should’ be there - this will inform action and drive improvement.
*If you think stock levels can be measured by weekly reports or averages, think about the statistician that drowned crossing a river... “It was 3 feet deep on average”
Focusing on depot-to-store service levels fosters genuine collaboration, it helps:
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