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Optimising depot stock is the key to availability

Ian Hall, COO

The objective of both the supplier and the retailer is to ensure that a product is on the shelf when a customer wants to buy it. That way both parties maximise their sales.

Yet we find that many suppliers still focus on supplier-to-retailer service level - i.e. did I deliver exactly what the retailer ordered? And whilst it is true that the supplier-to-retailer service level may make for a nice KPI report (or be used as evidence to blame the appropriate party), it does not actually help improve on shelf availability.

What's wrong with reporting on the supplier-to-retailer service level?

Key issues with supplier-to-retailer service level reporting are:
  • It can also be easily manipulated to look better than it is (if you don’t have stock, you can ask the retailer not to order it - masking the real issues).
  • It doesn’t always show the impact on the shopper - surely the most important measure!
  • It's backward looking and doesn't provide information that might help prevent stock-outs in store happening in the first place.
Instead, it makes sense to manage the entire "Flow-of-goods" at all points from factory dispatch to point of sale. This allows suppliers to actively look for and solve potential stock-out issues before they happen, whilst also collaborating with the retailer to move depot stock or increase order volumes as required.

Isn't depot stock the retailer's responsibility?

Many suppliers think that depot service level is the retailer’s responsibility. They assume that the retailers have fantastic, all-knowing systems that produce perfect forecasts, whereas in reality, they don’t.

Retailers will also inevitably focus on the key volume lines, products on promotion, or fire-fight the ones that have already gone out of stock. Especially as Supply-Chain Managers can have several thousand products to monitor (across multiple depots).

What should suppliers monitor in order to maximise in store availability?

You could have 98% depot-to-store availability across all items, but really poor availability on one critical product, and 100% availability on another. That failure goes unnoticed without drilling down into the detail. Even if you're drilling into the detail a month after the event, it is too late to rectify any issues that were present.

Detailed SKU-level, daily analysis is essential

In order to optimise availability and thereby maximise sales, suppliers should use the data to provide very specific, helpful insights to your retail Supply-Chain Manager. in doing so they can quickly understand the situation and take action (e.g. “We need to order more of this product into that depot, and here’s why”).

Focusing on depot-to-store service level fosters genuine collaboration, which enables:

  • Suppliers to focus on allocating limited resources effectively
  • Retailers to be proactive in managing orders (not just reacting to stock-outs)
  • Both parties to sell more, by optimising availability

Conclusion

All major supermarkets provide data about depot stocks and sales through their supplier portals (Sainsburys Horizon, for example). However, these systems supply raw data which is difficult, and not to mention time consuming to translate into actionable insights.

If you liked this then take a look at our other blog 'Getting your availability right'. Discover how your business can get the best out of its most underutilised and misunderstood insights. 

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