In-Store Supply Chain

Back-room replenishment tips help avoid stock-outs

When a dairy department associate at a Price Chopper store prepares to create an order of sour cream for the distribution center, he has more than current stock and gut to rely on. A computer-generated order system has already taken into account factors including ads, scan history, price point history, display history, seasonal impact and sales velocity.

That suggested order helps optimize inventory so the associate orders just the right amount of a product based on informed forecasts. But no terminal or printout can tell the associate in the throes of the sales day that two more cases of cream cheese are sitting in the back room waiting to be shelved.
Replenishment based on what sold, instead of what was sent, has revolutionized retail by improving in-stock positions, satisfying customers. Tracking sales data daily, hourly or even more often gives retailers a clearer idea of product movement and fuels better orders. But technology doesn't work in a vacuum. Making sure shelves are replenished from backroom supply remains largely an operations and not an IT issue.

Alert to Demand
"It's a matter of how much focus people in the store put on it," says Jim Mizeur, vice president of non-perishables for Golub Corporation, operator of Price Chopper supermarkets. "Computer-generated orders help."

Advancements in inventory and ordering systems are making it easier to optimize that inventory, reducing the need for backroom stock. Computer-generated orders (CGO) are becoming increasingly fine-tuned through better forecasting based on a myriad of influences, which enables reduction of safety inventory in the system. Two other technology advancements are also playing a role: one is providing alerts for store associates to prompt them to check replenishment needs and keeping them on track with their job tasks.

CGO at Price Chopper
At Price Chopper, "our goal is to set inventory and targeted turn levels by store and department, then give as much information as we can to help store personnel attain those goals," says Mizeur. To that end, Price Chopper deployed procurement and order management modules from AcquiTec International that enable merchandisers to create suggested orders. The system identifies by store by SKU the optimal inventory level for a specific item.

"We've seen a decrease in inventory and better in-stock position," says Mizeur. "We've seen an increase in freshness and a reduction in back room stock."
Once inventory is in the store, it's up to operations to keep shelves replenished from back stock. To promote timely movement, Price Chopper has established standards for the back room. "We have U-boats loaded with sale items and set times during the day that people are supposed to work the back stock," Mizeur explains. "It's a matter of how well they monitor that at the store level."

Soon, Price Chopper will have a better handle on movement within the store. "Technology will be able to tell us the inventory in the store. If we know that
we should sell X gallons of whole milk every X number of minutes and that rate
is not being met, that points to a shrink or replenishment problem."

IT Meets Operations
For Coop Danmark, reducing weekly deliveries has been one step toward optimizing store inventory. By deploying JDA Software's Advanced Store Replenishment in 87 Kvickly stores, the operator of 1,140 mini-markets, super- and hyper-markets in Denmark's' Nordic region has been able to improve inventory and ordering accuracy, generate suggested orders and minimize waste.

"The replenishment accuracy of ASR helped reduce the amount of product that we must discard," says Michael Djarnis, manager of supply chain development at Coop Danmark. The system has also fostered a greater awareness of inventory levels on the shelf, reducing the amount of unnecessary orders.

Until shelves can monitor themselves, tracking what's on the shelf and what needs to be refilled will remain an operational challenge. But technology that optimizes inventory and improves ordering and replenishment not only trims excess inventory — for many it has the effect of increasing vigilance of on-shelf inventory as well.