We received a number of great letters on our piece on Warehouse Management to the Rescue for Retail Out-of-Stocks?, which argued that the basic task management engine of a WMS could go a long way to solving the out-of-stock problem in retail, and maybe even bring down health care costs.
Our Feedback of the Week on this topic is a good letter from Cédric Guyot of Retail Solutions, Inc., who likes the idea, but sees some barriers. SCDigest editor Dan Gilmore responds.
You will find that and a number of other good letters below.
Feedback of the Week - on WMS to the Rescue?:
Great article as usual – a few comments:
The solution you offer may work if:
- Perpetual inventory was right, but it is not. A number of CPG companies have proven that, in the best cases, 35% of the item counts are accurate - 50% of the items have some form of phantom inventory (think theft and other forms of shrink, mis-picks, mis-checkouts, etc.), and the remaining 15% have hidden inventory;
- Products were sold in one single place on the floor – however, unlike a well-designed warehouse, you may have a promotion display and a home location that are completely different. One of them may be stocked up and the other one is not (there were examples we found where a promotional display actually decreased the total sales lift vs. just operating the promotion from home location as customers were so accustomed to find the goods on the home shelf that it ran out of space and no one actually went to the display);
- They had the same perspective: retailers tend to look at their business from a holistic, category-level standpoint and if an item runs out-of-stock, a “slide-and-hide” strategy is sometimes corporate policy (a famous club store does NOT have out-of-stocks, should you ask them, as they don’t care about assortment, just shelf fill rate) whereas, a supplier wants to push their own products and view slide-and-hide as the worse practice in the industry; and
- Finally, retailers and manufacturers (and their brokers) were to agree on a distribution of tasks. That may be the most difficult problem.
Altogether, I think that the ability to drive retail execution will end up being a competitive differentiator for CPG companies – but that it will be primarily driven on a relationship-by-relationship basis, potentially integrating with retailer task management systems when they exist.
Industry leaders are figuring out how to do a better job for THEIR SKUs and avoid brand shifting (or shift towards private labels) by offering better availability using the data coming from their retailer partner.
Thanks for the excellent newsletter.
VP - Marketing
Retail Solutions, Inc.
Cedric, good letter.
I am least concerned about #2 - most warehouses have the same SKU multiple places - easy to handle (piece picking, case picking, reserve storage, etc.). And sometimes those locations are 'dynamic' based on need, and if fact can change frequently. So, I think this could be easily handled within a store.
Other ones are more problematic, I agree, but still have confidence in this. Think the approach might improve PI accuracy, for example.
More on WMS to the Rescue:
Retail could probably use RFID, but the work we've done says that it is still too expensive to get an acceptable ROI. I did a very large project with AT&T in their new IPTV program. They have an RFID pilot going on now to track set top boxes, which are $100 to $250 items. This RFID program is weighted with technology and cost issues. So, while it has been an interesting experiment and technically successful, the commercial aspects of tracking $100 inventory items is a long way off.
We also did an interesting project with a large beer brewer who has a penchant for freshness. The project involved a light WMS to keep track of and rotate stock to help distributors manage FIFO. A simple concept, but if you have ever been to a beer distributor's warehouse, they have other priorities much higher than running an efficient warehouse operation.
That project did substrate your postulate that, in retail (since distributors do act a lot like a retailer from an inventory perspective), there is a place for, and value for, a WMS. The WMS supports stock management (FIFO), inventory management and, in some cases, operational optimization such as slotting. (I wonder who decides that the pallet of 100 watt bulbs should be on the top, rear shelf at Lowes?)
You are absolutely spot on here. I worked for Safeway Stores in the late 1970s and we had developed a tool for store managers to use in planning headcount. Mainframe based, it looked at calendar cycles, store traffic, events, weather and a number of other factors, including department volumes, to predict the number of employees needed on any given day. I know these guys think about tasking a lot.
Having said that, they (retailers) also obviously know how to manage inventories. This is where CPFR was born, along with the promise of gathering POS data. Things are just things, and things may be in multiple places – multiple floor locations, in the back room stock, in stales/RTV inventory, etc. Knowing where the stuff is, is what WMS systems do really, really well. A good POS system, coupled with a good WMS/Space-Stock management system should provide most of what a retailer needs to ensure consumers can find things on the shelf (if it is in the store).
One potential hiccup is that many shelves are stocked by vendors and route drivers. The systems used must be able to collect restock and damaged/stales removal data from these suppliers – hopefully, through common interfaces with their own handhelds.
Principal and Chief Researcher
Supply Chain Visions
Thomas A. Moore
There is more activity in this direction than you think.
Manhattan Associates presented at the RILA Logistics conference this year how a SaaS model of their warehouse management systems are being used in grocery and convenience store operations to pull stock from the back room to the sales floor. It is being activity tested, but there are still some roadblocks.
First and foremost is the lack of discipline on a retail sales floor. A superior DC operation has a high level of operational discipline, where there is a clear expectation that the human staff will follow the systematic processes. In the DC culture, the associates are trained over and over to follow process, and where the discipline is absent, the processes get sloppy. Now go to the sales floor of any big box retailer and look at the staff in the store. Do you see the discipline needed to make a WMS type of task management system work? Not that it cannot be doesn’t – but the odds are stacked against the process.
It is a great idea – but a culture remodel that builds process discipline is needed to make the foundation processes work.
David K. Schneider
David K Schneider & Company, LLC
Excellent thought. I totally agree with your assessment. A lot of the problems in retail stores can be solved in this manner. The POS systems in place do not help in this process. They only help in identifying the distribution orders to be raised. The task of replenishing the locations is definitely a huge task. With the size and scale of the retail stores, it becomes a huge task managing that. I think definitely a lite WMS is a wonderful option.
ACIES Technology Solutions Pvt Ltd
I spent a few years working in a hospital when I was in college and observed first hand that, for the most part, hospitals are pretty inefficient. I have seen little to change my mind in the many years since college. It struck me that there are many redundant tasks and ineffective management of Central Supply (excess inventory, inventory in the wrong location, inefficient purchasing processes, etc.) With nearly 35 years of Supply Chain Management in industry, I haven’t been able to get beyond a phone interview when applying for Supply Chain jobs in the medical field. I am not saying everything we do in industry would apply, but there is an awful lot of Demand Management, Purchasing, and Inventory Control that would apply in a hospital setting.
So, I guess I am saying that I definitely agree with you on Warehouse Management to the rescue.
Smith & Nephew
Very good article and I agree with you that a task management system, along with RFID and a disciplined work ethic, can solve this problem.