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Retail Vendor Performance Management News Round Up for January, 2017


The Problem with Phantom Inventory; Interesting New Solutions at NRF 3017; Amazon Rollout of Fulfillments Centers Continues On

Jan. 30, 2017

by SCDigest Editorial Staff


The Problem with Phantom Inventory in Retail


A guest column recently published in the Wall Street Journal says “phantom inventory” is a big cause of stock outs in the retail supply chain.


What is phantom inventory? It is “goods that show up in management systems as available but in fact are hidden from view because they've been misplaced, often tucked away in a backroom and forgotten,” according to a trio of academics: Fredrik Eng Larsson of the Stockholm Business School, Daniel Steeneck of the Air Force Institute of Technology, and James Rice Jr. of MIT's Center for Transportation & Logistics.

Supply Chain Digest Says...

We would add issues with ASN accuracy, especially for split cases cartons, where such accuracy - especially in retailers lacking a strong compliance management system - is notoriously problematic.

In their column, the three authors say that “Even with today's sophisticated inventory management systems, retailers are woefully unaware of just how low on-shelf availability is for many of the products they carry,” adding that “Our research, carried out in collaboration with a major consumer goods manufacturer, suggests the problem is significantly worse and costlier than many retailers assume.”

How much worse and costly? The authors say that most measurements of known stock-out levels give a misleading impression of how a store or product is performing, with their research showing that for a category of laundry detergents sold by a large retailer, lost sales were almost five times greater than previously assumed, owing to unobserved stock-outs - delivering a substantial hit to sales of the products.

In addition to the lost sales, inaccurate perpetual inventory levels also have a ripple impact across supply chains, the authors say, leading to inaccurate demand forecasts because systems may show products as in stock but unsold when in fact they haven't made it to store shelves at all.



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“Such faulty readings mount if the problems are repeated across many stores, triggering flawed sales reports that affect forecasts, production planning, measurement of store performance and automatic replenishment,” the authors say.

What causes the phantom inventory? Inventory records can't capture that certain items may have been stolen. Scanning errors, such as scanning the same UPC code for different SKUs say for cans of soup, give false readings of what product have been sold. Inventory sent to the store for a special promotion is often marooned in the backroom because store managers didn't run the promotion or stocked the products in a haphazard way.

We would add issues with ASN accuracy, especially for split cases cartons, where such accuracy - especially in retailers lacking a strong compliance management system - is notoriously problematic.

 

So what's the answer?

The authors say one approach with a lot of potential is to develop special analytics using machine learning technology. The analytics methods re-create the demand patterns for individual products, and incorporate the demand inventory uncertainty for each stock-keeping unit into forecasts and plans.

“When used in concert with existing solutions, this approach improves forecast accuracy and increases sales by dramatically reducing the number of stock-out events,” the authors conclude.

Interesting New Solutions at NRF 2017

SCDigest was at the NRF Big Shows at the Javits Center in New York City in mid-January, and wanted to share a couple of interesting new solutions there.

First, an expanded wide area RFID reading system from Zebra, called smartsense for retail. These wide area readers are placed on a store ceiling, and can read RFID tags with a high degree of accuracy in real-time across about 1500 square feet, and can be ganged together to cover larger areas.

What makes this Zebra solution different from other systems is that RFID reading is just one of its capabilities. It can also capture video with embedded cameras and use some ultrasonic technology to track smart phones, among other potential data feeds from one device.

This, Zebra says, can enable richer applications, such as tracking a given specific shopper through his or her smart phone combined with what RFID tagged items he or she has in a shopping cart, leading to all sorts of analytics about shopper behavior. This is innovation for sure, and a very new type of more total system solution from Zebra.

Digimarc was back to NRF with its special technology that can invisibly embed a bar code in a product's packaging. This can not only allow very rapid POS scanning (no need to orient the package to find the bar code), but support other applications.

For example, Bossa Nova Robotics has a robot that walks the store aisles, reading Digimarcs in the packaging and comparing that to the planogram to identify out-of-stocks.

Other companies have brought robotic solutions to market that do the same thing using video imaging - but the Digimarc approach is likely to be faster and offer greater accuracy.
The problem: the solution only works if all the goods on the shelf have Digimarc bar codes in the packaging, presenting a real chicken-and-egg problem.

Grocery Wegman's has been putting Digimarcs in its private label goods packaging.

Amazon Fulfillment Center Rollout Continues On

The on-line giant added 26 FCs worldwide last year, bringing its total distribution facilities of all kinds across the globe to an amazing 361, according to the consultants at MWPVL International, which have been tracking Amazon's network with rigor for years.

But Amazon is hardly slowing down. It has already announced plans for three new 1 million+ square feet DCs in Maryland, Jacksonville and the Dallas so far in 2017.


Your Comments/Feedback

Srihari

Senior Consultant, Infosys
Posted on: May, 22 2016
Great article. I am a little suprised not to see BNSF in the mix while I understand their financial mode/operation is a little different. 

That would only give a complete perspective with all the players in the pool.

Mike O'Brien

Senior editor, Access Intelligence
Posted on: May, 26 2016
Surprised to see Home Depot fall off the list; thought they were winning with Sync?

Julie Leonard

Marketing Director, Inovity
Posted on: Jun, 27 2016
Using the right tool for the right job has always been a best practice and one of the reasons, we feel, that RFID has never taken off in the DC as exponentially as pundits have been forecasting since 2006. While these results may seem surprising to those solely focused on barcode scanning, the adoption of multi-modal technologies in the DC makes perfect sense for greater worker efficiency and productivity.

Carsten Baumann

Strategic Alliance Manager, Schneider Electric
Posted on: Aug, 19 2016

The IoT Platform in this year's (2016) Hype Cycle is on the ascending side, entering the "Peak of Inflated Expectation" area. How does this compare to the IoT positions of the previous years, which have already peaked in 2015? Isn't this contradicting in itself?

Editor's Note: 

You are right, Internet of Things (IoT) was at the top of the Garter new technology hype curve not long ago. As you noted, however, this time the placement was for “IoT Platforms,” a category of software tools from a good number of vendors to manage connectivity, data communications and more with IoT-enabled devices in the field.

So, this is different fro IoT generally, though a company deploying connected things obviously needs some kind of platform – hoe grown or acquired – to manage those functions.

Why IoT generically is not on the curve this year I wondered myself.

 

 

Jo Ann Tudtud-Navalta

Materials Management Manager, Chong Hua Hospital, Cebu City, Philippines
Posted on: Aug, 21 2016

I agree totally with Mr. Schneider.

I have always lived by "put it in writing" all my work life.  I am a firm believer of the many benefits of putting everything in writing and I try to teach it to as many people as I can.

This "putting in writing" can also be used for almost anything else.  Here are some general benefits (only some) of "putting in writing":

1. Everything is better understood between parties involved.  There are lots of people types who need something visual to improve their understanding.
2. Everyone can read to review and correct anything misunderstood.  This will ensure that all parties concerned confirm the details of the agreements as correct.  This is further enhanced by having all parties involved sign off on a hard copy or confirm via reply email.
3. Everything has a proof.  Not to belittle the element of trust among parties involved, it is always safest to have tangible proof of what was agreed on.
4. There will be a document to refer to at any time by any one who needs clarification.
5. The documentation can be useful historical data for any future endeavor.  It provides inputs for better decisions on related situations in the future.
6. This can also be compiled and used to teach future new team members.  "Learn from the past" it is said.

There are many more benefits.  Mr. Schneider is very correct about his call to "put it in writing".





Sandy Montalbano

Consultant, Reshoring Initiative
Posted on: Aug, 24 2016
U.S. companies are reshoring and foreign companies are investing in U.S. locations to be in close proximity to the U.S. market for customer responsiveness, flexibility, quality control, and for the positive branding of "Made in USA".

Reshoring including FDI balanced offshoring in 2015 as it did in 2014. In comparison, in 2000-2007 the U.S. lost net about 200,000 manufacturing jobs per year to offshoring. That is huge progress to celebrate!

The Reshoring Initiative Can Help. In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the nonprofit Reshoring Initiative's free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm

Robert

Transportation Manager, N/A
Posted on: Aug, 30 2016
 Good article!  I am sending this to my colleagues who work with me.  We have to keep this in mind.  Thanks!

Ian Jansen

Mr, NHLS
Posted on: Sep, 14 2016
SCM is all about getting the order delivered to the Customer on date/ time requested because happy Customers = Revenue. Using the right tools to do the right job is important and SCM is heavily dependent on sophisticated ERP systems to get right real data info ASP.

I've worked in a DC with more than 400,000 line items and measured the Productivity of Pickers by how many "picks" per day.

I've learned that one doesn't have to remind Germany about your EDI orders.

Don Benson

Partner, Warehouse Coach
Posted on: Sep, 15 2016
Challenge - to build and sustain effective relationships at the level of the organizations that are responsible for effectively coordinating and colaborating in an otherwise highly competitive environment 

Jade

Admin, Fulfillment Logistics UK Ltd
Posted on: Oct, 02 2016
Of course we all need to up our game. We need to move with the times, and always be one step ahead of what the future will bring.

Mike Dargis

President of asset-based carrier based in the Midwest, Zip Xpress Inc. (at ZipXpress.net)
Posted on: Oct, 03 2016
Thanks for the article, but I know there's a lot more to this issue than just the pay rates. Please check out my blogs on the subject at www.zipxpress.net.

Blaine

Inventory Specialist, Syncron
Posted on: Nov, 16 2016
Lora, great article! I agree that companies choose the 'safe' solution more often than not. My solution is a bolt-on for legacy ERP's and we even face challeneges of customer adoption. Most like to play it safe and choose an ERP upgrade, which is more costly, time consuming, and has lower ROI across the board. Would love to learn more about your company, we are always looking for partnerships.

Blaine
blaine.schultz@syncron.com

Bob McIntyre

National Account Executive, DBK Concepts LLC
Posted on: Nov, 21 2016
This is a game changer in GE's production and prototyping.  It also has huge implications across the GE global supply chain with regard to the management of their support and spare parts network. 
 
 
 
 
 

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