I recently did an interview with Dan Gilmore from the Supply Chain Television Channel discussing a recent Wall Street Journal Article titled "Walmart and Kroger Get Tough with Food Suppliers on Delays." The subtitle was "Traditional grocers battling Amazon want to claw back sales lost when items are out of stock, equal to some 10% of annual sales, they say."
Dan asked me if this was news. It is news to the grocery industry but apparel and hard goods retailers have been levying fines on vendors for shipping on-time and complete and other supply chain failures for years.
Compliance Networks Says... |
 |
| For years we have discussed poor ASN Carton Accuracy as one driver for inaccurate store inventory. |
 |
|
|
What is new is that in this brave new world of ecommerce and the success of Amazon, retailers are leveraging their physical stores as a competitive advantage to satisfy a busy consumer. It is known as BOPIS or "Buy Online, Pick up in Store."
Home Depot, Best Buy and others have been doing it for years. Grocers are taking it a step further. Basically you enter your grocery list, an associate will pick the order and notify you when it is available to be picked up. You drive to the grocery store, park in a special location, call a number and tell them what space you are in and they deliver your merchandise.
Pretty cool.
Thinking about my personal grocery shopping experience helps me understand this better. I went shopping with my wife for Thanksgiving. She had a two page list of items and would highlight the items as she handed them to me to place in the basket. (I am a logistics guy and load grocery baskets as if I were loading a trailer so she is not allowed to put items directly in the cart.)
Too often that day and on others, what is on our list was not on the shelf. Occasionally, on similar trips we ask a store associate if there is any in the back. Sometimes yes, sometimes no but every time we check out, the checker asks: 'did you find everything you were looking for today?' Sometimes yes, sometimes no, but nothing happens. They don't ask what, they don't write it down, they are just being friendly and asking. Maybe they talk about it in morning meetings.
Back to BOPIS: Now think about the same process where a store associate is picking an order. They have a picking list (grocery list) and are moving up and down the aisles to pick my order. When they can't find something on the shelf, I assume they look in the back and then call a manager. As the BOPIS trend continues, the manager is getting called more and more often.
Eventually, district managers here it more frequently from their store managers and regional managers hear it from the district managers and so on. Store operations makes an effort to identify empty shelves and keep product moving from the back rooms. What happens when it is not in the store? How do we get it here?
Visit the Retail Vendor Performance Management home page to learn more
and subscribe to the monthly newsletter.
Walmart and Kroger and even Target have turned their attention to the vendor community. They recognize they can't sell it if they don't have it and shipping variability is having an impact on their in-stock position. To that end, Walmart has reduced their delivery window from 4 days to 2 and increased their fill rate requirement from 90% to 95%. Kroger, according to the article, is fining  suppliers $500 for every order that is more than 2 days late.
Will this solve the problem? It is only one tactic of several that should be investigated. Retailers need to do more to correct poor inventory accuracy in the stores. For years we have discussed poor ASN Carton Accuracy as one driver for inaccurate store inventory. Retailers also need to do more to understand shipping variability and reduce it or at least account for it.
What changes would be made to the order process if a buyer knew one category for a vendor had a typical fill rate of 95% and another 87%? What if they knew one vendor always shipped 5-7 days late? Or if three vendor DCs shipped on time but one vendor DC was always 5 days later?
This is all a lot of information for a human to consume but easy for machines if the data exists. This is an exciting time for us because 17 years ago we started a company to help retailers automate the vendor compliance process; from identification, calculation and communication. To do that we needed data from execution systems. As a result, we have the data that can help retailers make this a reality.
We might not eliminate all out of stocks but perhaps next Thanksgiving we only have to go to two stores and not four.
Any comments on this article? Please send below.
Your Comments/Feedback
|
