By Susan Viamari, Principal, Retail Gateway Solutions, IRI
It sounds simple: make the customer experience great! If only it were that easy…
The reality is that creating truly great customer experiences is complex and involves several steps and stakeholders – including buyers, suppliers, distribution centers – each one vitally important to the process.
Customers expect to find what they want, when they want it, where they want it, at a price they are content paying. Most of these “must-haves” put supply chain management – and ultimately on-shelf availability – right in the cross-hairs. Consumers today encounter at least one out-of-stock item during one out of five trips to a food, drug or mass merchandise store, so there is certainly room for improvement in the supply chain process.
Detailed in IRI’s recent white paper, On-Shelf Availability: Fueling Profitability, Customer Loyalty and Topline Sales Growth, out-of-stock situations cost CPG retailers more than $47 billion annually. Yet efforts to reduce out-of-stocks often creates over-stock situations, costing retailers even more.
Striking the right inventory balance is both art and science. The good news is that technology is bringing more—and more powerful—science to bear to solve this age-old conundrum.
One large CPG supplier recently combined supply chain insights with traditional point-of-sale data to tackle out-of-stocks with one of its seasonal lines across a regional grocery banner. It tapped into an IRI Collaborative Retail Gateway to integrate its retail partner’s supply chain data with last year’s sales data. The supplier found that demand of its product in 2018 began earlier than anticipated, and that product sales were misaligned with and outpacing purchase order placement and delivery. When the start of the product’s prime season began, out-of-stocks had grown and, though ordering activity increased, warehouse shipping was unable to keep pace with customer demand. Out-of-stocks remained an issue throughout the season.
Seasonal Brand X, Historical Performance at Retailer Y
With this historical perspective in hand, the supplier’s brand managers and its retailer partner’s category buyers were able to approach the 2019 season from a stronger position. Ordering began earlier, with shipping timed against the arrival of prime season. So far, in 2019, out-of-stocks have been very low, allowing the brand and retailer partners to get the most out of the product’s important spring season.
Moving quickly from insights to activation resulted in 16.6% sales growth through reduced out-of-stocks.
Getting the right product to the right place at the right time may not be easy, but it is necessary. Failure to deliver at the zero-moment of truth is a fast-track to the bottom. Luckily, big data and technology have converged to provide retailers and their suppliers with the detailed and integrated insights they need to balance timing and quantity of inventory to meet with fluctuating demand – even for difficult-to-anticipate seasonal items. With shelves stocked accurately and appropriately, retailers can provide excellent customer experiences, building loyalty and, ultimately, lifetime customer value.
Questions about how supply chain data can help you strike the right inventory balance to win the season? Contact your IRI representative or me at Susan.Viamari@IRIworldwide.com.