Out-of-Stocks Never Die . . . . Part Three
Lisle, IL. April 19, 2006. In our first two articles in this series we re-examined out-of-stocks from two perspectives. The first article reviewed over 50 separate studies on measurements, impacts and causes of out-of-stocks. The second article explored some long forgotten, as well as, recent findings about the strong sales impact of out-of-stocks.
Today, we will examine reasons why many supply chain investments dealing with out-of-stocks were ineffective.
Many of the efforts to reduce out-of-stocks in the late ‘90’s and early 2000’s were directed toward supply chain improvements: taking the inventory out of the chain and reducing the time from supply to store. However, 70-75% of all out-of-stocks are the direct result of retail ordering and shelf replenishment practices. Many supply chain efforts while helpful in other ways, could not solve retail out-of-stocks because they were aimed at areas other than the retail side of the business.
The solutions that did attempt to address the retail issues fell into two camps:
-
Process solutions - an attempt to change retail personnel habits at the shelf.
-
Technology solutions - replacing retail clerical efforts.
The process solutions aimed at increasing in-stock levels worked in the short run but were generally short lived due to the complexity and cost of managing these solutions in a retail environment.
Technology solutions attempting to supplant forecasting and ordering functions, carried out today by retail personnel are often too cumbersome to maintain. Other solutions, such as the current RFID efforts at Wal-Mart, produced limited success but at significant cost.
The most successful effort to date involves the combination of technology and process. Gladson QuickSet™ Permanent Image Shelf Strips used across the store have substantially reduced out-of-stocks by over two-thirds resulting in sales increases of over 20%. This solution includes the specific product image on the shelf tag or strip with appropriately spaced product information to physically represent the category planogram on the shelf. Also included is the product-specific information such as price, reorder UPC and product description, which has proven successful in combating out-of-stocks.
