WareLite Real Time Demand Chain Management A Simple Solution to Shelf Out of Stocks

Transcription

1 WareLite Real Time Demand Chain Management A Simple Solution to Shelf Out of Stocks Powered by WareLite BOSS Enabled by IBM Integration Framework 3 rd EPTS ing Symposium, Orlando, September 2007 Elena Pasquali, CEO, WareLite ltd elena.pasquali@warelite.net WareLite

2 Shelf Out of Stocks: the Problem s Size Retail Out-Of-Stocks (OOS) rate is on average 8.3% 1 globally This figure doubles (16.5%) for products under promotion 3, increasing up to 30% in Europe 11 Out-of-Stocks cause retailers an average 4% sales loss 1 Stock-outs cause walk-outs: in % of customers chose to shop elsewhere when faced by an empty shelf 5 Overstocking to prevent OOS cost retailers around $40 billion globally 8 25% of Out-of Stocks globally 1 and 38% in Europe 9 are due to the fact that the goods are available in the store s backroom but are not displayed on the shelf 2

3 Shelf Out of Stocks remains an unsolved problem for retailers and manufacturers Despite investments in sophisticated analytical tools, HR initiatives and RFID implementations, shelf out-ofstocks remains a largely unsolved problem Stock levels at the big six Tesco, Sainsbury s, Asda, Morrisons, Somerfield and Waitrose have deteriorated over the past six months compared with the first half of the year Sean Poulter, Daily Mail, December 18, 2006 Today s CP processes for demand sensing and shaping take 7 to 9 days to correct an out of stock. [ ] Retail perpetual inventory accuracy is worse than originally believed. The inaccuracies of even Wal-Mart store-level inventory data triggers manufacturing replenishment two days too late at a store level. L Cecere et Al, What We Have Learned From Three Years of Retail RFID Pilots, AMR Research, April 2007 The root cause of OOS is in the lack of consistent, automated, real time monitoring of On Shelf Availability i.e. Demand - across all products in store. WareLite Real Time Demand Chain Management addresses this issue WareLite

4 The Current Approach to On Shelf Availability Measurement 6,11 The direct measurement of actual OOS is still manual: POS data is only analyzed retrospectively i.e. indirectly - to provide demand forecasts and prediction of likelihood of out-ofstock 6,11 4

5 WareLite Real Time Demand Chain Management: Automated In- Replenishment SHELF POS Operator Purchase Alert: Re-stock Shelf RFID Alert: Re-stock Backroom Operator 5 or... Replenishment...Operator Backroom

6 WL DCM: and Enterprise Enterprise Enterprise Enterprise supports real time in-store operations, managed by WL DCM; Enterprise supports Real Time Dashboards, managed by third party BI/BAM tools 6

7 WareLite Real Time Demand Chain Management: the Purchase Purchase Calculate Sales Trend Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation 7

8 WareLite Real Time Demand Chain Management: the Purchase Purchase OSA Tx = OSA T0-1 Calculate Sales Trend Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation 8

9 WareLite Real Time Demand Chain Management: the Purchase Calculate Sales Trend Purchase Enterprise Amount of product sold per time unit (e.g. 2 minutes) Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation 9

10 WareLite Real Time Demand Chain Management: the Purchase Calculate Sales Trend Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation Purchase Quantity Sold Cumulative Sales Enterprise Conditioner Brand X: Current Sales Trend 09:00 09:30 10:00 10:30 11:00 11:30 12:00 12:30 13:00 13:30 14:00 14:30 Time Conditioner Brand X: Current Sales 09:00 09:30 10:00 10:30 11:00 11:30 12:00 12:30 13:00 13:30 14:00 14:30 Time 10

11 WareLite Real Time Demand Chain Management: the Purchase Purchase If a product is selling so quickly that it risks going out of stock in a time shorter than the replenishment time, an Operator is sent an alert Calculate Sales Trend Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation 11

12 WareLite Real Time Demand Chain Management: the Purchase Purchase Watermarks can be defined differently for each single product and they can be fixed, semifixed or variable Calculate Sales Trend Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation 12

13 WareLite Real Time Demand Chain Management: the Purchase Calculate Sales Trend Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation Purchase When a Low Watermark alert is sent, a Pending Replenishment Operation is opened. This will be closed only when the shelf replenishment will have been completed. The time elapsed between the opening and closing of the operation is calculated, allowing measurement of Operational Effectiveness 13

14 WareLite Real Time Demand Chain Management: the Purchase Purchase Calculate Sales Trend Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation 14

15 WareLite Real Time Demand Chain Management: the Purchase Calculate Sales Trend Update Sales Trend History Analyze Sales Trend & Alert Open Pending Operation N. of Alerts Purchase Conditioner A OOS Current Status - 14:30 Today Shampoo B Toothpaste C Wipes C Product Name Mask D Lipstick Z Enterprise N. Trend Alerts N. Low Watermark Alerts N. OOS 15

16 WareLite Real Time Demand Chain Management: the Shelf Replenishment Replenishment Close Pending Operation Update Warehouse Availability 16

17 WareLite Real Time Demand Chain Management: the Shelf Replenishment Replenishment Close Pending Operation Update Warehouse Availability OSA Ty = OSA Tx + N 17

18 WareLite Real Time Demand Chain Management: the Shelf Replenishment Close Pending Operation Update Warehouse Availability Replenishment Minutes Operational Effectiveness - Average Shelf Replenishment Time Today Conditioner A Enterprise Shampoo B Toothpaste C Wipes C Mask D Lipstick Z Product 18

19 WareLite Real Time Demand Chain Management: the Shelf Replenishment Close Pending Operation Update Warehouse Availability Replenishment Legacy Inventory Management Application Warehouse Availability Ty = Warehouse Availability Tx - N 19

20 WareLite Real Time Demand Chain Management: the Shelf Replenishment Replenishment Close Pending Operation Update Warehouse Availability Alerts can be sent to Managers, Depot Operators, Suppliers etc. Standing orders, delivery schedules etc. can be automatically updated 20

21 WareLite Real Time Demand Chain Management: the Shelf Replenishment Replenishment Close Pending Operation Update Warehouse Availability Up to the minute data available by product, store, region, globally etc. Enterprise 21

22 WL DCM and IBM SIF: Architecture Overview 3 Party IMS/ERP 3 Party POS SAP Oracle... Portal DCM-ENT DCM-ENT EXTENDA DCM-ENT DCM-ENT RETEK IBM STORE BROKER MQSeries DCM-RT DCM-RT... IBM Mobile Front-End DCM-RT DCM-RT

23 WareLite Real Time Demand Chain Management: Benefits It brings an instant 1% increase in revenues by eliminating those 25% of Out-of-Stocks that arise when goods are available in store but are not on the shelves It makes more efficient use of shelf stackers and shop floor operators time, thus reducing operational costs and increasing employee satisfaction It improves the customers' buying experience, leading to increased loyalty and future revenues Provides real time visibility over sales volumes, sales trends, outof-stocks, inventories and operational effectiveness, allowing both timely responsiveness to unexpected events and better planning, thus addressing those 47% of OOS that arise from inaccurate demand forecasting - increasing revenues by another 1.88% By sharing real time demand data between retailers and suppliers, the final 28% of Out-of-Stocks that arise from mismatches between suppliers capabilities and customer demand can be addressed and eliminated, adding a final 1.12% to turnover 23

24 Acknowledgments For their contribution to the development of WL DCM and unwavering support, we thank Dr. Adriano Visconti, IT Director, Coop CentroItalia The Motorola (Symbol) EMEA team With special thanks to James Pemberton, Strategic Alliance Director The IBM Retail Innovation/EBO Team (Northern and Southern Europe) With special thanks to Chris Osborne 24

25 References 1. Grocery Manufacturers of America et Al, Retail Out-of-Stocks: A Worldwide Examination of Extent, Causes and Consumer Responses, October D. Corsten, T. Gruen, Stock-Outs Cause Walkouts, Harvard Review, May J.C. Taylor, Retail on-shelf performance of advertised items: An assessment of supply chain effectiveness at the point of purchase, Journal of Logistics, L.W. Emmelhainz et Al, Logistics Implications of Retail Stockouts, Journal of Logistics, n. 2, John Davison, How retailers can keep the customer satisfied, Computing 19 Jan 2006, 6. ECR (Efficient Consumer Response) UK, Availability - A UK Perspective, IGD (Institute of Grocery Distribution), E Pasquali et Al, WareLite Real Time Demand Chain Management A Simple Solution to Retail Out-of-Stocks, WareLite 8. Rene Schrama, Beyond the Hype Delivering On-Shelf Availability, Symbol Technologies 2006, 9. Bill C Hardgrave et Al, RFID s Impact on Out of Stocks: A Sales Velocity Analysis, RFID Research Center, Information Technology Research Institute, Sam M. Walton College of, University of Arkansas, June 2006, L Cecere et Al, What We Have Learned From Three Years of Retail RFID Pilots, AMR Research, April 2007, ECR Europe, How to improve Consumer Response and Sales Performance through On-Shelf- Availability ECR Europe Forum, Milan, 8 May 2007, Dirk Heyman, Procter & Gamble, EPC Enabled Promotional Display excellence ECR Europe Forum, Milan, 10 May 2007, 25