This year’s Grocer 33 figures show that availability is slipping at all of the major multiples. What can be done to put a lid on it?
A resounding nil points has become an unfortunately common feature of our Grocer 33 survey when it comes to availability. The major mults managed to supply our legion of mystery shoppers with a full basket just 8% of the time.
Even this year’s winner, Morrisons, managed just six full baskets out of a possible 50. Last year, that would have put it in last place. The worst, Tesco and Waitrose, managed a mere three full baskets.
This, of course, includes not-stocked items. But even if not-stocked items are discounted, average availability over the year was 95.2%, down a full point on last year. Only Morrisons managed to record an average over 96%.
In total, the multiples missed out on sales of 366 out-of-stock products and 506 not-stocked of the 8,085 the shoppers went out to buy. So why has the situation got worse? And who’s doing what to fix it?
It would be easy to blame promotions. There are more of them than ever before and they can cause confusion. “Promotions lead to massive volatility in demand. The spike could be five-fold in one store and 25 in another,” says Alan Braithwaite, executive chairman of supply chain consultants LCP and a visiting professor at Cranfield University.
Some supermarkets don’t sufficiently adjust their allocation of promotional stock according to the store’s demographic, says Storecheck Marketing managing director Colin Harper. Some stores can end up with enough stock to last for two years while others run out after a week.
“The systems supermarkets use for demand forecasting at store level are generally crude,” adds Harper.
At the moment, many involve separate IT systems for ordering, warehouse picking and store replenishment. “If those elements are joined up in a single system it’s a heck of a lot easier to find out what’s going on,” says Mark Croxton, UK managing director of Aldata.
“We’ve not done as good a job as we could have with giving suppliers information and updating it”
Another possible cause is the expansion into convenience. “In convenience, chilled and ambient deliveries are combined. But when those orders are running through the same chain they bump into each other,” says Braithwaite.
But it’s not just the systems that are disconnected. “Buyers are no longer responsible for making sure the products end up on shelf,” says one supplier. “They just negotiate the price, and then logistics takes over. There’s no joined up thinking.”
Trying to keep a healthy cashflow by cutting inventory levels has also made the situation worse, says Croxton. “With just in time you can push it too far and end up having availability issues. In a tough trading environment, some are running a little bit too tight and getting caught out.”
Some retailers don’t see a problem. When questioned about its internal availability measure, Sainsbury’s said it “performed well against our targets” and had seen availability improve over the past five years. But it declined to disclose its latest figures. The Grocer 33 data has it at 95.6% and in second place.
A similar reporting gap can be found with Tesco. In its 2010 annual report, it boasted availability of 97% in 2009, based on the fulfilment of its dotcom orders. But it hasn’t given any availability figures in its past two annual reports. And in any case, on-shelf availability can be a far cry from a slick dotcom picking operation.
This year’s winner, Morrisons, says it can react quicker to fluctuations in demand thanks to its vertical supply chain. It has also, in the past year, injected healthy competition into stores by comparing gaps each morning to see how different departments have performed. “We’re getting a very competitive edge in-store because each department wants to be the lowest,” says group retail director Mark Harrison. “And it brings to the fore that there is a gap, so we can then have a deep dive about why it’s happened.”
Morrisons has also struck a balance between head office and store level control over ordering. Production levels at Market Street are decided by the store manager. Other ranges are determined by head office, but a store manager can call up to ask for more or fewer items.
The Co-operative Grouphas seen staggering improvements since the roll out of its SMART (Store Merchandising And Replenishment Transformation) initiative, which took responsibility for ordering away from the stores.
The initiative picked up a Grocer Gold for business initiative of the year this week. With its sophisticated predictions and daily on-shelf gap scanning, Co-op Group stores are now recording availability of over 97.5%, says COO and acting chief executive of food retail Sean Toal. The group didn’t have a comprehensive measure before, but Toal estimates it was about 93.5%. The granularity of its reports are immense.
“In the recent hot weather our soft drinks sales were up by 50% but we could tell that only 11 stores at any point were out-of-stock of a two-litre bottle of Diet Coke. If you’d have asked me about that last year I’d have said ‘no idea’,” he admits. Shoppers have noticed the change too - customer satisfaction ratings are at a two-year high, Toal adds.
Currently being rolled out is an ESM (events stock management) system, which will help predict demand for promotional and seasonal lines. “It will completely manage Christmas for us,” says Toal. “The system runs a very sophisticated algorithm to forecast and take accurate EPoS readings twice a day so the teams are consistently watching demand and increasing or decreasing orders.”
And next month, the group plans to release this information to its suppliers. “If I’m frank, we’ve not done as good a job as we could have with giving suppliers information and updating it. Now they will be able to make sure their manufacturing meets our requirements.”
Similarly, Tesco is trying to share information with suppliers through a new web portal called Tesco Connect. The system gives suppliers access to sales forecasts, promotional activity and anticipated future order sizes. Combining forecasts with information on how quickly a product is selling should help suppliers to respond more quickly to changes in demand, says supply chain director Tony Mitchell. “Previously, the only way suppliers could get access to this detailed information was by sending specific teams to work with us.
“We’ve already had some fantastic feedback from the suppliers who have worked with us on the new portal. Many of them have told us that the forecast data has begun to change the way they work and will help refocus their efforts.”
A trial earlier this year with suppliers including Nestlé, Unilever and Innocent slashed shortages by a third.
The success of this will hinge to a degree on whether suppliers make good use of the data.
“Retailers are frustrated with the level of analytics their suppliers use,” says Braithwaite. “They think they could be much more participatory.”
Data could help suppliers to negotiate, too. Low sales figures from a gondola end promotion in one store and a giant spike in another would indicate that the retailer hadn’t put the products on display, for example.
“There is one thing worse than not doing research, and that is doing research and not changing in response,” Sir Terry Leahy muses in his book, Management in 10 Words. This could surely be applied to the millions of lines of data generated by grocery sales every week. Just three years ago, the worst availability score (at Asda) was 96.2% - better than any retailer managed this year.
When availability drops to 92%, as it did on 54 occasions for The Grocer’s mystery shoppers this year, it’s not just sales the supermarket risks losing, it’s the customer, warns Braithwaite.
Wherever the answer lies, poor availability shouldn’t just concern logistics. And that’s the bottom line.