In: Operations Management
write your 200-word response to the questions below.
What makes a great grocery store in your opinion?
Ask your family/friends what they think and then describe your findings.
What do you think you could apply to opening up your own retail establishment and why?
Ans: There are few challenges in retail tougher than managing groceries; optimizing a broad inventory that includes fresh and short-shelf-life products is not easy. And there are few things that show better what a supply chain professional and a supermarket inventory management system can do and the impact they can have on profitability. Better replenishment of perishables means your displays look better, customers get fresher goods and you sell more. So let’s look at how effective grocery store inventory management makes best use of products’ shelf life information and category level consumer behavior to cut retail food waste.
1. DEFINE YOUR GOALS AND PRIORITIES – KNOW WHAT YOU VALUE MOST
Having worked with fresh goods wholesalers and retailers from big to small, high end to price-driven, supermarkets, convenience stores and cash & carry chains it’s clear that replenishment teams walk a tightrope between spoilage costs and shelf presentation, so it’s really important to get the balance right.
2. NEVER OVERLOOK PRODUCT LEVEL SHELF LIFE WHEN ORDERING
All major retailers have contracts with suppliers that specify that items have an agreed minimum shelf life when delivered. But this information isn’t always given sufficient importance in replenishment, as sell-by dates vary from delivery to delivery. However, the variables can often be worked into forecasts.
3. INCORPORATE FORECASTED SPOILAGE – SIMULATIONS CAN HELP
Spoilage forecasts can be used in order parameter calculation, but we also use it in replenishment calculations by factoring in future spoilage. In DC environments we usually do this by introducing batch level inventory balances with ‘sell-by’ date information. This helps keep availability high by replenishing before stock spoils, and it also flags items that need to be sold quickly.
4. MANAGE EACH PRODUCT INDIVIDUALLY – BUT UNDERSTAND HOW PRODUCTS BEHAVE IN GROUPS
In many perishable categories, products often substitute so readily for one another that the consumer can switch without a second thought. Fresh bread is a good example. With one particular client we began the process of optimizing bread replenishment by identifying ‘must-haves’ in each sub category via store-level ABC-classification.
5. DIVE INTO YOUR DAY-LEVEL DATA
In retail, big gains come from small improvements across countless SKU-Store -combinations. To get the big figures right you have to master your low level data. One good example is from a department store that’s known for its high-end food halls. When managers followed up an exception alert they discovered unacceptable levels of spoilage on fresh meat counters. An analysis of store-level data suggested that the problem only affected smaller, out-of-town stores.
Good data is essential for good grocery store inventory management, especially given it’s such a complex environment, but it’s not enough of itself. All the data in the world is of no help if you can’t access it and make sense of it easily. To do that you need a supermarket inventory management system with the power to handle big data, to interrogate it however you choose and to deliver results in real time. After all, if you’re managing fresh goods, a two hours wait for an answer to an important question is two hours too long.