ORLANDO, Fla. — In a new study of direct store delivery, in-stock levels were found to be at 98.2% — significantly higher than previous industry studies of in-stock conditions. But the study suggested numerous opportunities to further improve the in-stock levels.
The study, which was discussed this month during a session at the Food Marketing Institute/Grocery Manufacturers Association Supply Chain Conference here, was conducted by the GMA DSD Committee in concert with Willard Bishop LLC, Barrington, Ill. While most of the data in the study were reserved for participating retailers, a summary will be made available at an undetermined date.
“You would expect DSD to have higher in-stock levels, but I don't think anyone would have expected 98.2%,” said Jim Hertel, managing partner, Willard Bishop LLC, who led the panel discussion.
Retailers that participated in the study include Cub Foods, Hannaford Bros., Kroger, Safeway, Save Mart, Wegmans and Winn-Dixie. Participating DSD vendors include Bimbo Bakeries, Dreyer, Flower Foods, Kellogg, PepsiCo, Schwan's, Snyder's-Lance, Kraft Foods and Pepperidge Farm. Shelf analysis was conducted on six categories at 28 stores. In addition, interviews were conducted with 128 manufacturer sales reps (route drivers who service stores).
The shelf analysis was done on Tuesday afternoons at participating stores, using “shelf-snap” digital photos of in-stock levels to create “snapograms” that were compared with planograms of the same shelf area. “We compared the plan to the reality,” said Hertel. Since the in-stock conditions were captured at a particular point in time, the 98% level may not be achieved “every day of the week or every hour of the day,” he acknowledged.
In-stock levels were based on the presence or absence of a product on the shelf. In more than 100 previous, similar studies of both DSD and warehouse-supplied products, the average in-stock level was about 94%, Hertel said. Other studies over the past 15 years have put average in-stock conditions at 92%.
Hertel attributed the higher in-stock levels to more scorecarding and auditing of DSD vendors by retailers as well as application of best-practice techniques to eliminate out-of-stocks. “There's tons of research on best practices and companies are making strides toward adopting that,” he said.
The study suggested ways that in-stock levels of DSD items could still be improved, primarily through greater collaboration between retailers and suppliers on issues like shelf allocation and back room inventory. Other areas of collaboration include sharing of sales data, scheduling regular meetings to make planogram adjustments at stores, and establishing protocols for off-hour restocking from back-room supplies.
In terms of best practices, the study found varying levels of adoption by retail participants. While 86% of retailers allow two or more DSD suppliers to stage product for check-in at stores, only 14% assign more than one employee to serve as a receiver of DSD goods during peak times. And while all of the retailers use DSD technology like DEX, NEX and ASNs, not all give priority to suppliers who have also adopted that technology to expedite deliveries at the store.
The study also found opportunities in the survey of route drivers. Just 41% of the drivers said that they have consistent access to up-to-date information on what products have been authorized at the store. Half said that they never have access to POS store level data, and 43% indicated that waiting for products to be received into the store takes the most time away from their merchandising activities. “These are large opportunities,” said Hertel.
John Phillips, vice president, customer supply chain and logistics, PepsiCo, noted at the conference session that there is a “huge simple opportunity” to improve in-stock levels by updating planograms based on current information. “Very few retailers have a methodical way to handle exceptions and make sure information — one version of the truth — is available at stores,” he said. He added that within two to three weeks after a planogram is implemented, deviations take place based on the specific demographics of a store. “But there is no way to document those changes,” he observed. “We need to keep the communication flow current and up-to-date.”
The study also found an average of 13.1% “underfacings” — products with fewer shelf facings than assigned on a planogram. This compared with 30% underfacings in previous, similarly conducted studies. Any underfacings, said Hertel, represent “out-of-stocks waiting to happen,” especially with fast-moving items.
The study identified some opportunities to reduce underfacings, such as using syndicated and POS data at the store level, determining the necessary days of supply to establish shelf holding power for fast-moving items, and scheduling meetings between retailers and suppliers to realign facings to sales.