How Can Grocers Improve In-Stock Levels?

Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine. Pre-pandemic, poor forecasting was often tied to regional differences or shifting consumer preferences, and was often pinpointed as the cause of grocery’s high level of stockouts. Today, there are a whole slew of contributing factors. At the supply chain level, David Wendland, VP of strategic relations at Hamacher Resource Group, says the pandemic not only revealed an over-reliance on off-shore production and current distribution networks, but shortages of raw materials, packaging materials and available labor. Labor challenges, including lack of personnel and training, are also a considerable issue in restocking shelves and planogram compliance at the store level. Only 37 percent of grocers in the U.S. and Europe recently surveyed by Retail Insight felt they had enough staff to stock shelves adequately. Ken Morris, managing partner at Cambridge Retail Advisors, says successful marketing campaigns and promotions can lead to stockouts, although promotion stockouts should be expected (and planned for). Another common cause of out-of-stocks is poor inventory management, which some grocers are addressing through artificial intelligence, RFID and effective product substitution practices. Similarly, many out-of-stocks stem from inconsistent or inaccurate data management. Vendor collaboration can be part of the solution as some grocers, including Kroger, clearly communicate with vendors to identify what’s in stock and help ensure a smooth inventory flow into the warehouse, according to Adnan Durrani, CEO of Saffron Road. At the same time, grocers should prioritize vendors that consistently deliver on time and in full (OTIF) and ensure suppliers aren’t prioritizing competitors with fill-ins over them. Adding backup suppliers to the mix highlights a continued shift from just-in-time to just-in-case inventory replenishment. Keeping safety stock, however, is expensive and can take away warehouse space that might have been used to bring in new innovations. Streamlining the assortment can help boost on-shelf availability. Mr. Wendland believes it’s critical to identify what he calls “Never Outs” and then make sure they’re… well, never out. “These are the items within the category that represent the majority of sales (think 80-20 rule) and/or are game-changing new products that are heavily promoted, differentiated and incremental,” he explains. However, SKU rationalization at the expense of innovation risks losing customers to chains that offer the variety they crave.

• March 2023 Edition — Frozen & Refrigerated Buyer