Stefan Hahn, G\u00f6tz-Andreas Kemmner<\/p>\n
The German retail sector has considerable inventory reduction potential that needs to be identified and leveraged. High stock levels both in the central warehouses and in the outlets cover up weak points in the processes that cause bottlenecks, out-of-stocks and delivery delays.<\/strong><\/p>\n On average, 13% of retail sales are tied up in inventories. This results in an inventory range of well over one month. However, the resulting considerable cost reduction potential is often not recognized and lies dormant in retailers’ warehouses. This is astonishing when you consider the weak margins in this sector.<\/p>\n A decisive argument against reducing stock levels in the retail sector is certainly the fact that, despite modern logistics and ERC (Efficient Consumer Response) systems, stock-outs (gaps between shelves) still frequently occur in retail outlets. However, studies show that the main causes of stock-outs are usually found in the last 10 meters to the shelf. Consequently, they cannot be improved by optimizing the supply chain or by increasing stocks upstream in the supply chain.<\/p>\n Missing items on the shelf lead to lower sales for retailers and manufacturers. According to studies, consumers very often switch brands rather than shopping locations if the desired product is not available on the shelf. However, if you look at the nine percent non-purchase rate, the European food retail trade, and therefore also manufacturers, lose over EUR 4 billion in sales every year due to items not being available on the shelves. In Germany, the non-purchase rate of 14% is even well above the European average.<\/p>\n But why are many retail outlets unable to make sufficient deliveries? Studies show (e.g. OSA study Roland Berger 2003) that the area of “in-store logistics” (store ordering, shelf service) is a disproportionately high cause of errors. The most important causes here:<\/p>\n This means that almost three-quarters of the identified shelf gaps occur within the store’s sphere of influence. 10% are due to the connected ERP system (scheduling and forecasting system) with incorrect forecasts, excessive minimum order quantities or incorrect parameterization at article and supplier level. Only 4% of the shelf gaps investigated were due to delivery errors by the manufacturer and 12% were caused by listing discrepancies! These figures show that incorrect disposition mechanisms at manufacturers and retailers are responsible for only 14% of out-of-stocks. However, they are responsible for a good 80% of the existing surplus stocks.<\/p>\n A look at purchasing behavior makes it clear how important product availability at the point of sale is for customers. As many as 14% of customers in German retail stores do not buy anything if the desired item cannot be found on the shelf. (Source: ECR Europe)<\/p>\n Almost three quarters of all availability problems are caused in the stores, particularly in the last 10 meters to the shelf.<\/p>\n These figures already show that a high level of delivery readiness and low inventories are not contradictory, but rather are components of efficient inventory management that need to be adjusted individually. Increasing stocks in order to achieve delivery readiness is therefore rarely the necessary answer. In most cases it is even wrong. Further studies show that manufacturers and retailers who manage their supply chain efficiently tend to achieve better out-of-stock rates with significantly lower inventories.<\/p>\n\n
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