The number of headaches that are induced by on-shelf availability problems at Christmas will make retailers very thankful that the festive season comes only once a year.
One issue is that forecasting when customers are going to buy is increasingly challenging. Many people postpone their shopping, banking on last-minute Sales, which makes matching on-shelf availability with demand unpredictable.
Some retailers wrongly assume that customers will be more forgiving at Christmas if products they want are not available, because they believe they should have done their shopping earlier. This may be more forgivable in the last week before the big day, but will not sit well with customers looking for that must-have product, and it is particularly inexcusable in November. As Unipart Consumer Logistics sales director Paul Brooks says: “At this time of year, people will expect to find any promoted item in full capacity and availability.”
Good planning and forecasting is key. Comet head of supply chain Steve Pooley says initial peak planning meetings take place as early as January at the electricals retailer. It begins to build detailed supply chain plans that focus on the challenges ahead and incorporate key lessons from the previous year’s activity.
“The business is kept up to date with progress throughout the year and our activity ramps up as Christmas nears. Our experienced supply chain managers initiate frequent meetings with suppliers and distribution partners to alert them to challenges and needs,” he says.
Mamas & Papas commercial director Tim Maule says the maternity retailer prepares all its seasonal ranges in terms of design and supply chain at least a year in advance, with all marketing and retail activities decided and set in motion by March that year.
Similarly, NYK Logistics chief executive Ian Veitch says: “For us, Christmas starts at the beginning of the year. We start doing our first planning meetings at Easter and by summer we know the promotions retailers will be running.”
However, if retailers haven’t got the basics right by now, there is not much they can do before Christmas. Itim Consulting partner Karen Coxall says: “There are very few products you will be able to get in time for Christmas now.”
And getting planning and forecasting wrong does not just affect Christmas. “You get a knock-on effect for the rest of the year if you have slow-moving product that blocks you up for your peak. In line with forecast capacity planning is key,” explains Veitch. “Promotional product doesn’t have much value on December 26, so you have to get planning right.”
But there are ways to improve the chances of success. Some retailers are dual sourcing – in other words, sourcing the same product from both a local supplier and one further afield. KSA director Ruth Leak says this can bring significant advantages, because it offers greater flexibility. Pooley says Comet continually reviews supply chain plans against activity and adapts them accordingly. “This fluidity helps us recognise potential issues early and ensures great Christmas availability across all key lines,” he says.
GOOD VISIBILITY IS KEY
Availability is also reliant on knowing exactly where goods are within the supply chain and ensuring adequate time to get them to stores. Veitch says: “A lot of non-food product comes from the Far East or Europe, so shipping lines are busy and a lot of the infrastructure is fairly congested. You have got to have visibility of the inbound supply chain.”
It is also important to check stock at the first opportunity to ensure that product labelling matches what is in the box and therefore what goes on the stock systems in the first place, says DHL retail and consumer chief executive Perry Watts. “Many supply chains are going further afield and that brings with it the challenges of quality of labelling and packing. If a box comes in labelled red jumpers when they are blue and that doesn’t get discovered until it’s unloaded at the store’s back door, that’s an on-shelf availability nightmare waiting to happen.”
Keeping accurate stock records is also essential. Leak says the single greatest cause of poor availability is stock file inaccuracy. “The systems may be great, but people aren’t as good at reading systems. When it gets busier at Christmas and temporary staff come in, store disciplines can break down and you can also get poor data,” she says. Stock inaccuracy can be as much as 30 per cent, with 15 per cent being the average, according to Leak.
Availability needs to be addressed by all parts of the business. Coxall believes that there has been a lack of understanding on the part of merchandising and replenishment teams. She says that one example would be buying too much for the distribution centre to cope with, so products are pushed out to the store, causing shelf availability problems for other products. “Some retailers have the idea that if you fill the DCs, the stores will be ok. But once the DCs reach a certain service level, any improvement beyond that has very little effect on on-shelf availability.”
Replenishment systems themselves can also cause problems. “A lot of these systems are based on sales history, but if you’ve had out-of-stocks it’s not a true reflection of sales,” she says. As a result, retailers need to analyse their processes and systems in order to find long-term solutions and ensure there are not anomalies built in that can skew the replenishment process.
Coxall adds that one of the reasons for skewed figures is retailers taking a one-size-fits-all approach to replenishment. “The way you treat faster moving products can’t be the same as how you treat slower moving goods,” she says. And this can even feed through to the basics, such as shelf filling. “I’ve seen companies where they’ve had the most sophisticated replenishment algorithms you can think of, but the basics are completely shot,” she says. “If you don’t have the right processes to get product onto shelves, you won’t get it right.”
However, by focusing on the store, retailers can find quick fixes during the last few weeks before Christmas. Coxall believes ownership of on-shelf availability can be one of the biggest stumbling blocks. She says that most retailers start wrongly by looking at the beginning of the supply chain, where problems can seem insurmountable. Instead, if you work back from the store, it becomes a much easier job. “One of the biggest problems with availability is the number of factors involved. The most effective way is to start with the customer and their view and perception of availability,” she says. Itim believes that about 70 per cent of availability problems can be fixed in-store.
A well-organised stockroom is also vital – especially at Christmas, when the tendency is to ram both stores and stockrooms with extra goods. DHL Exel helps retailers introduce warehouse-type systems into their stockrooms. Watts claims such actions have increased availability by 8 per cent. “We’ve gone in and relocated and relaid out the backstage using our warehouse management systems and have brought in location codes and other disciplines learnt from our warehouse background,” he says. He points out that store staff do not necessarily like unloading goods at the back door, replenishing shelves and organising the stockroom. “Store operations people don’t tend to be good stock managers in that respect,” he says. DHL takes over shelf-stacking for some retail clients, sending its staff in during the night to replenish shelves.
Better organisation of delivery of stock to stores can also help improve availability. Brooks says: “We work very hard to make product identifiable at the back of the store.” At Homebase, Unipart introduced a red, amber, green sticker system that identifies the urgency of stock – red being a customer order or out-of-stock. This helps improve in-store visibility, which can have a dramatic effect on sales, Brooks adds. “It’s absolutely critical. Two to three hours can make a 10 per cent to 15 per cent difference on sales.”
Unipart has also worked with Boots, where it introduced a system in which goods were picked in the warehouse according to shelf display plans, making it quicker and easier to replenish the shelves and less congested in-store. This also helps solve potential availability problems caused by inexperienced Christmas temps on the shopfloor.
Many people recommend focusing resources on key lines over the Christmas period. Coxall says: “Only a few per cent of products produce more than 90 per cent of revenue, so if you target the top-selling products you don’t have to focus on many products to be effective.” If product sells out, substitution can help slower-moving lines sell. “Substitution can improve margins, because you avoid markdowns,” says Leak.
John Lewis head of supply chain and administration Andy Banks says: “To make sure customers get the very best on-shelf availability, we ramp up warehouse deliveries to seven days a week, flow stock directly to the shopfloor wherever possible and undertake numerous on-shelf checks of best-sellers every day in all of our shops. We also put particular emphasis on our star lines with extra purchase quantities and use a range of communications to ensure that every partner is able to recognise, promote and have the product knowledge to sell confidently.”
Everyone in the business must be aware that they play a part in ensuring good on-shelf availability. “You should focus on roles and accountability,” says IGD supply chain business analyst Darran Watkins. Everyone involved, from the supplier to head office and store staff, must know what their role involves.
At Currys, supply chain director Jeremy Ross says the launch of its Newark distribution centre brought about an opportunity to invest heavily in training for the entire team, including delivery drivers and warehouse operators, as well as management. “Everybody understands the role they play and we are already seeing new levels of collaboration between commercial planning teams, operations teams and store teams – not to mention suppliers. We’ve established a robust meeting and reporting schedule, which will allow us to review and amend our plans accordingly. We can react quickly to any surge in demand or surprise stock issue,” he says.
It may only be a matter of weeks – if not days – before festive shopping fervour gathers pace, but it is still not too late to ensure availability is top of your Christmas list.