Out of stocks On shelf availability "Full shelf satisfaction" Project proposal ECR Europe MunichLond

1
Out of stocks On shelf availability"Full
shelf satisfaction" Project proposal ECR
EuropeMunich/London, May 3, 2001
Out of stocks On shelf availability May 3,
2001
2
Content Page

• A. Project background - availability is still an
  issue in Europe 3
• B. Questions to be answered - designing the path
  to availability excellence 6
• C. Project approach - a 4 module approach that
  will take the participants
• from theory to implementation 9
• D. Roles of participating parties - clear roles
  of each party ensure efficient
• project work 23
• E. Project organization - close interaction with
  participating companies required 25
• F. Project timing - tangible results in 6
  months 27

This document was created for the exclusive use
of our clients. It is not complete unless
supported by the underlying detailed analyses and
oral presentation. It must not be passed on to
third parties except with the explicit prior
consent of Roland Berger Strategy Consultants.
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A. Project background - availability is still
an issue in Europe
4
Out of stock situation in Europe is still
unacceptably high even after 6 years of ECR
activity
On-shelf availability performance core
assortment
Achievable best in class results
99
D2)
E2)
Europe1)
AUT2)
Best performance
98.2
98.2
97.0
99.6
Worst performance
92.0
92.7
91.8
85.0
1) CCRRGE/Accenture 1996 2) Roland Berger study
1999
5
Out-of-stocks affect both retailers and
manufacturers up to 60 lost sales with
out-of-stock items
Lost sales retailer
Lost sales manufacturer
Consumers' reaction on out-of-stock items
What do you do if an item that you wanted to buy
is out-of-stock?
25
100
6
33
27
9
I buy another brand
I buy the missing item(s) in anotherstore
I leave the store and continue in another store
I buy another taste or another size
Total
I dont buythis item at all
Source Roland Berger European survey in 1999
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B. Questions to be answered - designing the
path to availability excellence
7
In the course of the project, the ECR key
questions have to be answered
Key questions to be answered during the project
ECR Key questions
1
What is the size of the OOS problem in Europe at
each key point of the supply chain?
2
What are the root causes for out of stocks in
different environments?
3
Which tools are available to avoid OOS and how
successful are they?
4
How should best practices look like, validated
through pilot trials and linking demand and
supply side strategies?
5
How should an easy-to-follow roadmap look like to
ensure industry-wide implementation of best
practices?
8
In order to answer these questions several
aspects will be key
Success factors
1. We should build heavily on existing knowledge
and insights, but we will need to investigate
further to ensure hard data and quantifiable
results based on a consistent methodology 2. We
have to incorporate consumer/shopper insights,
since the understanding of shopper preferences
and behavior will be key to address OOS problems
3. We should establish an easy-to-understand
and proven trial methodology, linking demand and
supply side aspects and forming the basis for an
industry roadmap 4. We should ensure a thorough
evaluation of existing and emerging tools and IT
solutions as well as the definition of additional
requirements in order to facilitate efficient
roll-out and performance monitoring
9
C. Project approach - a 4 module approach that
will take the participants from theory to
implementation
10
The ECR project is set up in 4 modules taking the
participants from research all the way to
implementation stage
Project overview
Module I
Module II
Module III
Module IV
Consolidation ofexisting knowledge
European availabilitysurvey
Pilot trials
Documentation of findings

• Availability data
• Root causes OOS
• Consumer behavior
• Current technology

• Current availability
• Root causes OOS
• Consumer behavior
• Benefits from availa-bility improvements

• Supply chain definition
• Availability assessment
• Performance targets
• Improvement strategies
• Supply chain tactics

• Handbook
• Status report
• Presentations atECR conference 2002 in Barcelona

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C.I Consolidation of existing knowledge
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Consolidating existing findings will form the
base for additional research and the pilot
preparations
I Consolidation of existing knowledge - tasks and
results
Tasks
Results
Availabilitydata
1

• Analyze existing data
• In-house
• ECR Europe
• ECR Europe participants
• Other studies

• Availability differences in different
  environments (e.g. product categories, markets,
  supply chain model)

Root causesfor OOS
2

• Analyze existing data
• In-house
• Conducted interviews of participants
• Press research

• Stages in supply chain responsible for OOS
• Identification of bottlenecks and problems at a
  micro-level
• Perceived vs. real problem areas

Consumerbehavior
3

• Analyze existing data
• In-house studies
• Research know-how on implications of OOS on
  consumer behavior
• Statistics/findings of ECR participants

• Degree of dissatisfaction in case of stock-out
• Behavior in case of OOS
• Store switching
• Brand switching
• Consumer perception of stock-outs

• Waiving of purchase

State oftechnology
4

• Existing IT solutions for supply chain management
• Technological barriers
• Future plans of IT developers

• Analyze existing data
• In-house know-how
• Corporate information of IT providers
• Studies/reports describing current state of the
  art

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Root causes for OOS in-store causes were the
most important reasons for not having products on
shelf
I.2. Root causes for OOS
Manuf. related reasons
Retailer related reasons
Total
100.0
74.0
38.3
11.9
9.8
5.5
3.8
4.7
12.3
12.3
13.6
13.6
Shortdelivery
Totalcauses
Totalstorecauses
Zerooptionmanage-ment
Inaccuratebookstock
TotalManu-facturer
Deletion inprogress
New line - not in store
Productin chiller
Sales gtforecast
Incorrectdelivery
Totalretailerdepot
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Depending on the importance and role of a
category, the replenishment schedule has to be
planned, optimal service levels need to be found
I.4. Implications of Category Role
Supply chain investment
Role
Service levels

• Best practice
• Highest level of investment
• Availability is key

• 99.5
• Replenished throughout day

Destination

• 97
• Replenished as needed

• Normal level of investment
• Availability and cost important

Core

• 95
• Replenished once per day

• No investment
• Cost is important

Convenience

• 99.5
• Replenished throughout day

• Best practice
• Availability is key

Seasonal destination

• 95
• Replenished once per day

• Minimum level of investment
• Cost is important

Seasonal convenience
Source Roland Berger
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C.II European availability survey
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The European survey will allow to quantify the
cost of out of stocks in Europe
II Contents and results of the European
availability survey
Contents
Results
Current availability
1

• Questionnaires and interviews with multinational,
  multi-format retailers and multinational
  manufacturers
• Store checks

• For 3 markets (developing, mature, sophisticated)
  availability data for categories, store formats
  etc. will be collected
• Availability development

Root causes for OOS
2

• Questionnaires and expert interviews with
  responsible managers along the entire supply
  chain on
• Perceived problems
• Usage of IT-tools

• Location of bottlenecks/problem fields
• Quantification of problem impact
• Development of root causes over time
• Usage and acceptance of new technologies(ECR,
  CPFR, etc.)

Consumer behavior
3

• Questionnaires and interviews with
• Consumers
• Participating companies

• Consumer perception and behavior with regard to
  OOS
• Approach for companies to evaluate data on OOS
  find percentage of lost sales for a)
  manufacturers andb) retailers

Benefits from improvement
4

• Best practice analysis
• Comparison participating companies with best
  practices
• Combination of existing and new data

• Improvement potential quantified
• Improvement potential for
• Product categories
• Countries
• Groups of retailers/manufacturers

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C.III Pilot trials
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In module III, an availability improvement
roadmap will be developed and tested in close
cooperation with participants (1)
III Pilot trials
Contents
Results
Supply chain definition
1

• Choice of a product category
• Analysis of the supply chain for this category in
  3 different-ly developed markets
• Tool Workshops, expert interviews

• Process mapping for entire supply chain (product
  and information flow)
• Strengths and weaknesses of process
• Differences in supply chain strategies for
  different markets and store formats

Availability assessment
2

• Assessment of supply chain (product information
  flow) with 4 measures
• Structure of process (plants, IT infrastructure)
• Costs of core processes
• Volumes for each case process
• Performance of processes (forecast accuracy,
  inventory levels, etc.)

• Current distribution structure and availability
  performance of participants
• Key business opportunities to improve
  availability in the short and long run

Performance targets
3

• Matching of traditional targets (stock levels,
  lead times, wastage) with current category
  marketing strategy
• Consideration of supply chain structure and
  availability performance

• Determination of relevant availability targets
  for chosen category
• Targets for all participants of supply chain

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In module III, an availability improvement
roadmap will be developed and tested in close
cooperation with participants (2)
III Pilot trials
Contents
Results
Improvement strategies
4

• Evaluation of different possible availability
  improvement strategies, considering potential of
  IT solutions
• Design of ideal information flow, IT
  requirements, possible integrated category
  management CPFR application

• Strategy that incorporates set targets, using IT
  solutions
• Cost-benefit analyses of different IT tools

Supply chain tactics
5

• Workshops with participants on previous
  experiences with measures such as CRP
• Analysis on effectiveness of CPFR
• Validation of tactics against performance targets

• Definition of range of tactics/measures that
  employ development strategy action plan
• Evaluation of effectiveness of CPFR

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With regard to tactics we will also look at the
impact CPFR can have on improving availability
III.5. improvement tactics CPFR
POS data
Exception triggers
Retailer support data
Retailer
Resolve, collabora-te on exception items
Collabo-rative activities
Develop common front-end agreement
Generate joint business plan
Identify exceptions for sales forecast
Identify exceptions for order forecast
Resolve / collaborate on excep-tion items
Create sales forecast
Create order forecast
Order gene-ration
Manufacturer support data
Manufacturer
Exception triggers
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C.IV Documentation of project findings
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The project documentation will be an
easy-to-follow roadmap to facilitate
industry-wide implementation of best practices
IV Project documentation
Contents
Reasoning
Handbook
1
ECR roadmap
2
Presentation
3
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D. Roles of participating parties - clear roles
of each party ensure efficient project work
24
In order to conduct a successful project, all
participants will have to give considerable input
Roles and Responsibilities

• Roland Berger
• Deliverables
• Guidance/methodology
• Preparation of workshops/meetings
• Consolidate analysis
• Strategy development
• Overall project management

• Participating companies
• Deliverables
• Data provision
• Analysis of data
• Collaboration at meetings and workshops
• Completion of assignments

ECR Europe study "Full shelf satisfaction"
25
E. Project organization - close interaction with
participating companies required
26
Critical success factor for the project will be a
consequent project management focussing on the
collaboration of the different parties
Tasks
Steering group

• Definition of project milestones
• Project revision on a regular basis

• Roland Berger
• Gerhard Haus-ruckinger (Partner)
• Markus Tkotz (PM)

• ECR Europe
• N.N.
• N.N.

Project management

• Realization of project goals
• Data collection and analysis
• Strategy deployment
• Usage of simulation tools
• Execution of European study
• Communication towards projects management
• Integration of participating parties

• Roland Berger
• N.N.

• ECR Europe
• N.N.

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F. Project timing - tangible results in 6 months
28
The project will take about 6 months until
completion during this period, a series of
workshops and status presentations will be held
Project timing "Full shelf satisfaction"
May
June
July
August
September
October
November
December
Month
Week
Modules
Workshop
Duration
Milestone
Source Roland Berger