Perfect in-store execution, a major source of untapped value

8/13/2019 Perfect in-store execution, a major source of untapped value

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Perfect In-Store ExecutionUnlocking the Value for Retailers andManufacturers

Rod StreetStrategic Consultant, IRI

October 2013


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Perfect In-Store ExecutionUnlocking the Value for Retailers and Manufacturers

The In-Store Challenge

What is it worth to your businessto deliver a perfect in-storeshopping experience every time?

The answer will vary, but it isbound to be a big number.

Poor execution reduces themarket share of retailers andbrands every time the shopper

arrives at the shelf and theirexperience is not perfect.

How would you define perfectin-store execution?

We believe it is where:

The right stores are holdingthe product the shopper wants

The product is merchandisedin the right place in-store (onshelf, bin or end)

The brand is in stock, in theright pack size, at the time theshopper arrives

The right price andpromotional offer is made tothe shopper

Enough, but no more,inventory is available

Sadly, despite nearly a hundredyears of self-service grocery,creating this experienceconsistently remains an industrywide challenge. It is estimatedthat as few as one in 25 just4% of shopping trips end incomplete success 1 . Ironically,failure not only disappoints

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shoppers, it also raisesoperational costs, making itdoubly damaging!

The increasing use of retailer point-of-sale (POS) data provides the fuel to get closerto perfection.

Embedded in processes and usedacross categories and partners,retailer POS data enablesmaximum value to be extractedfor all players and shoppers.Leading companies are nowstarting to target this pot of valueaggressively.

Since the 1990s, retailer -supplier partnerships to exploitretailer POS data have generatedacronyms like VMI, CRP andCPFR, all designed to move closerto a demand driven supply chain.

Initially, most use of this datafocused on simply improving on-shelf availability and inventorymanagement. But since themillennium, it has been used in amuch wider variety of ways toimprove both supply and salesoperations, including promotionaloptimisation, product lifecyclemanagement, and merchandisingdeployment.

Case studies, companyexperiences and publishedanalysis all attest to thesignificant joint value that can becreated by initiatives in thisspace.

Despite the evidence of thepower of POS data, it remains a

bolt - on for most companies,used for a few categories or inspecific projects, but notdeployed rigorously as thefoundation for day-to-day waysof working.

Given the size of opportunity, thepaucity of grocery growth in

Europe and the maturity of theexperience and supportingplatforms, this is a majoropportunity missed.

Furthermore, as leading playersbegin to adopt and leverage POSdata more broadly, there will bemuch greater pressure on allsuppliers to deliver to new higheroperational standards in these

areas, if they are to competesuccessfully.


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The Nature and Size of thePrize

The value to be unlocked is bothbroad and deep. It is not justabout market share. It is alsofound in most of the keyoperational metrics for sales andsupply chain: availability,inventory, voids, lead time,compliance, store performancetracking, forecast accuracy,promotional returns and waste.

Retailer POS data sits at theheart of enhancing theperformance of these processesin both retailers and suppliers.How does it do this? It achievesthis by enabling the closermanagement of each of theshopping moments-of-truth instores.

POS data changes the basisfor decisions being made, tobe:

More granular in geography,timeframe and point in thevalue chain;

Demand driven, based onactual sales versus estimates;

Integrated, to expose gapsbetween actual and plans orbenchmarks.

POS data exposes thenormally invisible lostopportunities of operationalweaknesses, such as:

Unfulfilled shopper demandfrom sales that did not happenbecause of stock-outs, voids

or poorly ranged stores;

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Lost attention frompromotions that did notappear in store on the rightday or with the right inventorysupport;

Replenishment that did nothappen because the stock onthe system did not really existor was stuck in the back roomand not on the shelf;

Products that were notmerchandised well becausesuppliers field staff were notcalling on the right outlets;

Store replenishment that isnot tailored to meet the dailysales demands of individualstores.

In short, POS data addresses allof the factors that undermineperfect in-store execution!Processes that use daily andintra-day retailer POS data astheir fuel are a powerful enablerfor improvements in retailexecution and this is worth a lotof money to businesses.

Grocery out-of-stocks run atabout 8% 2 . Nearly one-third ofthese missed sales will be lost

and the loss can be even higherto the store or brand that lets theshopper down in this way,especially on a repeated basis.

Furthermore, with the growth ofpromotions and a continuedvalue mentality in shoppers, thedanger and impact of out-of-stocks is only increasing ascompeting promotions drive

widening variability in dailydemand.

All along the value chain, thereare benefits that companiesenjoy when they move to retailerPOS data-fueled processes.These often include inventorysavings of 10-15%, improvedplanogram compliance (where a10% improvement reduces out-of-stocks by 1%) or improvedforecast accuracy and reducedoperating costs as expensive and

limited manual checks and gapscans are substituted.

This scale of prizes cannot beignored in a European grocerymarket that is stagnating andwhere value is being driven byprice increases alone. Indeed, thescale and breadth of benefits(see inset table) is what isdriving the increasing energy of

leading retailers and suppliers inthis area.


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AREA OF DATA USE BENEFIT RANGE ADDITIONAL FACTORS

Improved on-shelfavailability (OSA) andvoid monitoring

2-10% of revenue. This is mostlyfrom OSA. Void monitoring typicallyadds 1-3%.

Scale depends on the dataused and level ofcooperation.

Better field teamtargeting and callobjective setting

Typical revenue increase included inhigher-end estimates above. Fieldteam can be critical to realisebenefits, especially where certainstores are persistently out-of-stock

in a category and local storemanagers carry moreresponsibilities.

There is an additional 15-35%increase in field team productivity(cost per account covered) basedon adjusting call patterns, morefocused in-call activity and less timein compiling multiple data sources.

The cost/productivitybenefit varies acrosscategories but is readilycaptured and typically usedto widen the coverage of

the team.

Revised promotionalavailability andplanning

Increase on promotional uplifts ofup to 30-50%.

Wide variations acrosscategory/channel/country.

Improved new productsales (speed andsolidity of distributionon shelf)

5-15% of year-one sales for asuccessful new productdevelopment (NPD) item.

Also provides significant lift indistribution up to 20% pointshigher in somechannels/geographies.

Depends on priority given insales team to securingdistribution, timing andchannel.

Improved inventorymanagement (withinretailer) from use ofavailability data insupply chain andbetter forecasting

5-15% inventory reduction throughstore and distribution centre.

Value depends on scope.

Promotionaloptimisation fromanalytics applied tocategory-wide retailer

sales data

3-6% revenue gain and muchhigher margin gains, plus higherreturn on investment (ROI) againstpromotional discounts and gate

fees.

Benefits Realised by Area


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Leveraging POS Data forExecution Excellence

Applicability varies acrossdepartments and store types,with a bias to larger stores andfaster moving lines where POSdata is most powerful. But,leading players are alreadymoving to use retailer POS dataas a core part of key sales,category management andsupply chain processes, bringingthis data into the heart of thebusiness.

Those processes that havebenefited most are:

Promotional management

Replenishment

Field team call prioritisation

New product introduction

Store execution

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Embedded effectively, the use ofretailer POS data enables theseto become truly demand signaldriven, with a level of timelinessand granularity that enables astep change in performance ofcritical value. Executionalexcellence that enables the valuechain to efficiently meet shopperneeds on a day-by-day basis is apowerful advantage for bothretailers and retailer-supplier

partnerships in boosting earningsand securing shopper loyalty andtrust.

The Current State of Play

However, these benefits are stillvery narrowly enjoyed.

Even on-shelf availability remainsa significant opportunity area,despite extensive industryinitiatives over the last twentyyears (e.g. ECR Europe OSA,which was launched in 2001 andis still running).

As recently as 2009, only two of

the six leading grocery chains inthe UK had store based on-shelfavailability tracking 3 , andalthough this has progressed inthe last few years, manyEuropean retailers still have noshopper-facing measures inplace.

However, it is gathering pace andas with all innovations, there are

leaders and laggards acrossretailers, suppliers andcategories.

A POS data driven loss tree pinpoints causes of execution issues.

Product is OOSin 100 stores

Stores with stock80 stores

Stores with no stock20 stores

Other e.g. in wrongplace or delisted

15 stores

In-stock not on-shelf35 stores

Phantom stock35 stores

Orders placed15 stores

No order placed5 stores

Distribution centrecheck

Distribution centreOOS

Distribution centrehas stock

SS system check

Ordersissue?

Shipmentsissue? Stock issue?

In store visitrequired

Why was stocknot shipped?


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At least one-third of suppliers inEurope are already working withretail partners using retailer POS

data 4 and the widening field ofdata and uses leaves a lot ofopportunities.

In some respects, the state ofplay is perhaps more advanced inthe U.S., where only 6% ofretailers do not share data withpartners and well over half haveestablished programs with theircore suppliers 5 on at least the

most basic items of data (POSand inventory).

However, even here the picture islittle different on the moreextended range of data items andin the breadth of use beyondleading retailers and suppliers.

Too often, retailer POS dataremains siloed even insidecompanies. It is not widelyviewed as a shared enterprise

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resources and functional silosexist in both suppliers andretailers, partly related to

infrastructure and partly due tothe narrow day-to-day focus ofmanagers.

A 2011 U.S. survey by ConsumerGoods Technology magazine ondownstream data usage foundthat 50% more sales functionsused this data than supply chainfunctions, and only 28% of trademarketing teams use it.

Only in the most advancedplayers is this data now beingused in operational systemsembedded in the day-to-dayprocesses that drive sales,category management and thesupply chain. Most still treat it asone-off projects or bolt-ons,limited in scope, and are notprogressing to integrate it better

into day-to-day working.

The Challenges that InhibitProgress

There are many reasons for this.Genuine challenges have existedto embedding this data inbusinesses and these challengespresent obstacles to thosewanting to move forward. Manyof these challenges concern theintrinsic nature of the data thatare very granular, large andvaried in format, generatingdifficult execution challenges in

their complexity and integration.

In one GMA forum, suppliershighlighted their three topchallenges as the integration ofdata across organisations, thesynchronisation of data and thevariety of sources 6 .

Specifically, the main challengescentre on four interlocking issuesthat serve to slow progress andinhibit the

Matrix Examples of retail POS data that can be used to address a wide variety of sales and supply chain issues.

PRINCIPALRETAIL

DATA ITEM

STORESALES OUT

STORESTOCK ON

HAND

RANGEPLAN

RETAIL DC -STOCK

CATEGORYSALES

STOREORDERS

SHELFCAPACITY/

FACINGS

STOREFORECASTS

LOYALTY,TRANSACTION

DATAWASTAGE OTHER

Merchandising / Sales

Improve opOSA

Optimiseevent ROI

ID opproblem

stores/catsPrice

compliance

ImproveOOSS

Reducevoids

ImproveOOSD

Mgnt over/undertrade

Retail storeops advice(OSA, price

etc.)

Improve opOSA

Optimiseassortment/

space

ID case sizeneeds

ImproveOSA

(manageparameters)

Optimiseassortment

Target trips

Improve OSA

Optimiseprice

response

Optimisemedia

response

Planning(D&S)

Improvemacro

forecast

Improvestore

forecast

ImproveCPFR

Reduce VCinventory

Manage dayscover

Improveorder fcstvisibility

Assist CPFRReduce VCinventory

Manage dayscover

Reccd stockallocation

EnhancedCPFR advice

Improvemacro fcst

Reduce SCinventory

Improveexecution(DC-store)

ImproveOOS (fcst)

EnhanceCPFR

Improvemacro fcst

Improvestore fcst

Reduce VCinventory

Improve OSA(time of day)

KVI ID &planning

Order to cash(from store tosupplier)

Improvetime to fixOSA

Reduceinventory

Reducewaste

ID problemstores

Improve OSA

Improve DCstock mgmt

Enhancestore

deliveryschedule

ID problemstores

Reducewaste

Inventory &shrinkage

ReducephantomReduce

overstockID store

shrinkage

Reduce totalVC inventory

ID DCshrinkage

Reducephantom

Reduce totalVC

inventory

Reducestore

inventory

Reduce totalVC inventory


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development of smoothoperations:

Data quality andavailability:

There is a patchwork to bemanaged with retailer POS data.Core POS data is robust andincreasingly accessible.However, there are challenges inusing it:

Sheer volume;

The attribution of meaningto this data;

Alignment betweensupplier and retailer;

The integration ofadditional data (e.g.promotional flags, storeprofiles, planograms).

These issues make it difficult tohandle as a programme acrosscategories, partners andgeographies. The challenge existswithin retailers themselves andeven more so acrosspartnerships. This is compoundedby data quality issues. Theapparent uniqueness of thebarcode is undermined by the

fact that over 60% of codes canbe duplicated within a typicalretailers product file and over80% are mismatched withsuppliers files 7 .

Data timeliness andfrequency:

The practical experience of thoseworking with this dataoperationally shows that largevolumes of data also present

challenges. For the value of dailyor intra-day data to be unlocked,it must be accessed in a verytimely way and processedquickly.

This needs processes andcapabilities that can handle largedata files at speed. This presentsproblems even to thoseorganisations that have investedin web portals and other sharingmechanisms, unless there issufficient corporate support.

Converting analysis toaction:

The presence of massiveamounts of detailed data,especially when integrated fromdifferent sources, presentsproblems. Managers running an

operational function (retail, salesor supply) must maintainstringent daily performancestandards. They have little timeto wade through masses ofinformation or interpret a sea ofmetrics. It can be the equivalentof trying to find a valuable insightfrom the hundreds of pagesreceived in response to a Googlesearch.

Addressing this requires goodtools and integrated informationfor the right people. It demandsclarity around what is needed.The increasing capacity andsophistication of systems likeTesco Connect or CarrefourNetmust be matched by suppliersuse of proper platforms forprocessing the large volume of

data and retailers platforms

A prize worth having

The challenge

A leading manufacturer wasalready receiving daily POSand supply chain data frommany retailers throughoutEurope and Asia. The client

wanted a consistent approachto leverage this assets todrive business improvementsin key sales and supply chainbusiness processes .

The solution

Using a consistent approachacross retailers and countriesit implemented IRIs in -storeexecution solution with the

aim of improving availability.Using automated root causealgorithms and IRIs exceptionreporting has enabled theorganisation to identify andfocus on the highest valueopportunities.

The outcome

The incremental benefit of theIRI solution has beencalculated at over 1% inincremental sales, worth over 18m per annum.

As the European SalesDirector says , we can reactmore quickly to marketconditions and are moreproactive.


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that offer ease of use and asingle version of the truth tomultiple functions.

A clear structure to reports,sorted into critical results areasand supported by automatedalgorithms that generate alertsand easy to assimilate red-amber-green tables are some ofthe vital component that users

need. Yet, this requires greaterprocessing support than even thelatest version of Microsoft Excelcan offer.

Partnering along the supplychain:

The final area of challenge issimply that the benefits of thesedata sources can only beunlocked with co-operation

across functions and partners.This demands trust andincentives for all sides on topicsof commercial sensitivity. In theU.S., 2012 results from anannual data sharing study seemto indicate that retailers desire tocharge for this sort of data hasled to its more selective use bysuppliers 5 .

The sharing and use of this datais often pictured as an issue oftrust between trading partners.Although this is undoubtedly thecase, it is by no means thecomplete picture. The challengeis about clarity over the businesscase and a rationale for sharingand being able to specify howsharing will benefit the tradingrelationship and provide returnsfor the resource and effort

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needed. Often, this argument ispoorly made or the focus is noton the real pain points in thecategory that all parties canagree are a priority.

The effort needed to orchestrateprogress on top of day-to-daycustomer-supplier interactions isalso a brake on progress formany. There needs to be

continual support and a strongbusiness focus to fuel thedevelopment.

Embedding ExcellenceAs the use of retailer POS datagrows, especially in leadingsuppliers and retailers, thecompetitive pressure to makeeffective and broad-scale usage acore capability becomesirresistible. So how do you startto progress this exciting agendaand embed this powerful data

source into ways of working inthe business and betweenpartners?

The process must move throughseveral stages. These continuallyfocus on incremental value targeting and capturing benefitsin a recognised format for theorganization.

IRIs partnerships with

organisations on this journey tounlock value has enabled it toobserve a three step pattern thatbusinesses typically movethrough as they progress.

These stages of development,retain a constant eye on valuewith a focus that gradually shiftsto incorporating these newmeasures into business-as-usual,

once the best way to achieve thevalue in the specific situation isunderstood and proven.

Whats the best starting point?We have found that successalways begins with a competitivepriority for your business; with acompelling near-term businessbenefit something that can becaptured within a matter of


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component that users need. Yet,months. This benefit fuelssuccess in and across

organisations.There is no universal answer,but common early prioritiesare often:

For retailers: optimise on-shelfavailability for fast-movinglines or, once this is in place,increase effectiveness of keypromotional events. These arethe low hanging fruit for an

initiative beginning in the rightdepartments.

For suppliers: on-shelfavailability is a similarlypowerful starting point, as canbe driving inventoryefficiencies through the supplychain. However, for those withsome experience already, it ismore likely to be the need to

improve key

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processes, such as new lineintroduction or promotionalmanagement, that provide a

compelling opportunity .Regardless of the starting point,the first step is always to identifya clearly bounded opportunityand begin to assemble a coalitionof all the necessary stakeholders(who are normally spread acrossfunctions).

A tighter focus (as expressed bythe product line, category and

retailer/supplier) is important tohelp ensure a good return andminimise the inevitable additionalcost and effort required toprogress. It also aids pace whichis important for momentum.

This is where working with anexperienced partner paysdividends both in terms ofmaintaining speed and in easing

the path with enabling solutionsand insights.

Our experience suggests that

whatever the general case forprogressing, the pressure onbusinesses today makes a strongspecific business rationale vital.

Nonetheless for success alongthe journey this step must alsostart to deliver the processes thatcan be developed beyond theinitial phases.

Once successfully begunbusinesses typically build out,developing the benefits and thesupporting structure to ensurethat value is developed andmaintained.

Efforts often remain as pilots oradd-on structures whilst new oradditional areas are addressed.

This builds the investment case

for broader changes and theessential solutions and support

Business go through three stages of development to reach embedding excellence.

PROVE THE VALUE EXPAND THE VALUE EMBED THE VALUE

Identify business priority

Establish team and scope

Baseline benefit metrics

Pilot new ways ofworking

Capture the business case

Make the case for change

Establish steering group

Broaden pilot focus

Expand portfolio of projects

Standardise projectapproaches

Capture and share businessresults

Identify broader initiativefocus/goal

Establish hand-off criteria

Standardise approach, reportsand measures

Capture and share learnings

Build into processes

Track benefits


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for embedding new ways ofworking.

If initiatives stall, it is often atthis point, as the focus on valueis lost, the diversity of initiativesgrows and the difficulty ofmaintaining sponsorshipincreases. Only careful benefitsmeasurement maintainsmomentum and carriesorganisations through to the thirdstage.

At this point, organisations lookat how best to serve up POS dataas an enterprise-wide enablerand, whilst value is still at theheart of progress, the challengeis to create new processes,systems and standards.

Only a few industry leaders are atthis stage at any scale.

Conclusion and the WayForward

Over the next few years, therewill be few initiatives in theEuropean grocery industry thatunlock significant additionalvalue. The productivity of retailspace is going to reduce, manycategories will be in decline involume terms or suffer under thecontinued economic pressurethat households face both in andoutside the Eurozone. However,

better in-store execution is onesuch opportunity.

Already being pursued byindustry leaders, the challenge isfor a broader range of businessesto capture the opportunities andstart to transform the way thatmany category and supplyprocesses work with a cleartarget of perfect in-store

execution.

At IRI we have been working withretailers and suppliers for over adecade providing both expertise

and flexible solutions to realisevalue quickly and scale upsuccessfully.

IRIs in -store execution solutionenables retailers andmanufacturers to work togetherto maximise sales and revenuegrowth by illuminating problemareas so that root causes can beidentified and eliminated and

shoppers needs better fulfilled.This solution provides acollaboration platform thataddresses on-shelf availability,promotional efficiency, innovationand along the supply chainreporting in a suite of flexiblemodules with easy to tailorreports and workflow deliveredthrough the IRI Advantage TM

platform.

A single trusted source of information meets stakeholder needs and delivers reports to enableevidence-based collaboration across the supply chain.


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Our data agnostic platformcreates a shared single view ofthe truth that unlocks newinsights from POS data andcrosses the siloes within andbetween businesses.

If you would like to discussany of the subjects raised inthis paper or for moreinformation about how IRIcan work with you to deliverperfect in-store execution,please contact your IRIConsultant or send us anemail at:

[email protected] .

We will be pleased to meetand demonstrate how oursolutions are being used bymarket leaders today andhow they could be used todrive growth and efficiency inyour organisation.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Sources and references

A CG Manufacturers guide to Retail Data Goldmines, VMT (2012)

Retailer Direct Data Report, GMA (2009)

Crystal ball 2.0, the state of retail demand forecasting, RSR (2011)

ECR Europe/GS1 Forum Budapest (2011)

ECR Europe POS data sharing presentation (2012)

Demand Signal Repository - survey, CGT (2011)

1. ECR Europe

2. GMA (2007) and ECR Europe

3. Cranfield Centre for Logistics & Supply Chain Management

4. ECR Europe (2012)

5. Shared Data Study CGT/RIS (2013)

6. Capitalising on Retailer Data within the CPG organisation, GMA (2011)

7. Data Crunch Report, GS1 (2009)

About IRI. IRI is a leader in delivering powerful market and shopper information, predictive analysis and the foresightthat leads to action. We go beyond the data to ignite extraordinary growth for our clients in the CPG, retail and over-the-counter healthcare industries by pinpointing what matters and illuminating how it can impact their businessesacross sales and marketing. Move your business forward at IRIworldwide.eu

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Copyright 2013 Information Resources, Inc. (IRI). All rights reserved. IRI, the IRI logo and the names of IRI products and servicesreferenced herein are either trademarks or registered trademarks of IRI. All other trademarks are the property of their respectiveowners.

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Perfect in-store execution, a major source of untapped value