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WareLite Real Time Demand WareLite Real Time Demand WareLite Real Time Demand WareLite Real Time Demand
Chain Management Chain Management Chain Management Chain Management –––– A Simple A Simple A Simple A Simple
Solution to Shelf Out of StocksSolution to Shelf Out of StocksSolution to Shelf Out of StocksSolution to Shelf Out of Stocks
Powered by WareLite BOSSEnabled by IBM Store Integration
1
Enabled by IBM Store Integration Framework
3rd EPTS Event Processing Symposium, Orlando, 17-19 September 2007
Elena Pasquali, CEO, WareLite [email protected]
www.warelite.net
© WareLite 2007
Shelf Out of Stocks: the Problem’s Size
• Retail Out-Of-Stocks (OOS) rate is on average 8.3% 1 globally• This figure doubles (16.5%) for products under prom otion 3,
increasing up to 30% in Europe 11
• Out-of-Stocks cause retailers an average 4% sales l oss 1
• Stock-outs cause walk-outs: in 2005 47% of customer s chose to shop elsewhere when faced by an empty shelf 5
• Overstocking to prevent OOS cost retailers around $ 40 billion • Overstocking to prevent OOS cost retailers around $ 40 billion globally 8
• 25% of Out-of Stocks globally 1 – and 38% in Europe 9 – are due to the fact that the goods are available in the store’ s backroom but are not displayed on the shelf
2
Shelf Out of Stocks remains an unsolved problem for retailers and manufacturers
• Despite investments in sophisticated analytical too ls, HR initiatives and RFID implementations, shelf out- of-stocks remains a largely unsolved problem
– “Stock levels at the big six – Tesco, Sainsbury’s, Asda, Morrisons, Somerfield and Waitrose – have deteriorated over the past six months compared with the first half of the year “ Sean Poulter, Daily Mail, December 18, 2006
– “Today’s CP processes for demand sensing and shaping take 7 to 9 days to correct an out of stock. […] Retail perpetual inventory accuracy is worse
© WareLite 2007 3
correct an out of stock. […] Retail perpetual inventory accuracy is worse than originally believed. The inaccuracies of even Wal-Mart store-level inventory data triggers manufacturing replenishment two days too late at a store level.” L Cecere et Al, ‘What We Have Learned From Three Years of Retail RFID Pilots’, AMR Research, April 2007
The root cause of OOS is in the lack of consistent, automated, real
time monitoring of On Shelf Availability – i.e. Demand - across all
products in store.
WareLite Real Time Demand Chain Management addresses this issue
The Current Approach to On Shelf Availability Measurement 6,11
4
The direct measurement of actual OOS is still manua l: POS data is only analyzed retrospectively – i.e. indirectly - to provide
demand forecasts and ‘prediction of likelihood of o ut-of-stock’ 6,11
WareLite Real Time Demand Chain Management: Automat ed In-Store Replenishment
SHELF POS Operator
Alert: Re-stock Shelf
RFID
PurchaseEvent
5Operator
Alert: Re-stockBackroom
RFID
or...
Backroom
ReplenishmentEvent
...Operator
WL DCM: ‘Store Data’ and ‘ Enterprise Data’
StoreData
StoreData
6
‘Store Data’ supports real time in-store operations, managed by WL
DCM; ‘Enterprise Data’ supports Real Time Dashboards, managed by
third party BI/BAM tools
EnterpriseData
StoreData
EnterpriseData
EnterpriseData
StoreData
StoreData
StoreData
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent
Update On-Shelf Availability
Business Process
7
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent
OSA Tx = OSAT0 - 1
StoreData
Update On-Shelf Availability
Business Process
8
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent
Amount of product
sold per time unit
(e.g. 2 minutes)Update On-Shelf Availability
Business Process
Enterprise Data
9
(e.g. 2 minutes)
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent
Conditioner Brand X: Current Sales Trend
20
25
30
Qua
ntity
Sol
d
Enterprise Data
Update On-Shelf Availability
Business Process
10
0
5
10
15
09:00 09:30 10:00 10:30 11:00 11:30 12:00 12:30 13:00 13:30 14:00 14:30
Time
Qua
ntity
Sol
d
Conditioner Brand X: Current Sales
0
20
40
60
80
100
09:00 09:30 10:00 10:30 11:00 11:30 12:00 12:30 13:00 13:30 14:00 14:30
Time
Cum
ulat
ive
Sal
es
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent If a product is selling so
quickly that it risks
going out of stock in a
time shorter than the
replenishment time, an
Operator is sent an alert
StoreData
Update On-Shelf Availability
Business Process
11
Operator is sent an alert
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent Watermarks can be
defined differently
for each single
product and they
can be fixed, semi-
fixed or variable
StoreData
Update On-Shelf Availability
Business Process
12
fixed or variable
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent
When a Low Watermark
alert is sent, a Pending
Replenishment Operation is
StoreData
Update On-Shelf Availability
Business Process
13
Replenishment Operation is
opened. This will be closed
only when the shelf
replenishment will have
been completed. The time
elapsed between the
opening and closing of the
operation is calculated,
allowing measurement of
Operational Effectiveness
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent Store
Data
Update On-Shelf Availability
Business Process
14
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WareLite Real Time Demand Chain Management: the Pur chase Process
WL BOSS
PurchaseEvent
OOS Current Status - 14:30 Today
Enterprise Data
Update On-Shelf Availability
Business Process
15
02468
101214
Condit
ioner
ASha
mpoo B
Toothp
aste
C
Wipe
s C
Mas
k DLip
stick
Z
Product Name
N.
of A
lerts N. Trend Alerts
N. Low Watermark Alerts
N. OOS
Calculate Sales Trend
Analyze Sales Trend & Alert
Check Watermark & Alert
Update Sales Trend History
Open Pending Operation
Check OOS & Alert
Update OOS History
WL BOSS
WareLite Real Time Demand Chain Management: the She lf Replenishment Process
Business Process
ReplenishmentEvent
16
Close Pending Operation
Check Watermark & Alert
Update On-Shelf AvailabilityProcess
Update Warehouse Availability
Check OOS & Alert
Update OOS History
WL BOSS
WareLite Real Time Demand Chain Management: the She lf Replenishment Process
Store
ReplenishmentEvent
Business Process
17
OSA Ty= OSATx + N
StoreData
Close Pending Operation
Check Watermark & Alert
Update On-Shelf AvailabilityProcess
Update Warehouse Availability
Check OOS & Alert
Update OOS History
WL BOSS
WareLite Real Time Demand Chain Management: the She lf Replenishment Process
Enterprise Data
ReplenishmentEvent
Business Process
18
Operational Effectiveness - Average Shelf Replenishment Time Today
0
20
40
60
80
100
ConditionerA
Shampoo B Toothpaste C Wipes C Mask D Lipstick Z
Product
Min
utes
Data
Close Pending Operation
Check Watermark & Alert
Update On-Shelf AvailabilityProcess
Update Warehouse Availability
Check OOS & Alert
Update OOS History
WL BOSS
WareLite Real Time Demand Chain Management: the She lf Replenishment Process
StoreData
ReplenishmentEvent
Business Process
19
Warehouse AvailabilityTy=
Warehouse AvailabilityTx - N
Legacy
Inventory
Management
Application
Close Pending Operation
Check Watermark & Alert
Update On-Shelf AvailabilityProcess
Update Warehouse Availability
Check OOS & Alert
Update OOS History
WL BOSS
WareLite Real Time Demand Chain Management: the She lf Replenishment Process
Store
ReplenishmentEvent
Business Process
20
Alerts can be sent to
Store Managers, Depot
Operators, Suppliers etc.
Standing orders, delivery
schedules etc. can be
automatically updated
StoreData
Close Pending Operation
Check Watermark & Alert
Update On-Shelf AvailabilityProcess
Update Warehouse Availability
Check OOS & Alert
Update OOS History
WL BOSS
WareLite Real Time Demand Chain Management: the She lf Replenishment Process
ReplenishmentEvent
Business Process
21
Up to the minute
data available by
product, store,
region, globally etc.
Enterprise DataClose Pending Operation
Check Watermark & Alert
Update On-Shelf AvailabilityProcess
Update Warehouse Availability
Check OOS & Alert
Update OOS History
WL DCM and IBM SIF: Architecture Overview
EXTENDA
3° Party POS
IBM STOREBROKER
DCM-ENT
DCM-ENT
Portal
DCM-ENT
DCM-ENT
SAP Oracle ......
3° Party IMS/ERP
RETEK
......
BROKER
DCM-RT
DCM-RT
DCM-RT
MQSeries
DCM-RT
IBM Mobile Front-End
WareLite Real Time Demand Chain Management: Benefit s
• It brings an instant 1% increase in revenues by eliminating those 25% of Out-of-Stocks that arise when goods are avai lable in store but are not on the shelves
• It makes more efficient use of shelf stackers’ and shop floor operators’ time, thus reducing operational costs and increasing employee satisfaction
• It improves the customers' buying experience , leading to increased loyalty and future revenues
• Provides real time visibility over sales volumes, sales tren ds, out -of -stocks, inventories and operational effectiveness , allowing both
23
• Provides real time visibility over sales volumes, sales tren ds, out -of -stocks, inventories and operational effectiveness , allowing both timely responsiveness to unexpected events and bett er planning, thus addressing those 47% of OOS that arise from in accurate demand forecasting - increasing revenues by another 1.88%
• By sharing real time demand data between retailers and suppliers, the final 28% of Out-of-Stocks that arise from mism atches between suppliers capabilities and customer demand can be a ddressed and eliminated , adding a final 1.12% to turnover
Acknowledgments
• For their contribution to the development of WL DCM and unwavering support, we thank– Dr. Adriano Visconti, IT Director, Coop CentroItalia– The Motorola (Symbol) EMEA team
• With special thanks to James Pemberton, Strategic Alliance DirectorDirector
– The IBM Retail Innovation/EBO Team (Northern and Southern Europe)
• With special thanks to Chris Osborne
24
References1. Grocery Manufacturers of America et Al, ‘Retail O ut-of-Stocks: A Worldwide Examination of Extent,
Causes and Consumer Responses’, October 20022. D. Corsten, T. Gruen, ‘Stock-Outs Cause Walkouts’ , Harvard Business Review, May 20043. J.C. Taylor, ‘Retail on-shelf performance of adve rtised items: An assessment of supply chain
effectiveness at the point of purchase’, Journal of Business Logistics, 20014. L.W. Emmelhainz et Al, ‘Logistics Implications of Retail Stockouts’, Journal of Business Logistics,
n. 2, 19915. John Davison, ‘How retailers can keep the custome r satisfied’, Computing 19 Jan 2006,
http://www.computing.co.uk/computing/features/21488 56/retailers-keep-customer6. ECR (Efficient Consumer Response) UK, ‘Availabili ty - A UK Perspective’, IGD (Institute of Grocery
Distribution), 20047. E Pasquali et Al, ‘WareLite Real Time Demand Chai n Management – A Simple Solution to Retail
Out-of-Stocks’, WareLite http://www.wlboss.com/articles/WL_Real_Time_Demand_ Chain_Management.pdf
8. Rene Schrama, “Beyond the Hype… Delivering On -Shelf Availability”, Symbol Technologies 2006,
25
8. Rene Schrama, “Beyond the Hype… Delivering On -Shelf Availability”, Symbol Technologies 2006, http://www.gs1uk.org/uploaded/doc_library/Rene%20Sc hrama1377.pdf
9. Bill C Hardgrave et Al, ‘RFID’s Impact on Out of Stocks: A Sales Velocity Analysis’, RFID Research Center, Information Technology Research Institute, Sam M. Walton College of Business, University of Arkansas, June 2006, http://itrc.uark.edu/research/display.asp?article=I TRI-WP068-0606
10. L Cecere et Al, ‘What We Have Learned From Three Years of Retail RFID Pilots’, AMR Research, April 2007, http://www.amrresearch.com/Content/View.asp?pmillid =20358
11. ECR Europe, ‘How to improve Consumer Response an d Sales Performance through On-Shelf-Availability’ ECR Europe Forum, Milan, 8 May 2007, http://www.ecreuropeforum.net/PublicPages/Archive/M ilan/Downloads/CC5%20-%20OSA.pdf
12. Dirk Heyman, Procter & Gamble, ‘EPC Enabled Prom otional Display excellence’ ECR Europe Forum, Milan, 10 May 2007, http://www.ecreuropeforum.net/PublicPages/Archive/M ilan/Downloads/BO4.2%20-%20RFID.pdf