Some thoughts on “on-shelf availability”: the importance of out of stock
Gilles Dallest
We have converted the ancient art of selling into a science that is taught in business schools, is the subject of PhD theses and for which companies spend millions on consulting missions, expert consultants and even artificial intelligence tools. However, I am always surprised to see that very often the most fundamental criterion of all is not 100% controlled:
“If the product is not in the store, it cannot be sold!”
So spoke my sales manager to the young yogurt salesman I was more than 35 years ago when I began my journey into the FMCG world. Standing in front of dairy department of my first store, a small “Super U” in Armentières, in the north of France, I so became aware of what should be the first of my priorities: on-shelf availability.
We are not talking here about the choice or relevance of the assortment, but about its presence. There is no mystery or complicated theory in the fact that the products agreed on with the retailer must find themselves on a shop’s shelves at the end of their journey started as raw material.
Absence and how to remedy it
The fact that a reference is not present in store can have various causes, the main ones being:
On shelf
- Industrial out of stock: due to a manufacturing or logistics problem, the product is not delivered by the manufacturer to the distributor
- Stock-out linked to the difference between theoretical stock and physical stock: the stock calculated in store (deliveries minus sales) does not take into account the unknown markdown. Therefore, the automatic resupply system does not order the product even if it is without physical stock.
- Out of stock linked to the order size: the product is not ordered in sufficient quantity to cover the demand between two deliveries.
- Shelving problem: the product is in the store’s reserve but is not put on the shelf due to lack of staff or prioritization.
- Insufficient shelf space: the available space does not allow the placement of all the agreed products or not in sufficient quantity so that the shelf stock is not exhausted on days of high demand.
- Difference between the SKUs “available on platform” and “mandatory”: the store manager or head of department is responsible for defining his own assortment from the range available in the warehouse. This is a situation that is becoming less and less frequent with the centralization of the assortments definition, but which still exists and requires from the sales representative a real act of sale and shelf management advice at store level.
In promotion
The promotional out of stock potential is a great area for improvement. Often, the agreed, organized, paid and effective promotion does not reach its maximum potential due to the lack of products.
- Promotion not installed in store:
- The product did not arrive in time for the promotion start date
- Too many promotions planned for the space available in store (gondola heads, promotional islands)
- Promotional out of stock:
- Insufficient order due to erroneous forecasting, usually related to the fear of generating an overstock.
The presence of the agreed assortment in stores is of course the responsibility of the distributor. However, the complexity of managing tens of thousands of SKUs and ensuring that all reach the shelves in sufficient quantity is a challenge and it can be very helpful to count with the support and collaboration of manufacturers.
How can a manufacturer ensure the presence of its references on the shelf?
We have seen that there are many reasons why a product might not be in the store where it should be. Once these anomalies have been identified, they can be remedied through negotiation, shelf management or a better demand planning. However, the key to all these processes is the identification of the “non-presence” of references.
Historically, when manufacturers visited and delivered all stores directly with teams of delivery-salespeople, it was very simple to pick the missing items from the sales truck or order them directly for the next visit. With the centralization of logistics, in-store visits have become more limited and there are very few sales forces large enough to allow physical visits beyond hypermarkets, when they are not limited to the largest of them.
Two questions then arise:
- Is it essential that a sector manager visiting a hypermarket devote most of his visit time to shelf-checking?
- How can we ensure that the assortments negotiated for unvisited stores are present where they should be?
The solution involves the use of the sell out data shared by distributors. With a weekly, or better daily, frequency of information, it is possible to identify which references have been sold in each store since “if they are sold, they are present!”
The calculation and integration of the rotations of each product in each point of sale make it possible to identify the decreases or the absence of sales corresponding to a lack of presence. To make the work of the sales or logistics teams more efficient and simpler, it is also possible to set alarms according to the strategic priority of the ranges.
The availability of detailed sell out data at store level also strengthens demand planning processes, whether in terms of linear presence or promotional forecasting. The quantities manufactured and available are thus better adapted to the needs to ensure that the product is always present when the shopper requires it.
In this way, the technology supports the work of the sales person and logistics teams to ensure the availability of the product since:
“If the product is in the store, it’s sure to sell!”
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