What can we learn from empty shelves?

Nothing sticks in your mind like disappointment! This is basic psychology and it also applies to customers standing in front of an empty supermarket shelf. The new mySAP Retail Supply Chain Planning solution helps retailers develop effective value-add chains to avoid empty shelves and keep their customers happy.

We're in the supermarket, and a customer is looking forward to a pleasant evening and a good bottle of his favorite wine. But when he gets to the wine aisle, there are huge gaps on the shelves! He's very disappointed – perhaps even disappointed enough to go and do his shopping in another supermarket. Retailers suffer out-of-stock situations like this every day, sometimes with dramatic – and undesirable – consequences. A study conducted by Ayhan Akkaya has shown that 60 % of all out-of-stock situations lead to massive sales losses because customers are disappointed and change to a different supplier. So what could be more natural for retailers than to use the easiest method of avoiding out-of-stock situations, which is simply to keep a few more – or maybe even a lot more – reserve stocks than they need in the supply chain for purposes of security? Having more goods in the supply chain means faster responses to current needs, no out-of-stock situations and therefore satisfied customers, or so retailers often argue. It may be simple, but it's also very costly, which means it's not a good solution at all!

Holding too much reserve stock ties up capital and storage capacity. According to a study by the ERP Consultant Group, holding excess reserve stock costs retailers in the USA alone an annual US$ 1.1 billion. Today's retailers are performing a balancing act; they have to try to avoid getting out-of-stock at all costs while at the same time keeping the cost of inventory management under control.

Added to this is the fact that the complexity and high volume of goods stocked presents a huge challenge in itself for any business. Retailing companies usually have several distribution centers and hundreds if not thousands of branches, all of which have to be managed within the supply chain. And what does this involve? A retailer with 1,000 branches selling 40,000 articles in each branch needs to be able to plan 40 million shelf spaces each day and keep them filled with goods. And of course, it has to be the right goods…

Good planning means good business

mySAP Retail Supply Chain Planning helps retailers to cope with the challenges of optimizing their reserve stocks and avoiding out-of-stock situations. To do this, the system offers modules called POS Data Warehouse, Forecast & Replenishment and Merchandise and Assortment Planning.  

The POS Data Warehouse module forms the data foundation of the mySAP Retail Supply Chain Planning solution. It collects POS data from the cash desk systems in the branches via the POS input interface. Incoming cash desk data is checked, updated and made available to other solutions in mySAP Retail, such as accounting or inventory management. The POS Data Warehouse module can also be used to carry out detailed evaluations, for example as part of store controlling.

Forecasts for replenishment

The POS Data Warehouse also supports the Forecast & Replenishment module. This module uses the verified POS data to produce detailed forecasts for supplying goods to branches and distribution centers. Special offers, seasonal events such as Christmas and one-off events such as the soccer World Cup can also be worked into the forecasts. The forecasts are used as the basis for replenishment planning for distribution centers, individual branches and the company’s branches as a whole.

The next step is to optimize ordering processes. Precise conditions for ordering goods from suppliers can be taken into account and the finishing touches are made. For example, it may sometimes be useful to order an additional pallet of goods from the supplier if this improves the conditions he offers. The planning data from the Forecast & Replenishment module is then passed to an output system from which the actual order to the supplier can be made.

At the same time, data is passed from the output system back into the Forecast & Replenishment module to allow an effective response to problems like bottlenecks in the supplier’s system. The user guidance system in Forecast & Replenishment allows staff in the resource planning department to view all the important data at a glance. This means that anything unusual or problematic such as out-of-stock situations can be dealt with straight away.
 

Getting the right goods is vital!

The task of getting the right goods onto the shelves in the retailer’s shops is handled by the Merchandise and Assortment Planning module. This is an integrated planning tool which makes use of data from the SAP Business Information Warehouse and the accounts system in mySAP Retail. The Merchandise and Assortment Planning module allows both top-down planning and bottom-up planning.

Top-down planning takes the firm’s strategic objectives as its starting point and carries out planning exercises for goods, assortments and the firm’s various areas of business. A number of criteria are important here. As well as considering which goods to sell, the system can also work out what level of sales can be achieved with a given financial outlay on certain assortments and certain goods.

Bottom-up planning starts with the individual branches or a selected group of branches, and incorporates planning of assortments, goods and sales levels. The system uses various criteria, such as the purchasing habits of customers in a certain region, for example, to decide how to put together the individual assortments.

An important feature of Merchandise and Assortment Planning is that it allows new articles to be added and listed immediately during the planning phase. It also works in conjunction with the Forecast & Replenishment module to plan the correct distribution of goods to different branches. These functions of the Merchandise and Assortment Planning module allow companies to respond even more quickly to market changes.

Planning means progress!

A retail business can significantly optimize its logistics by using these three modules of the mySAP Retail Supply Chain Planning solution to improve its planning. The solution has been specially developed with the needs of retailers in mind. The cutting-edge retail system architecture of the solution reflects the fact that users have particularly high performance expectations when it comes to trading solutions because of the complex requirements that need to be met. A benchmark test conducted in April 2002 by Hewlett-Packard managed to load over 500 million POS entries (pure sales data) in one hour. The same test carried out planning for over 44 million branch/article combinations, producing 2.8 million lines in follow-up documents.

In future, it will be possible to use mySAP Retail Supply Chain Planning to optimize the planning of resources including transport, warehousing facilities and staff. Comprehensive simulation options will allow a wide range of scenarios to be planned and assessed for efficiency, thereby identifying bottlenecks at an early stage and avoiding them. The interplay between the two planning modules Forecast & Replenishment and Merchandise and Assortment Planning will play a particularly important role in this. These modules will ensure that, as soon as new articles are introduced, it will be possible using data on similar articles to carry out sales simulations and to perform simulations of how new articles will behave in the supply chain.

With these new planning capabilities, the mySAP Retail Supply Chain Planning solution enables retailers to turn sequential and linear supply chains into a cutting-edge, flexible supply chain network. This is a cooperative environment in which everyone involved works together, jointly plans and coordinates their activities and optimizes their business processes with customers, manufacturers and partners along the entire value-added chain. It’s an excellent way of ensuring customers never stand disappointed in front of empty shelves.

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