Ipso Facto


If you don’t have the best of everything, make the best of everything you have. – Erk Russell


Store in stock.

It’s one of the most critical measures of supply chain health in retail for which there is data readily available.

Unfortunately, your customers don’t care.

Think about it – the store in stock percentage represents the number of times the system inventory record for an item/store is above some minimum quantity (could be zero, could be the shelf facings, take your pick).

What customers truly care about is on shelf availability. In other words, when they’re standing there in the aisle, is the product present on the shelf for them to buy it?

What if the system inventory record for an item says there is 5 on hand, but the store is physically out of stock?

What if the system record matches what’s physically in the four walls of the store, but the product is stuck in the back room (or some other customer inaccessible location)?

What if the system record matches the physical quantity in the store and the product is displayed in multiple locations on the sales floor, half of which are empty?

All of those scenarios represent in-stock successes, but on shelf availability failures.

Inevitably, item level RFID tagging is going to be as ubiquitous as item level barcoding is today. Problem is that nobody’s really talking about it anymore, so it’s going a lot slower than we would like. Even when it does come to pass, there will be significant capital investment required at store level to get to the point where stock can be precisely counted and located in real time.

At some point, it will become possible to truly measure on-shelf availability – but it’s going to take years.

Do we really want to wait that long?

If the physical count in the store more closely matches the system record and if the supply chain (including the back of the store) is aligned to flow product directly to the shelf as quickly as possible, then in stock will more closely resemble on shelf availability.

The good news is that there are things retailers can be doing today to make this happen before ‘self-counting shelves’ are a reality.

Make On Hand Accuracy a Store KPI

Management of the on hand balance at the store is often viewed as a necessary evil and it can seem overwhelming. It’s common practice for retailers to count store stock annually and pat themselves on the back for achieving a low shrink percentage measured in dollars.

The problem is that this measure is for accountants, not customers. To the customer, the physical quantity of each item in each store on each day is what’s important. Practices that degrade the accuracy of item level counts should be reviewed and corrected, such as:

  • – Scanning items under a ‘dummy’ product number if the bar code is missing from the tag.
  • – Blind receiving shipments from the DC to get product into the store faster (unless the DCs are consistently demonstrating very high levels of picking accuracy).
  • – ‘Pencil whipping’ the on hand balance, rather than thoroughly investigating and searching when the system record is significantly different from what’s immediately visible.

Only by instituting an on hand accuracy measurement program (and using the results to identify and fix flawed processes) can you have confidence that store on hand system records match what’s actually in the store.

Eliminate the Back Room

I’m not suggesting something as drastic as knocking down walls, but the back room should only exist to hold product that doesn’t physically fit on the shelf at the time of receipt. An easy way to eliminate the back room is to make changes in the supply chain that support that goal:

  • – Minimum shipment quantities from the DC should be aligned to the planogram of the smallest store that it services. If the shelf in the smallest store only holds 6 units of an item, then you’re guaranteeing backroom stock if the DC ships in cases of 12. Maybe the DC should be shipping that item in onesies. Will that increase DC handling costs? Probably. But just think of how much labour is being consumed across dozens (hundreds? thousands?) of stores each day rummaging through the back room to find product to keep the shelves full.
  • – Ship more frequently to the store, thereby reducing the shipment quantities (assuming ship packs have been ‘right sized’). See my argument above about considering the cost of store labour by not providing them with shelf-ready shipments.
  • – Appropriately staff the stores such that a truck can be received and the product put onto the sales floor within 2 shifts. That way, there should never be any question as to where the product is in the store – if it’s in the on hand, it’s out on the floor.

The Supply Chain, Merchandising and Distribution home office operations have to do their part here. They have all of the data they need to set up the stores for success in this regard – they just need to be co-ordinated.

Institute Plain Old Good Shopkeeping

In a retail store, there are generally two ways of doing things – the easy way or the right way. As with most things, taking the ‘easy’ shortcut now tends to make your life more difficult down the road, while expending a little extra effort to do what we know is right pays handsome future dividends:

  • – Don’t just jam product wherever there’s available overhead space to get it off your checklist. At least try to find a spot near the product’s home. If there isn’t a spot, then make a spot. Much better to reorganize when the opportunity presents itself, rather than going on a scavenger hunt when a customer is tapping her foot waiting for you to find the product.
  • – When using backroom storage is unavoidable, keep it organized. There’s nothing wrong with using masking tape and black markers as a stock locator system if you don’t have anything more sophisticated at your disposal.
  • – Walk the aisles at least once a day. When product has been put in the wrong spot, it will stick out like a sore thumb to an experienced retail associate. Put it back in the home (or at least collect it into a central area where the restocking crew can deal with it when their shift begins).

I suppose you could wait until self-counting shelves come along instead, but guess what? You’ll still need to do everything described above to have the physical product properly presented to the consumer anyhow.

Why not start working on it now?

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