Optimize labor, product freshness, in-stock positions, and shrink levels.
When it comes to ordering across fresh departments, food retailers are challenged with a significant knowledge gap between an experienced store associate and a new or recently transferred-in store associate. And that knowledge gap has lead to inaccurate ordering, penalizing store-level financial performance.
Automated replenishment (also known as Computer Generated Ordering or CGO) gives all store associates accurate data to base their orders on. “It means less guesswork and it helps raise the level of less experienced associates. A CGO solution understands the ebbs and flows of each local market and customizes replenishment recommendations to maximize freshness, drive higher sales, and reduce waste,” said Joe Smirlies, Invatron’s SVP of Products.
The highly-accurate forecasted replenishment recommendations and process improvements CGO brings to food retailers has a direct positive impact on the Big 4 operating metrics for grocers across labor, product freshness, out-of-stocks and shrink.
The Road to Fresher Product and Increased Sales
Freshness is a major differentiator for supermarkets. It is a top driver of customer satisfaction, directly impacting a retailer’s reputation and loyalty with its customers. According to Deloitte, 30 percent of produce in stores does not meet consumers’ expectations. And people decide where to shop based on perceived freshness. In the hyper-growth age of e-commerce, consumers are now choosing where to shop online if they believe the personal shopper knows how to pick the freshest product for their order.
To achieve freshness, grocers are employing “velocity strategies” enabled by automated replenishment to move products faster, handle them less, and store them for shorter periods of time.
An American supermarket chain ranked among the top 25 North American food retailers by Supermarket News, and one of Invatron’s longest-standing customers encourages their staff to think beyond the ABCs of ordering and evaluate how they are managing their inventory to concentrate on providing the freshest product possible to their shoppers.
The first step is to carry minimal perishable inventory in the backroom cooler. Over-ordering results in a cluttered, overstocked backroom, where product is stored for longer periods of time and requires more touches to rotate. The excess stock makes it difficult for stores to restock their shelves quickly, resulting in higher out-of-stock rates.
After implementing Invafresh’s solution, stores order fresh product today, to be delivered and sold tomorrow.
Adopting automated replenishment and these velocity strategies, this supermarket chain achieved 4 percent sales growth from 2019 to 2020 in fresh meat and produce items.
Shifting to a leaner, just-in-time inventory model is key to maximize freshness. And of course, the labor associated with reduced touches can be saved or re-prioritized.
Getting A Grip on Sales and Shrink
Shrink is highest in the perimeter. The combined average shrink for all fresh departments is a whopping 6.6 percent, according to FMI.
A CGO solution optimizes each and every store order, so grocery retailers achieve higher margins and minimize losses from waste. It uses historical and real-time inputs (both internal and external) to determine the exact amount of inventory needed to meet expected sales demand across all sales channels, leveraging current and future inventory levels to ensure right-sized orders. In short, the solution knows how much you have, how much you’ll need, and how much to order to satisfy your consumers’ demand.
That same supermarket chain gained a dramatic 15 percent reduction in known loss from last year to current, proving how effective CGO is at reducing shrink.
Why Count When you Can Automate
Retailers without a fresh CGO solution require multiple associates across the department to perform manual counts and order calculations to place the order before the cut-off time. Whereas retailers that leverage a CGO solution in fresh gain a competitive advantage and benefit from:
- An accurate perpetual inventory at store-level, eliminating the need to physically count inventory each and every day; and
- An accelerated order review and approval process where department managers or team leads need to review only 20 percent of an order (high volume, promotional, and seasonal items), as the remaining 80 percent is typically one to two cases.
These benefits result in higher operating margins, reduced working capital needs, and increased labor productivity.
Automated replenishment will help food retailers make faster and better inventory decisions that generate substantial returns on the costly investments in merchandising, store aesthetics, e-commerce, and now enhanced safety measures they are making to grow their brand and affinity with consumers.
Grocers using a CGO solution as part of their food technology platform have successfully optimized labor, product freshness, in-stock positions, and shrink levels.