After a product is shipped to the store, there are still many steps before getting it in the customers’ hands. Unpredictability of consumer behaviour and buying patterns force retailers to develop an efficient and agile method of replenishing their shelves with the products consumers need. In retail operations, how – and how fast – a retailer can stock an ordered product, replenish the product after purchase, recover their shelves and process returns will have a direct impact on customer experience, operating cost, and sales throughput.
While advanced technology and sophisticated vendor management can lead to a more efficient supply chain, it’s important to remember that the most reliable route to greater profitability is often getting the basics right. Improving your stocking, replenishment and recovery processes will get results fast.
For a recent national retailer client, keeping up with competitors and retaining customer satisfaction, while keeping costs low, required improved stocking replenishment, and recovery process efficiency. The client aimed to decrease costs and increase the process cycle efficiency to get items on the shelf – and accessible to customers – faster (and cheaper). This company carries hundreds of products and manages many SKUs, so the potential benefits of creating a Lean replenishment strategy were too big to ignore.
TPG improved stocking, replenishment, and recovery process efficiency in the back room of this leading discount retailer by over 27%, identifying $1.3M associate cost savings by applying traditional Lean Six Sigma techniques. Learn how you can too, below.
Defining who is responsible for various roles will eliminate delayed restocking, work interruptions and wasted time and cost of getting the product on the shelf. Walking around a large store takes time that could be better spent working on value-add activities such as supporting the customer and ensuring no out-of-stock products. When roles are not clearly defined, employees may find themselves walking between departments and catering to interruptions outside of their role. With our client, by defining who is responsible for picking cartons, stocking aisles and replenishing backstock inventory, we reduced the time and cost required to get a product from the backroom to the shelf and reduced amount of out-of-stock products.
Establishing an SOP ensures that production operations are performed consistently to maintain quality control across the store. They aim to achieve efficiency, quality output, safety and uniformity of performance while reducing miscommunication and failure to comply with industry and company regulations. The SOPs we created for this retailer documented the optimal order stocking and replenishment operations and timing that should be completed to maximize process time efficiency.
Lean methodology outlines 8 forms of waste that contribute to inefficient processes, lost time and money. Simply observing how an organization runs will inform how they are wasting valuable resources:
For this retailer, we performed time studies and work observations across multiple departments. We then conducted subsequent data analyses to identify the processes that yielded high amounts of waste including waiting, transportation, and excess inventory.
Managing backroom inventory properly can be a challenge. It is even a greater challenge when retailers don’t have inventory locations that are controlled via barcodes, which was the situation we faced during this project. Without technology enabled inventory management, all inventory management processes were based off paper planograms and employee knowledge which became a major challenge and source of process variation. It requires constant monitoring and can sometimes take associates away from the sales floor where they would otherwise be helping customers. We aimed to improve that process for everyone.
Similar to an SOP, having standard inventory management practices is essential to creating a lean replenishment process. Standardizing best practices for how the backroom and shelving processes operate will improve the end-to-end replenishment process, saving valuable time and making everyone’s job easier.
Some standards we implemented for this retailer, that led to their total savings included:
Top-stock shelving. By moving backroom inventory to the top shelves of sales aisles and keeping the merchandise closer to where it’s being sold, shelf stock remains full, and associates can keep a more accurate read on the inventory. This also creates more space in the back room that can be utilized for online grocery pickup, or holiday overstock. The biggest benefit of implementing top-stock shelving is reducing the walking distance – and associated wasted time – between the back room and the sales floor.
Backstock racks: Vertical storage can be a huge time and space saver when planned effectively. It can increase storage capacity while also making it easier to store and access backstock. Increasing capacity allows you to keep inventory on hand without taking up more floor space and avoiding costly restocking delays.
Mobile Bin Racking: Organizing and labelling mobile storage units appropriately will create maximum space and organization in your stockroom. The mobile bins allowed for stocking and replenishing to occur more quickly, and without having to walk back and forth to the backroom. Having a rolling cart with inventory enables quicker stocking and eliminates the need to go back and forth between the salesfloor and back room when a shelf needs to be replenished.
Cartons Per Hour (CPH) Standards: CPH aims to maximize warehouse productivity while maintaining quality. We developed these standards for stocking, replenishment, and recovery processes to create performance standards which can measure performance and efficiency.
SMED (Single Minute Exchange of Dies) methodology: SMED is one of the many lean production methods for reducing waste in a manufacturing process. SMED is typically applied to improve equipment changeover times by converting as many changeover steps as possible to “external” (performed while the equipment is running), and to simplify and streamline the remaining steps. In our situation, we applied the same thinking but applied the store like a piece of equipment. We worked to complete as many stocking, replenishment, and recovery activities while the store is closed as possible which allowed for associates to focus more on customer service during store open hours.
Standardizing the stocking, replenishment, and recovery process activities, defining the process roles and responsibilities, and adding low-cost equipment to the process will offer broad benefits including reduced process costs, lower stock levels, improved inventory turnover and higher service levels. Our retail client realized significant annual cost savings and increased efficiencies across the organization. By implementing similar restocking, replenishing and recovery best practices, you can too!
At The Poirier Group, our focus is to continuously demonstrate our commitment to delivering results through a seamless and digitally connected and integrated retail supply chain. We believe in instilling new behaviours in supply chain and inventory planning and helping organizations become more agile and change capable. Our retail clients’ success stories demonstrate our ability to drive innovation and results. Learn more about our Inventory Management offerings today.