Featured Program
We chose Retail Solutions because their offering enables our suppliers to immediately and effectively leverage our data to drive improvements in our joint supply chain. Retail Solutions’ technology and services provide an effective solution to share near real-time data in a way that enables suppliers to take immediate
action.
- Pete Bonneau,
Vice President of Efficiency and Productivity,
Food Lion.
Retailer Program: Food Lion
Optimizing Shelf Availability on Multi-Week Promotions
Vendor Pulse Supplier of the Month:
June 2009
The goal:
Ragu, one of the top brands for Unilever, is a regularly promoted item at Food Lion. Applying a recent Vendor Pulse supplier of the Month methodology for store-level promotion allocation, Unilever refined the approach to adapt it to long promotions such as the ones it runs for Ragu – to drive up availability during the entire 3 weeks of a promotion.
Data leveraged:
To achieve its goal, Unilever leveraged Vendor Pulse to ensure it had a good understanding of a past comparable promotion:
- Reviewed sales by day and quantified lost sales opportunity (based on stores with no sales)
- Further analyzed what days of the week had the worst out-of-stock rate, as well as the number of stores that were out-of-stock for 2, 5 and 10 days during a recent, comparable 21-day promotion.
Business process:
Upon reviewing the most recent comparable promotion (same price and same products), Unilever realized that almost 75% of the stores had out-of-stocks for 5 or more days during the promotion for each of the 10 biggest SKUs in the promotion, resulting in an opportunity to increase sales by 20+% by improving availability. Unilever also realized that very long out-of-stocks (10 or more days), or half of the total promotional period, were significantly less frequent for force-out items than for non-force-out items. The first agreement between Food Lion and Unilever was therefore to increase the number of force-out items from 4 to 6 of the top 10 SKUs in the promotion.
Based on sales in the comparable prior promotion result, Unilever then calculated force-out quantities for each store for the 6 SKUs, aggregated them at the DC level and submitted them to Food Lion for the entire promotion period, based on inventory level then at the store. Food Lion accepted 100% of the recommended quantities and proceeded with the shipment.
The outcome:
Unilever was able to increase dollar sales 6.3% for the promotion and reduced out-of-stock for the 6 force-out items by 4% (or 1762 store-days!) In comparison to the similar promotion that was analyzed to provide a baseline:
- Week 1 saw a reduction in out-of-stock by 22.4% for the 6 force-out items (vs. 5.9% for the overall promotion)
- However, in week 2, out-of-stocks went up again – the Unilever model not anticipating the increase sales due to the first week's out-of-stock correction.
- In week 3, Unilever was able to make adjustments and reduced out-of-stocks for the 6 force-out items by 17.4% (vs. 9.2% for the overall promotion)
Altogether, Unilever estimates that it recaptured 20% of the total missed opportunity for the promotion, leaving significant room for future improvements.
Unilever managed to bring back several critical takeaways that will drive up availability further in future promotions:
- Force out more items is a proven way to bring up availability – industrializing this approach inside the company and extending it across items, events and categories is a must-have capability
- During long promotions, force-out items should be shipped on a weekly basis (vs. all at once in the beginning of the promotion) to ensure adjustments can be made quickly.
- Understanding store replenishment patterns just prior to the promotion is equally critical to adjusting force-out quantities shortly before the event starts (to avoid basing force-out quantities on outdated inventory information)