October 3, 2022

Increasing sales through the promotion of freshness on the shelves

Optimizing inventory management of perishable products

Increasing sales through the promotion of freshness on the shelves

At a glance

Challenge

To address spoilage cost reduction in a fresh retail business, the project focused on increasing replenishment efficiency. Key issues such as outdated forecasting, manual store orders, and obsolete management tools were leading to excessive stock levels and food spoilage. The goal was to optimize inventory management for perishable products, enhancing freshness on shelves and reducing spoilage rates, thereby boosting sales.

Solution

The ROP methodology proposed a solution focused on three key areas:

  1. Replenishment: A new approach combining accurate forecasting with a replenishment algorithm tailored to perishable product requirements.
  2. Order Management: Control over additional inventory orders from stores.
  3. People: Close monitoring of KPIs and enhancing inventory managers' expertise.

Results

With reduced stock levels, significant cost savings were achieved, including a €1.4M reduction in Fruits & Vegetables and €0.2M in Cured Meat & Cheese inventory costs. The methodology improved forecasting accuracy and replenishment control, resulting in fewer stock-outs and enhanced overall process management. The approach is now being expanded across the entire fresh department, covering 86% of all categories.

Challenge

To address spoilage cost reduction in a fresh retail business, the project focused on increasing replenishment efficiency. Key issues such as outdated forecasting, manual store orders, and obsolete management tools were leading to excessive stock levels and food spoilage. The goal was to optimize inventory management for perishable products, enhancing freshness on shelves and reducing spoilage rates, thereby boosting sales.

Approach

Solution

The ROP methodology proposed a solution focused on three key areas:

  1. Replenishment: A new approach combining accurate forecasting with a replenishment algorithm tailored to perishable product requirements.
  2. Order Management: Control over additional inventory orders from stores.
  3. People: Close monitoring of KPIs and enhancing inventory managers' expertise.

Results

With reduced stock levels, significant cost savings were achieved, including a €1.4M reduction in Fruits & Vegetables and €0.2M in Cured Meat & Cheese inventory costs. The methodology improved forecasting accuracy and replenishment control, resulting in fewer stock-outs and enhanced overall process management. The approach is now being expanded across the entire fresh department, covering 86% of all categories.

Our
AI-generated
summary

Our AI-generated summary

Our AI-generated summary

Being the spoilage cost reduction one of the main concerns of our customer’s fresh retail business, the increase of the replenishment efficiency was set as a strategic priority.

The combination of a replenishment method that lacked several key fresh-retail specificities, the stores’ manual orders that were significantly exceeding the ideal stock levels, an inaccurate forecasting process and obsolete management tools were contributing to product spoilage.

The project goal was to increase sales throw the promotion of freshness on the shelves, reducing food spoilage rates thanks to the optimization inventory management of perishable products.

The ROP methodology proposed a solution based on three main topics:

  • New approach combining a more accurate forecasting method with a replenishment algorithm that embeds both the state of the art methodologies with the perishable requirements – Replenishment
  • Control over every additional inventory order from stores – Order Management
  • Close monitoring of KPIs and increase inventory managers’ know-how – People

With the overall decrease of stock levels, there was a significant shrinkage (1,4 M€ in Fruits & Vegetables) and inventory costs reduction (0,2 M€ in Cured Meat & Cheese). In some cases, it was also possible to reduce stock-outs, due to a more accurate forecast.

Our AI-generated summary

Our AI-generated summary

The main intangible benefit was the overall replenishment process control by the stock management team, now provided with the right tools and the suitable know-how.

The methodology is currently being implemented at the whole fresh department, now with 86% of all categories fully covered by ROP.



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