By: Pat Walsh, Vice President, Supply Chain & Business Development, Food Marketing Institute
One topic always top-of-mind for me is ensuring On-Shelf Availability (OSA). Believe it or not, many retailers still struggle with the basics of OSA and the lost sales associated with out of stocks.
Take this scenario for example: When shoppers walk into a store or go online to look for a particular brand of, say, soda and don’t find it there are consequences. Seventy percent of the time, the shopper simply chooses another brand. The second time it happens, the same 70 percent of shoppers will either buy a substitute, buy nothing or shop somewhere else. The third time it happens, they simply move on to another retailer that has what they want. Not an outcome anyone wants. With fierce competition between retailers and any other competitor with a good idea and the funds to execute it, on-shelf availability is extremely important.
We know the OSA rate, the measure of products that are not available to buy right now, has been stuck at a stubborn eight percent for some time. If that doesn’t sound like much to you, translate it into dollars. If your company records $100 million in annual sales, that’s $8 million you’re leaving on the table.
As omnichannel shopping becomes more ubiquitous, the consumer will want more products, more quickly and all the time. That makes OSA a serious challenge, but one that can be met. The Trading Partner Alliance (TPA), comprised of FMI and GMA, joined forces to launch a research project to come up with some solutions. The OSA challenges, they found, fall into four categories:
Metrics and Data
There is no industry-wide accepted definition of what OSA is, no way to measure exactly how serious the problem is. Not everybody is using the same numbers.
Process and Practice
Retailers and manufacturers sometimes have trouble working together. When a retailer creates a specific sales program, but the manufacturer can’t get the product to it in time, that’s a problem.
Who on the retailer’s organizational chart is responsible for inventory management? Is it the supply chain specialist? The category manager? The buyer?
The industry is still struggling to wrap its head around how and when to use data, and how to analyze the massive amount of data pouring in.
The retail and manufacturing executives involved with the TPA project have come up with some action items to resolve these issues and this is just one of the several industry-wide initiatives in which FMI will act as a thought leader moving forward.
Download Solving the Out-of-Stock Problem Report