A study by Grocery Manufacturers Association (GMA) shows that the average of visible stock-outs in inventory reaches 2%, referring to when the inventory in retailer systems amounts to zero. To diminish this breach, retailers invest significantly in systems, analytics and optimization of logistic processes, to obtain a perfect level of inventory in the store, minimizing short-outs and increasing product availability. Nonetheless, this is not enough. GMA explains that an even bigger problem hides in invisible stock breaks, when in the system you can find a positive inventory but at the gondolas or sales points there is no product. GMA estimates that these invisible shortages reach 6%.
Generally, invisible shortages happen when the products are in the storage room, but are not available for clients; when a client has the product but hasn`t finalized the purchasing process; or when the product is definitely not in the store but it is not specified in the system. This last reason is called phantom inventory and happens when there is a decrease of products, stealing or a bad registration of products at the checkout.
By analyzing the effect of a purchasing decision in a stock shortage situation, studies show that, in average, in 60% of the opportunities consumers change the product for an equivalent in the store or definitely come back at another moment to purchase it. This implies that when a costumer doesn´t find an available product, you can expect a loss of 40% of potential sale. This creates losses of even 3,3% of potential sales, which 0,8% are associated to visible stock-outs and 2,4% to invisible ones.
As mentioned earlier, retailers have historically invested in resources to improve their logistic processes, have more efficient distribution centers, demand planning software etc., which related to 1/3 of the already mentioned problematic. This opens the question of what to do with the remainder opportunity, specially the problems that happen inside the store and that create even a 2,4% loss in sales. With hundreds and thousands of SKU`s at the sales points and with employees focused on selling or completing administrative tasks in intense days, it is difficult for the teams to uncover stock shortages, which can last days or even weeks. A solution can be to increase the personnel, who check the availability of important products, however, this is costly and only tackles part of the problem.
Frogmi has developed a low cost and efficient alternative
By using the retailer
s real time purchasing information, as well as the historic information, and by applying artificial intelligence algorithms, is possible to automatically detect anomalies in the purchasing of products that appear with a positive inventory in the companys systems. These anomalies are translated automatically and in real time through a task system, unique in the industry, designed specifically for product tasks. Checking tasks would involve seeing if the products are in the gondolas, if they have the correct prices, and in the case of discounts, if they are accompanied with graphic material. In the case that the problem can
t be solved by performing these tasks, like for example the product didnt have a physical inventory at the gondola or in the storage room, Frogmi sends an automatic task to the responsible area so they can solve the problem. At the same time, it controls the time it takes to manage this in order to solve it as fast as possible. With Frogmi, clients have been able to improve their gondola availability to 4pp, which is translated in an increase of sales of over 1,5%.