What’s the recipe for retailers to have fresher food and less waste?
Many retailers today have automated replenishment processes for a wide range of products. However, in product categories with ultra-fresh food (with a shelf life of only a couple of days or less) many still work with manual processes. Think of products such as vegetables and fruits, meat, fish or convenience food: These fresh products are crucial for grocery retailers to attract and retain customers. Fresh quality is often a large factor in a customer’s decision to shop at one store or another. But if there are out of stocks or the product is not fresh enough for the consumer, they cannot buy what they want and might go even to a competitor. And products that do not sell because the shelf life has expired lead to costly write-offs and global waste of resources.
Why is fresh so difficult to handle for many forecasting and replenishment solutions?
There are a couple of reasons:
- Quickly changing trends and strong seasonal influences make sales of fresh products difficult to predict.
- Waste is another topic that must be considered.
- Fresh products are often delivered to the stores during the day or even multiple times per day.
But think about the benefits: reduced labor costs, better product availability and less waste not only in terms of money but also food which has a global impact. How could you achieve this?
The solution SAP Forecasting & Replenishment for Retail, add-on for fresh products addresses these key points of an otherwise cost intensive process. Let me explain what the main features of this product are:
A true daily forecast for your fresh items that reacts fast on current trends
Based on daily historical sales data as input and other influencing factors such as weekday influences, current tendency predictor the system will calculate a fresh forecast. Additionally, further demand influencing factors such as price changes, promotions, events or even weather information can be included in the forecasting model A system that gets smarter each day by looking at these inputs.
Projected waste is another consideration in replenishment for fresh products with very short shelf life.
Talking about waste does not only mean that there was some waste – you must also know where write-offs are likely to occur to calculate precise order amounts. This is what projected waste is about: How much of my current stock on hand will be probably spoiled in the next days because the shelf life has expired. Based on rules you can define in the solution how the system will calculate likely future waste and include this in its stock projection. By doing this, the replenishment accuracy is tremendously improved – no need for inaccurate general percentages or high safety amounts.
Regular replenishment scheduling is often based on full days. However, in reality it may happen that goods are delivered during the middle of the day (so called “intra-day”), particularly smaller, city stores with very limited storage areas. Store opening hours can have an additional impact on demand distribution and might be different per week day (e.g. longer store opening on a Thursday). Some goods might be even delivered twice a day.
To address these business issues, it is possible with SAP Forecasting and Replenishment, add-on for fresh products to define order and delivery information that is not only based on days but in addition with time stamps. These schedules can be considered during the replenishment calculation as well as store opening hours.
But does this really work?
Read in this Business Transformation Study how Maxima Group , a grocery retailer with meanwhile more than 1000 stores in the Baltics, Poland and Bulgaria, is replenishing now their short shelf life products including packaged meat, dairy and bread with the same efficiency they did already for their standard assortment with SAP Forecasting and Replenishment by using the add-on or fresh products.
- 20 % waste and loss reduction
- 50 % better forecasting accuracy
- 92 % store acceptance level for automatically calculated orders of fresh products
All in all, this is the secret recipe for fresher food, happier employees and customers and most important from a global perspective– less waste of food. Just try!
FYI – More information about SAP Forecasting and Replenishment can be found here
Thanks Sylvia - very good!
Very Informative and good article.
Thanks from Kancor-pioneer in the field of Global Spice Extraction.