Facing and shelf capacity: how to match the shelf to sales velocity?

Why the facing decides the out-of-stock

The facing is the number of units visible at the front, and the capacity is the total number of units the shelf can hold for a reference (front × depth). When capacity is lower than sales between two replenishment passes, the out-of-stock is certain, whatever the quality of the order: the product is in the back room, the shelf is empty. It is one of the store-level causes which, according to Corsten and Gruen, account for 72% of out-of-stocks.

The symptom is easy to recognise: a product always out of stock in the evening, put back on the shelf every morning, with stock in the back room.

The calculation rule

Minimum capacity of a reference = average hourly sales × number of hours between two replenishment passes × safety coefficient (1.5 to absorb peaks).

Examples:

Reference	Sales per hour	Hours between passes	Minimum capacity
Semi-skimmed milk 1 L	30	4	180 units
Flagship biscuits	6	4	36 units
Common hair colour shade	0.5	24 (morning replenishment)	18 units

If the facing cannot hold this capacity, two solutions: give the reference more facings (at the expense of a slow-moving reference) or add a replenishment pass. The first costs shelf space, the second staff time.

Where to start

Not with the whole aisle. Sales are highly concentrated: the twenty best-selling references of an aisle often make more than a third of its turnover, and they are the ones suffering facing out-of-stocks. The method:

1. Pull the hourly sales of the twenty best references of each aisle over four weeks.
2. Calculate the minimum capacity with the rule above, using the real interval between two passes (often 24 hours if replenishment only happens in the morning).
3. Compare with the current capacity of the facing. Any reference below is a scheduled out-of-stock.
4. Reallocate shelf space: take room from references in the same aisle that sell less than one unit a day.

This exercise generally reveals a few fast movers with two or three facings too few, and dozens of slow references taking too much room.

What it changes for replenishment

A well-sized facing removes replenishment passes. A reference at 6 sales an hour on a facing of 8 units must be reloaded every hour; on a facing of 36, every four hours. At aisle level, putting the twenty best references on the right facing can bring three passes a day down to one and a half, with equal or fewer out-of-stocks. The organisation of passes is covered in how to organise replenishment to avoid gaps on the shelf.

Special cases

• Promotions: velocity is multiplied by three to ten; the promotion’s facing must be calculated on expected sales, not usual sales.
• Short-dated fresh: capacity cannot always be raised without increasing waste; the extra pass is then the right lever.
• Categories with many references (beauty, hair colour, stationery): the facing per reference stays short by construction; the answer is to reduce the range and count out-of-stocks per reference, as explained in which products are most often out of stock.

What shopper reporting changes

ShelfAlert reports give, reference by reference, the time at which the facing empties. A product reported every day at the same time is a facing to review; the dashboard makes the list, without a count. 14-day trial, no payment card: see the plan for store managers.

Sources

• Corsten, Gruen, “Desperately Seeking Shelf Availability”, International Journal of Retail & Distribution Management, 2003, and “On Shelf Availability”, 2004: summary.
• Gruen, Corsten, Bharadwaj, “Retail Out-of-Stocks: A Worldwide Examination”, GMA, 2002: full study (PDF).