How to reduce out-of-stocks on the shelf in a store?

First, know where out-of-stocks come from

The reflex is to blame logistics or the supplier. The research says otherwise: in the worldwide study by Gruen, Corsten and Bharadwaj for the Grocery Manufacturers of America, then in their 2004 work, 72% of out-of-stocks are caused inside the store itself: an order placed too late or too small, a wrong forecast, a product in the back room but not on the shelf. The rest comes from upstream (warehouse, transport, supplier).

Practical consequence: a store manager controls three quarters of the problem without changing wholesaler or supplier.

The five levers, in order

1. Measure per aisle, not on average

A store-wide out-of-stock rate of 6% hides a fresh aisle at 12% and a household aisle at 2%. Without a measure per aisle and per time slot, you treat the symptom at random. The minimum: a gap count at fixed times, twice a day, recorded per aisle. Better: continuous detection (see lever 5). The calculation is explained in our article on the on-shelf out-of-stock rate.

2. Fix the book stock

A large share of out-of-stocks comes from wrong book stock: the system believes four units remain, the shelf is empty, the automatic order never fires. Unrecorded breakage, theft, receiving errors, misplaced products. Cycle counts targeted at fast movers correct this “phantom stock” before it blocks replenishment.

3. Size the facing to the velocity

A product that sells twenty units a day on a facing that holds six will be out of stock three times a day, whatever logistics does. Reviewing the shelf capacity of the twenty best sellers of each aisle is the cheapest and fastest lever: it is a planogram change, not an investment.

4. Replenish at the right hours

The gap appears during selling hours, not overnight. Replenishment concentrated before opening lets the shelf empty until the next day. Moving part of the team to peak slots (late morning, late afternoon, Saturday) shortens every out-of-stock at constant headcount. We detail the organisation in how to organise replenishment to avoid gaps on the shelf.

5. Shorten the time between the gap and its detection

This is the forgotten lever. An out-of-stock costs in proportion to its duration: a gap seen in ten minutes costs ten minutes of sales, a gap seen at the next walk costs three hours. Shelf cameras and sensors exist but remain expensive to fit across a whole store. Reporting by the shoppers themselves, at the moment they notice the gap, gives continuous detection without hardware.

A worked example

A 2,500 m² supermarket at 6% out-of-stock on 8,000 shelf references has 480 references missing at any time. If out-of-stocks last three hours on average, every hour gained on detection removes a third of the lost sales. On the basis of the ECR France barometer, where a hypermarket loses about 45 baskets a day to out-of-stocks, gaining one hour of detection represents about fifteen baskets saved per day.

What shopper reporting changes

ShelfAlert puts a QR code in the aisle: the shopper scans the missing product in two seconds, the manager receives the alert in real time and sees the most-requested products. That is lever 5 without installation, and it feeds lever 1 with a continuous measure per aisle. The trial lasts 14 days, no payment card: see the plan for store managers.

Sources

• Gruen, Corsten, Bharadwaj, “Retail Out-of-Stocks: A Worldwide Examination of Extent, Causes and Consumer Responses”, Grocery Manufacturers of America, 2002: full study (PDF).
• Corsten, Gruen, “Desperately Seeking Shelf Availability”, International Journal of Retail & Distribution Management, 2003, and “On Shelf Availability”, 2004: summary.
• ECR France / IRI out-of-stock barometer, reported by LSA and Les Marchés.