The Impact of Automatic Store Replenishment on Retail

Technologies and Concepts for the Out-of-Stocks Problem

verfasst von: Alfred Angerer

Verlag: DUV

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

Fast moving consumer goods retailing is a highly competitive market. European retailers are continuously aiming to improve customer loyalty by offering good service. At the same time, they are struggling to reduce costs in order to stay competitive. One technology that promises to decrease the number of out-of-stocks while simultaneously reducing store handling costs is automatic store replenishment (ASR). At the heart of ASR systems lies software that automatically places an order to replenish stocks. Many European grocery retailers have started to implement such decision support systems. Surprisingly, although several retailers have automated their order process in the last few years, there is almost no academic source examining this topic at the level of the store. It is worth noting that other technologies In retail, such as RFID (Radio Frequency Identification) and the introduction of the barcode, have received far greater attention from the public and from researchers. Furthermore, while the topic of extent and root-causes of retail out-of-stock has received substantial interest over the course of the last years, the question to what extent existing and new practices remedy OOS is largely unanswered. In particular, there is a debate whether ASR improve or worsen OOS. Therefore, Dr. Alfred Angerer has well chosen a topic of both managerial and academic relevance.

Inhaltsverzeichnis

Frontmatter

1. Introduction

Abstract

Grocery retailing is a highly competitive market (e.g. Keh and Park 1997). European retailers are continuously aiming to improve customer loyalty by offering good service. At the same time, they are struggling to reduce costs in order to stay competitive. The effort to achieve customer service excellence has only been partly successful, as the low average product shelf availability rates of 92–95% (Gruen, Corsten et al. 2002; Roland Berger 2003b) and a sunk store loyalty underline. The major part of retailer costs are personnel costs, and in particular it is the operations in the store that require intensive staff dedication (Broekmeulen, van Donselaar et al. 2004a). The German retailer Globus has calculated that the logistics costs of the last 50 meters in the store, i.e. from the backroom to the shelf, are three times as expensive as the first 250 kilometres from the producer to the store gate (Shalla 2005). A technique that promises to reduce the out-of-stock (OOS) rate by simultaneously reducing the store handling costs are so-called automatic store replenishment (ASR) systems, the main research subject of this thesis.

2. Research Framework and Design

Abstract

The outcome of any research is strongly affected by the choice of the research methods and strategies. As Scandura and Williams state (2000, p. 1249) “[a]ny research method chosen will have inherent flaws, and the choice of that method will limit the conclusions.” This means that design choices about instrumentation, data analysis and construct validation may affect the types of conclusions that are drawn (Sackett and Larson 1990). Therefore, this chapter gives an overview of the research methodology chosen for this thesis. First, a research framework narrows the research field down. Second, the qualitative and quantitative research methods are depicted before, finally, the research activities that led to this thesis are presented.

3. Literature Research

Abstract

There exists almost no academic source that deals directly with automatic store replenishment systems at retail store level. Yet, even if theory cannot provide direct answers to the research questions, it is fruitful to consider the presented practical problem from different theoretical perspectives in order to obtain new impulses for this research project. Therefore, four theoretical research sources are addressed below in detail to verify, what contribution further theoretical streams can offer. The literature research focuses on sources dealing with inventory management, logistics and operations management, business IT and contingency theory (see Table 2).

4. Development of Models

Abstract

The first milestone in this work is the creation of a descriptive model of ASR systems. It provides an answer to the first research question Q₁: how can automatic store replenishment systems be classified? This model does not claim to include all possible kinds of replenishment systems, as new, revolutionary, decentralized systems may be developed in the future.⁴¹ Yet it provides a helpful structure to examine the replenishment systems of today’s retailers. As it is created on an abstract level, its core results can be applied to other industries dealing with piece goods replenishment processes as well.

5. Quantitative Analysis

Abstract

To be able to test the hypotheses formulated in the previous chapter, two different data sets of the company MYFOOD, a major central European grocery retailer, are analysed.⁶⁸ One part of the data stems from a physical OOS audit project that the KLOG conducted together with this retailer in summer and autumn 2004. In addition, historical sales and POS data was extracted from the retailer’s ERP system to complement the findings. The quantitative analysis made on this dataset consists of three parts, analogous to the three groups of hypotheses. First, correlations between OOS rate and product characteristics are explored. Second, the influence of store characteristics on the OOS rate is examined. Finally, overall replenishment performance is tested. Table 13 gives an overview of the datasets that are used for the hypothesis testing and which will be presented in this chapter.

6. Field Research and Managerial Implications

Abstract

As seen in the quantitative analysis, higher ASR systems can significantly improve retailers’ inventory performance, reduce OOS incidents, and show more constant results. Yet it was also found that badly or crudely parameterised systems will not deliver the desired results. As stated by the contingency theory, the context of the company is decisive in determining the success of an automatic replenishment system. Therefore, in order to be able to give recommendations to practitioners it is necessary to examine in detail how retailers successfully introduced ASR systems and in which fields they can still improve their operations. In this chapter, the case studies of four retailers are depicted. For each company, a description of their replenishment processes, the organizational changes and personnel issues linked to the ASR introduction are highlighted as well as the outcome of ASR system’s introduction.

7. Conclusion

Abstract

In this final chapter, the contributions for theoretical research and practitioners are summarized, before further research fields are depicted.

8. Appendix and References

Abstract

The difficulty with the data extracted from MYFOOD’s ERP system was that the system does not record any absolute values of the stock level. This means that it is not possible to determine ex post the quantity of goods there were for a certain product on a specific day. In addition, MYFOOD interviewees stressed the inaccuracy of the inventory records. This statement is supported by physical audits (see Figure 49) and by other researchers (e.g. Broekmeulen, van Donselaar et al. 2005). The only available data was relative, i.e. showing how many units were delivered and how many units left the store on a certain day. With this data it is possible to determine the stock level curve, but without knowing at which height on the y-axis the curve is (see Figure 57).

Titel: The Impact of Automatic Store Replenishment on Retail
verfasst von: Alfred Angerer
Verlag: DUV
Electronic ISBN: 978-3-8350-9129-0
Print ISBN: 978-3-8350-0302-6
DOI: https://doi.org/10.1007/978-3-8350-9129-0