30|Retail News|June 2020|www.retailnews.ie
In-Store Efficiency
Taking stock of your profits!
Simon Hedaux, founder and CEO of Rethink Productivity, examines why high stock levels are damaging your business and advises on how to fix this.
SHREWD business owners have always understood that positive cashflow is the life blood of their business. Reports in the UK and US suggest that between 80% and 90% of small business failures are due to cashflow problems. Stock levels matter because they tie up assets and can be a major contributor to cashflow challenges. Most operators understand the impact of stock holding on their finances. What is less obvious is the impact on the efficiency of the operation. These are the top issues created by high stock levels. 1. Delivery and fill up workload When stores receive more stock than they can fit on their shop floor, it creates work to sort the stock into items to go straight to shelf and those that should be diverted to the stockroom for storage. Or everything is moved to the shop floor, causing congestion for customers and any excess moved again to storage areas. Whichever way it happens, the team handle stock more than is strictly necessary, creating more work. This inefficiency can be further compounded when stores don’t have the best equipment for moving stock and poor access to stock storage areas. We’ve seen excess stock shipped to the stockroom by multiple journeys with a customer shopping basket or trolley. A roll cage or fit-for-purpose stock trolley would reduce trips and time taken. Back shop areas are not always set up for peak efficiency, as anyone who has had to carry stock upstairs will tell you. And perhaps worst of all is when stores incur the hire costs for a container to store their
overflow stock. Not only are they notorious targets for thieves, it is so easy for out-of-sight stock to become out of mind too, only to be rediscovered at a future date. 2. Stock counts and on-shelf availability The more stock you have, the more there is to count so, stock counts take longer. And, the impact of high stock levels goes further. Retail tests tend to show that as more stock counts are completed, stock file accuracy falls, and the more stock there is, the more inaccurate they are. When lines are stored in multiple locations, counts become more inaccurate and when there is so much stock, lines get hidden behind other stock. Either all the stock must be moved every time a count is done, or items are likely to be missed. Stock count problems are the root cause of the phenomenon where stores have both high stock levels and poor on-shelf availability. As counts become more inaccurate, there is a tendency for the faster selling lines, those that really matter for your customers, to be out of stock. Most stores with a stock system will have stock counts generated for negative stock file lines and undertake gap counts. High stock levels and inaccurate counts combine to create a vicious cycle of more counts and more errors in the counts, creating extra workload for the team and poorer onshelf availability for the customer. Most retail business have a small core of higher selling lines and a longer tail of slow selling lines – and it is these slower selling lines that tend to be the part of a high stock problem. The fastest growing retailers in grocery include Lidl and Aldi, whose model is to minimise choice for customers, creating a simple and lower stock model for the store teams to run. They focus on shelf availability as it really matters if a line
