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Be Fresher, Sell More, Waste Less

Rob Broekmeulen

Nevin Mutlu

November 30, 2017

SMWL workshop

Prague

Contents

• Summary of “Sell More, Waste Less” findings

• Recent findings from research & industry

• What new research does the industry need?

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The “Sell More, Waste Less” project

• Goal:

• improve the performance of the fresh supply chains

• Methods:

�Analysing data from 3 retailers (categories Fruit & Vegetables, Fresh Meat, and Convenience from 27 supermarkets),

�Interviews, and

�Literature review

• Output:

�A report with best practice checklist,

�Scientific publication (in IJPE), and

�A tool to quantify waste and OSA.

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Result 1: Fresh case cover is a strong indicator for waste3

Fresh Case Cover (FCC) = (Case pack size) / (Average demand during shelf life)

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Result 2: Impact case pack and shelf life

• Increasing the shelf life with just one day has the greatest impact on OSA, waste, and freshness

• Focus on SKUs with a shelf life up to 8 days

• Requires improved supply chain and supplier collaboration

• Reducing the case pack size (piece picking) comes second in impact on OSA and waste, but the effect on freshness is limited

• Smaller batches increase grabbing by customers (if all batches are put on the shelf)

• Not all ordering systems can deal with changes in the case pack in an adequate way (case pack provides safety stock)

• Changing the case pack requires supplier collaboration

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Result 3: Large differences between stores

• Based on a benchmark tool that calculates the estimated waste and OSA in an ideal world, assuming

− FIFO withdrawal, and

− the age information of the inventory on the shelf is taken into account when making the replenishment order.

• But, in the real world,

− Inventory age is not tracked in the inventory system, and

− Customers frequently grab fresher items (LIFO).

�Resulting in sub-optimal replenishment decisions.

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Relation OSA and freshness

What is the main driver of sales?

• OSA, or

• Freshness?

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Increasing the OSA

hurts freshness

What is fresh?

• Never tinned, frozen or otherwise preserved.

• But what about curing or clever packaging?

• Long shelf life after sales.

• Abandon unnecessary expiration date coding.

• Short supply chain after harvest/production?

• Production date coding (requires training of consumers).

• Should we try to define or set standards for freshness?

• Should we research how customers perceive freshness?

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Case: Albert CZ8

• Confirmed strong correlation between FCC and waste.

• Detected 608 problematic SKUs, based on FCC>1.

• Represent 6 mln EUR of waste (0.3% of sales), and

• Ca. 10% of the assortment (varies per store).

• Solution: of the 608 SKUs, 358 are considered, resulting in

• 65 Changed case pack sizes

• 111 Delisted SKUs

• 66 Other (piece picking, re-packing, etc.)

• 116 No change possible

• Realized savings in 2016: 1 mln EUR (and potential for more).

Case: Makro (Metro NL)9

• Confirmed strong correlation between FCC and waste:

• Large improvement by including Minimum Safety Stock

• Relation also dependent on (type of) store.

• Benchmarking stores revealed inadequacies ordering system.

• Changing the flow type increases freshness and reduces waste.

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Relation waste and order adjustments10

Small stores benefit the most

from adjusting the order advice

Recent findings from research

• Lower service level at the DC results in better freshness in the stores and reduced waste (with constant OSA). Can be achieved by:

• Optimizing replenishment frequency between supplier and retailer,

• Synchronizing production with ordering, and

• Replacing the current KPIs by a freshness-related KPI

• Unpacking in the DC is shown not only to reduce waste (or increase OSA) but also to be cost optimal for a wide range of SKU’s.

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Lessons learnt

• Confirmation of very large potential to increase profit

• Keep in mind how change affects different actors

− large versus small stores

− supplier versus retailer

• Align the reorder levels when changing the minimum order quantities in the stores

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