Update on Fresh Project by Rob Broeckmeulen - ecr-shrink

Establishing an efficient frontier for
shrinkage and on-shelf availability
Status update research project for the
ECR Europe Shrinkage group, sept 2014
Rob Broekmeulen and Karel van Donselaar
Research problem
Project steps
Added Value
Project status
Next steps
The problem
• Not enough insight in the trade-off between
shrinkage and on-shelf availability
• Majority of shrinkage at grocery retailers is caused
by perishable food due to waste
• Shoppers want choice and freshness in food
How can we improve
on-shelf availability
without increasing waste
(or reduce waste
with constant on-shelf availability)?
Project in 3 steps
• Step 1: Identify awareness and current practice
w.r.t . the trade-off between on-shelf availability and waste
• Step 2: Identify best practice
• Step 3: Quantify
- The retailers’ current performance
- The improvement potential when specific
changes are made (based on the best practices)
Interviews, best practice literature, data analysis and
using an Excel-based benchmark tool
Added Value for the participating retailers
We provide each participating retailer an independent
view on their current operations and insight in the gap
between the current and the optimal situation:
• Which improvement opportunities have been made
• Which further improvement opportunities exist?
• What are the most promising improvement
opportunities (quantification and prioritization of
the benefits)?
They receive an individual feedback based on the
analysis of detailed operational data for 9 representative
stores and three fresh product categories: meat, fruit
and vegetables and convenience products.
Added Value for all ECR-retailers
By providing a project report, a final presentation and the
benchmark tool to all ECR-members they can benchmark
themselves and identify and evaluate improvement
opportunities with minimal amount of time and data
In this way their senior management can be assisted, e.g. in:
1. Showing that waste is a choice,
2. Finding the optimal balance between on-shelf availability
(OSA) and waste, and
3. Identifying, quantifying and prioritizing improvement
projects for fresh product categories.
Project status (based on steps in the proposal)
• Step 1: Identify awareness and current practice
• All 3 retailers have been visited; first interviews have
taken place
• Step 2: To identify and evaluate best practices
• Interviews and best practice literature study are halfway
• Step 3: Quantify current performance and
improvement potential
• Most data received from 2 out of 3 retailers (matching
front and back office data via SKUid’s relatively good)
• OSA cannot be determined from transactional data since
match supply/sales/waste not perfect -> Additional data
on availability and replenishment logic needed
• Benchmark tool is ready for project use
Next steps
• Further interviews with retailers for current and best
• Gather additional data and replenishment logic
• Analyse data
• Present preliminary results to individual retailers
• Write final report
• Present results to ECR-working group
An efficient frontier: examples
Base scenario:
• Shelf life 5 days
• Average demand 1 item/day
• Variance 1
• Daily ordering and delivery
• FIFO withdrawal
Waste [%]
Examples of ways to increase on-shelf
availability for fresh products
1) Changing the
minimal order quantity
1) Reduction of lead-time and/or
review period
3) Optimizing assortments
4) Exploiting demand substitution,
e.g. by differentiating OSA targets
5) Special replenishment logic
Requires awareness first!
Research proposal summary
Research title:
Establishing an efficient frontier for
shrinkage and on-shelf availability
Project duration:
9 months
What is this project about?
• In retail, there is a trade-off between
shrinkage (mainly waste in perishables) and
on-shelf availability: Actions to improve on
one may often negatively impact the other
Research partners: Technische Universiteit Eindhoven
Rob A.C.M. Broekmeulen ([email protected])
Karel H. van Donselaar ([email protected])
How much time will be needed from
• Participation in project meetings (every 4-6
What data will be required?
• A detailed data request will be developed at
the beginning of the project
• Interviews (1-2 h each) with selected
experts from your organisation, to be
identified at project start
– Likely to include representatives from
operations, supply chain, trading, finance,
loss prevention
• Likely data will include:
– Shrink/Waste/Markdown data (at lowest
available granularity level)
– Availability data (at lowest available
granularity level)
– Store and item attribute data (as
available, incl. sales volumes, forecast
data, etc.)
• The results will be helpful for retailers
seeking to strike the right balance between
reducing shrink and improving availability
What are the deliverables?
What are the expected benefits?
• Tool (Excel based)
• The project will produce tangible, actionable
outputs that retailers can use to implement
bottom line improvements through higher
sales and lower waste
• Project report (“White Paper”) detailing
insights and best practices that will help
• Help to validate or set the right targets for
shrinkage and on-shelf availability
• While this trade-off is intuitively well
understood, there is little ‘fact- and numbersbased’ research on the relationship and
what drives it
• The purpose of the project is to investigate
the trade-off using rigorous, quantitative
modelling with a focus on perishables waste
• Any results published or shared will observe
strictest confidentiality standards – no
retailer-specific data will be divulged
• Seminar/Final presentation delivering the
outputs to you and the Shrinkage & OSA
• Reduce shrinkage by addressing the right
drivers, without negative sales impact
• …and/or improve on-shelf availability,
without negative shrinkage impact

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