Did you know 40% of perishable goods are wasted in shops and supermarkets after reaching the store? Given all our technology, and all the systems we can use to manage inventory and stock, this represents an incredible loss not only to the business, but also to the environment.
On top of this, retailers find themselves under pressure to minimise waste.
According to the British Retail Consortium 180,000 tonnes of food is wasted by the UK’s seven major supermarkets a year. The negative sentiment towards this is clearly seen with the likes of the #WasteNot campaign from Hugh Fearnley-Whittingstall attracting more than 250,000 signatures.
Just over the English Channel, the French government is legislating to force supermarkets to donate wasted food to charities.
How can retailers respond? I’d argue Dynamic Store Merchandising (DSM) offers one of the solutions that can help put these businesses back on track, by reducing the waste that’s impacting their already wafer-thin margins.
Dynamic Store Merchandising explained
DSM is a store inventory management system that aligns data from what you have in stock, against what’s being sold in real time at the tills.
Using predictive analytics, the application can estimate when stock on the shelf is going to run out, while simultaneously alerting staff when supplies are low. This helps strike the balance between having the right amount of products on shelves, while stopping too much new stock being ordered, meaning less fresh goods are thrown away.
If broccoli is flying out of the shelves one day, for example, the system automatically knows how much to order, and can alert assistants when supplies are running low.
The end result means a retailer’s shelves are better stocked to meet customer demand, and less is thrown away. Empty shelves are a massive frustration for customers. In such a competitive market it’s no secret shoppers will take their business elsewhere if they can’t purchase what they want.
According to our research, one in every 13 items a customer looks for is out of stock – DSM can also help you save those sales.
By taking real-time demand feeds from point of sale, a retailer can typically recover 25% of their current losses from wasting perishables.
Saving beyond the cost of the product
For retailers, it’s not just the direct cost of throwing products away – there’s also shelf space to consider. On top of that the there’s time and effort it takes to fill the shelves in the first place, not to mention the journey a product has to take through the supply chain. Throwing something away represents waste through the entire process.
Mark downs generate over 2% of total sales lost to profit due to margin erosion there’s also a staffing cost to manage. Meat, fish Chicken, for example are even more expensive, due to the process needed to discard out of date (and therefore contaminated) meat.
While supermarkets are getting slightly better at reducing waste, a rise in click-and-collect serviced from the stores has made shelf out-of-stocks worse. Some businesses prioritise orders through these online services and it means for customers coming into store at 11am on a Saturday morning some of the shelves are empty.
The good news is: DSM can help resolve some of these challenges by lifting operating profit by 1.25%. So, if you have an operating profit of £1bn a year that’s an extra £12,500,000 to be made a year.
It’s about creating actionable insights from the sea of information available. Big data has been around in the retail space for as long as I can remember, but the challenge has been making use of it all.
While not being a silver bullet for all the supply chain issues, this is something retailers can use on top of their existing systems – and a 1.25% increase in operating margin would be very welcome one the bottom line!
Want to know more about Dynamic Store Merchandising? Come and speak to us at Fujitsu World Tour – registration is now open.
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