- By 32 percent for products that sold 0.1 to 0.2 times per week, which is the same as one to two items every 10 days;
- By 32 percent for products that sold 0.2 to 0.3 times per week;
- By 20 percent for products that sold 0.3 to 0.5 times per week;
- By 36 percent for products that sold 0.5 to 1 times per week;
- By 29 percent for products that sold 1 to 3 times per week;
- By 32 percent for products that sold 3 to 7 times per week.
For products that sold less than 0.1 units per day, RFID made no difference in reducing OOS. Hardgrave says these are extremely slow-moving items.
Due to consumer buying behavior, an out-of-stock occurrence doesn't always translate into a lost sale, but it can contribute to significant financial losses. Nationally, retailers absorb about 42 percent of the impact of an out of stock, while suppliers absorb about 33 percent. For a store with a national average of 8 percent of its products being out of stock, the estimated potential lost sales are 3.4 percent, Hardgrave says.
Lean Provision Is Tesco's Secret Weapon In Wal-Mart Battle
The key behind the success of Tesco's loyalty card program is its lean provision system that efficiently delivers exactly what customers really want, exactly when they want it, and exactly where they want it, according to the author of a book on the topic.
"Tesco in Britain is a pioneer in lean provision," says James Womack, co-author with Daniel Jones of Lean Solutions: How Companies and Customers Can Create Value and Wealth To-gether (Free Press; October, 2005; hardcover).
The British retailer's lean provision system allows it to respond rapidly to the wealth of data collected from its 12 million Clubcards. It combines point-of-sale data, crossdock distribution centers and frequent deliveries to many stores along "milk-runs" to stock the right items in a range of retail formats. These include Tesco Express convenience stores; Tesco Metro (small supermarkets in cities); traditional Tesco supermarkets; Tesco Extra ("big box" superstores in suburbs); and Tesco.com for Web shoppers.
"The range of retail formats, plus detailed knowledge about specific consumers and rapid replenishment of each store, will progressively permit Tesco to offer each household convenient variety at lower total cost," says Womack, founder and chairman of the non-profit Lean Enterprise Institute (LEI), Cambridge, MA.
He says the strategy has worked "brilliantly," permitting Tesco to establish the lowest cost position among British retailers (including Wal-Mart's Asda chain) while posting progressively higher margins and steadily increasing its share in every format.
Tesco's has 31 percent of U.K. market share, nearly double the 16 percent held by Asda, according to a recent article in the Wall Street Journal. Last month, Wal-Mart abandoned an eight-year effort in South Korea by selling its 16 stores there.
Tesco, which plans to open a chain of small stores on the U.S. West Coast next year, has 39 Korean stores.
In other news, Tesco plans to move significant volumes of product from road to rail when it introduces purpose-built green trains later this summer. The estimated $6 million project will begin moving non-food products daily from its main distribution center in Midlands, England, to its regional Scottish distribution center in Livingston, Scotland, cutting an estimated 4.5 million road miles and around 6,000 tons of carbon dioxide emissions a year.
Laurie McIlwee, distribution director for Tesco, says ""Rail distribution has been around for many years, but this is the first time a large retailer has invested in a dedicated rail supply chain on this scale. It is an exciting move for Tesco, offering a faster route to Scotland, and a boost for the environment. It brings a whole new meaning to Tesco Express."
The first of these trains will leave Daventry for Scotland in August. If successful, Tesco will look to increase the volume of freight moved in this way and possibly to extend the trial to other areas.
Most Large U.S. Companies Unprepared For A Pandemic
Sixty-eight percent of companies with more than $1 billion in revenues are not prepared for a pandemic, such as an avian flu outbreak, according to a recent study by AMR Research Inc., Boston.
The survey highlights the fact that a majority of companies have not implemented a risk management strategy.