partnering to capture lost sales revenue...class desc item desc net sales units net sales dollars...
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Partnering to Capture Lost Sales Revenue
VCF Case Study withIMS Client Discovery
3.0 From Compliance to CollaborationCompliance Reduce errors (costs)
CollaborativeReducing Out of Stocksrequires jointmetrics, definitions, processes and accountability
Out of Stock is at “Moment of Purchase” • Doesn’t matter if there
is stock in DC
• Doesn’t matter if there is stock in some stores
• Issue of Out of Stock occurs at the shelf in the store where consumer tries to make a purchase
Joint Value Props• If not on shelf, consumer has “other” places to purchase
• 0 Shelf Inventory = Lost sale opportunity
• Out of Stock = Consumer dissatisfaction
• In stock = Sale & Profit without additional marketing
• Helps identify process improvement opportunities
• Increase effectiveness of supply chain
• Engage partner collaboration at 3.0 level
Case Study Approach
Scope
• Deep dive with retailers
• Multiple Categories
• SKU level data by store … by week• Sell Through
• On hand Inventory
• IMS case & client analytics
• Identify best models, tools
Case Study Objectives
• Identify models / standards:
• Definitions
• Metrics
• Valuing lost sales
• Reporting
• Share best practices & samples
Definitions
OOS Definitions• Pure data driven definition
• Core Definition – No on‐hand inventory for active SKUs
• Standard is “weekly”
OOS Caveats• Highly dependent upon reported inventory accuracy
• Can not measure if consumer bought alternate SKU
• On hand inventory for SKU = 0 for the week
• “Avg Unit Sales Rate” X Week Out of Stock = Units Sales Lost
• # of Stores Out Stock X Units Sales Lost = Weekly Lost Opportunity
• $ Value / Unit X Weekly unit Lost Opportunity = $ Revenue Potential
• Gross Margin % X $ Revenue Potential = Gross Profit $ Potential
Valuing Lost Sales
The Calculation Details• Prior 4 week run rate applied to each week
– Average sell thru per week from 5 weeks prior to 1 week prior to the current week being analyzed
– Blanks and missing weeks not included as zeros in the calculated averages
• ASP (Average Selling Price) applied to unit run rates– Run rates for units and dollars are calculated as per criteria are considered lost units and sales … IF the out of stocks status is true for that week
Findings and Insights
Variance OOS
Outlets are NOT created equal
$0
$500
$1,000
$1,500
$2,000
$2,500
Sell Thru Outlet Productivity Across Quarter
2257 Outlets$65/Week
812 Outlets $146/Week
554 Outlets $311/Week
593 Outlets $1,141/Week
OOS Variance by Type of Outlet
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
1/5
1/12
1/19
1/26 2/2
2/9
2/16
2/23 3/2
3/9
3/16
3/23
3/30 4/6
4/13
4/20
4/27 5/4
5/11
5/18
5/25 6/1
6/8
6/15
6/22
6/29 7/6
7/13
7/20
7/27 8/3
8/10
8/17
8/24
8/31 9/7
9/14
9/21
9/28
10/5
10/1
2
10/1
9
10/2
6
11/2
11/9
11/1
6
11/2
3
11/3
0
12/7
12/1
4
12/2
1
12/2
8
% o
f out
lets
with
an
OO
S O
ccur
ence
Top 10 SKU Out of Stock Outlets by Week (No units or negative on hand inventory)
Tier 1 Tier 2
Tier 3 Tier 4
OOS Variance by Product Category
Seasonality
OOS and Lost Sales vary substantially by month by category
Size of the Prize
Lost Revenue Opportunity by Outlet
Lost Sales can be SubstantialLost Sales can be Substantial
Just 1 Outlet Lost Annual Opportunity
• Missed Revenue $ 129,364• Lost Gross Margin $ 51,745
Annual Lost Opportunity ~ 30 Stores
• Missed Revenue $ 3,880,922• Lost Gross Margin $ 1,552,369
Key Insights Leverage data & insights
across seasonal buys Need to “slice & dice” by
class, style, color, size Need “alerts” for
replenished items
Visualizing Relationships & ValueVisualizing Relationships & Value
90/10 …
Focus on biggest Opportunities
Show pain of loss
90/10 …
Focus on biggest Opportunities
Show pain of loss
Class Desc Item Desc Net sales units Net sales dollars OOS Lost Sales Units Lost Sales DollarsClass 1 Item 1 815 $3,223 22.6% 411 $399
Item 2 246 $16,955 6.4% 59 $948Item 3 806 $4,588 11.0% 332 $497Item 4 412 $1,223 4.2% 67 $257Item 5 1,341 $3,961 5.1% 90 $254Item 6 162 $6,359 8.9% 60 $982Item 7 2,465 $38,694 5.1% 466 $2,377Item 8 156 $6,120 17.6% 64 $1,028Item 9 2,247 $4,410 5.4% 234 $81Item 10 482 $1,899 9.0% 119 $282
Class 1 Total 9,132 $87,432 10.7% 1,903 $7,104Class 2 Item 11 96 $5,463 19.2% 52 $1,208
Item 12 1,372 $28,784 18.7% 472 $2,739Item 13 324 $17,644 17.4% 131 $2,892Item 14 297 $5,906 9.4% 89 $693Item 15 267 $5,320 9.0% 80 $680Item 16 569 $11,292 22.4% 263 $1,589Item 17 380 $4,896 15.7% 130 $638Item 18 158 $3,936 5.1% 48 $400Item 19 382 $9,466 13.5% 120 $1,376Item 20 159 $2,344 52.2% 102 $440
Class 2 Total 4,004 $95,052 17.8% 1,487 $12,655Class 3 Item 21 78 $6,542 30.1% 125 $3,984
Item 22 108 $2,670 18.2% 57 $1,451Item 23 72 $6,015 24.9% 86 $5,250Item 24 111 $2,741 11.9% 47 $1,771Item 25 104 $6,164 20.6% 91 $4,550Item 26 77 $7,169 15.1% 53 $4,239Item 27 211 $10,531 7.4% 56 $3,892Item 28 103 $3,055 14.5% 83 $1,457Item 29 48 $1,434 32.4% 75 $687Item 30 94 $4,158 10.9% 54 $1,829
Class 3 Total 1,006 $50,480 17.4% 726 $29,108Class 4 Item 31 35 $3,124 10.9% 28 $872
Item 32 75 $5,968 2.6% 18 $800Item 33 223 $4,419 2.3% 42 $280Item 34 473 $7,588 8.0% 62 $505Item 35 155 $6,180 2.0% 43 $1,144Item 36 128 $10,853 19.2% 88 $4,122Item 37 116 $2,873 16.3% 88 $890Item 38 372 $7,332 2.8% 26 $358Item 39 203 $4,036 5.0% 29 $395Item 40 94 $3,275 2.1% 15 $105
Class 4 Total 1,874 $55,647 7.1% 439 $9,469
Top 10 Items by Class of Lost Sales Opportunity for 13 weeks
Inventory Intervention for Best SKUs
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
1/5
1/12
1/19
1/26 2/2
2/9
2/16
2/23 3/2
3/9
3/16
3/23
3/30 4/6
4/13
4/20
4/27 5/4
5/11
5/18
5/25 6/1
6/8
6/15
6/22
6/29 7/6
7/13
7/20
7/27 8/3
8/10
8/17
8/24
8/31 9/7
9/14
9/21
9/28
10/5
10/1
2
10/1
9
10/2
6
11/2
11/9
11/1
6
11/2
3
11/3
0
12/7
12/1
4
12/2
1
12/2
8
% o
f out
lets
with
a L
ow S
tock
Occ
uren
ce
Top 10 SKU Low Stock Outlets by Week(< 2 units or < 2.0 WOS)
Tier 1 Tier 2
Tier 3 Tier 4
Weekly Low Stock AlertHighlight “Opportunities”
Ability to “Drill Down”
Make it the scorecard for both partners
Key Insights• Out of Stocks vary considerably by product class• Double digit Out of Stock % represent lost sales
opportunity worth pursuing• While Out of Stock % can be in low in high revenue
categories, often the greatest lost sales revenue opportunity is in categories with high revenue
• A key to leveraging capture of lost sales opportunity will be ability to pinpoint key SKUs & and identify store patterns of Out of Stocks
Should you take the plunge?
It’s not rocket science, BUT …
• Requires resources• Data accuracy• Systems integration• BI – Analytics• Actionable reporting• Frequency ‐‐ Timely• Scalable processes
Should you engage … invest?
Key Questions: Root Cause Analyses
• How Much … value?• Where … by stores• When … seasonality• Why …
– Internal retail – External supplier– Joint Processes
Considerations
• ASP … Profit Margin• Nature of Category• Product Life Cycle• Seasonality• # SKUs• # Stores
Requirements
• Consistent definitions• Data by SKU by store• “Accurate” on‐hand inventory• Systems / Analytics … Reporting• Processes … Partnership
Key Success Factors
• Focus on major Opportunities• Min Weekly Analytics• Early alerts• Ability to drill down• Dashboard / Portal• Collaboration 3.0
Additional ConsiderationsAdditional Data Recommendations to be considered Marketing plans by SKU / Category
• Impact of ads and promotions on velocity and stock
• Out of stock rates on ads and promos … peak seasons
Margin data … analyze profit potential / loss
Supply Chain dynamics:• DC replenishment timelines• DC to store mapping?• DC on hand inventory?
Collaboration 3.0
Value of Collaborating on Out of Stocks
• Both partners can harvest lost sales
• Increased revenue & gross profit without increased marketing spend
• Process improvement beyond shipping and logistical compliance
• Move from “catching bad” … to more “Partnership” focus on bottom line
Benefits
Q & A ‐What would you like to know?
IMS Case Study Contacts
Chris PetersenSenior Partner / [email protected]
Charlynn ManhartPartner / Measurement & [email protected]
Blog site: www.IMSResultsCount.com
Facebook: IMSResultsCount
Twitter: @IMSResultsCount
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