The Path to Shelf-Ready Fulfillment: A Self-Assessing Guide
“Shelf-Ready Fulfillment is the delivery of display-ready merchandise to the retail store to optimize business performance.”
Leading retailers are boosting revenue, increasing efficiencies, and cutting costs with shelf-ready fulfillment - the delivery of display-ready merchandise to the retail store. What do these retailers know about improving overall business performance with shelf-ready initiatives? This article provides a self-assessment model to help you know where you stand in relation to the leaders and what steps you can take to gain competitive advantage using these strategies.
Leading retailers are enabling shelf-ready fulfillment to boost sales and margins, increase efficiencies, and reduce costs. They are reducing touches (and store labor) required to replenish store shelves by performing VAS and shelf-preparation tasks further upstream in the supply chain. They are shipping products to the store organized for faster putaway. And they are reaping revenue and other rewards from coordinated shipping of launch and “go-together” sets precisely aligned with promotions and merchandising plans. Enabling these strategies frees up store associates to focus on cross-selling and the customer experience, which drives higher sales and fewer markdowns. If you are looking for ways to improve business performance, this article provides a self-assessment model to help determine whether these strategies are right for you and where to begin.
Self-Assessment: Shelf-Ready Fulfillment
Do you want to know how your company compares to early adopters across the five key characteristics of shelf-ready fulfillment? Fortna developed this self-assessing guide to provide a view of how shelf-ready pioneers are gaining advantage across five key areas. What does the path to Shelf-Ready Fulfillment look like for your company? Review the self-assessment and discover your next steps.
Receipts
Receipts, verifying inventory received at the store against what is reported on the delivery manifest and the accompanying exception handling are still being managed through manual processes in some retail environments despite advances in systems and technology that allow for Advance Shipping Notice (ASN) and RFID tagging. The journey from Stage 1 to Stage 3 represents the largest leap for most companies where stage 1 is characterized by disorganized backrooms, paper-based checks and additional data entry required to check individual items and Stage 3 is carton-level verification with SKU-level validation for exception cartons only. Additional time spent on verifying receipts takes time and focus away from store associates’ ability to sell products and provide better customer service.
The transition to Stage 5 requires a fully automated, system-driven process with limited manual intervention. To enable the most advanced store receiving processes, retailers will have developed supply chain fulfillment processes that provide the assurance of accurate carton contents.
Product Organization
Product organization, where merchandise arrives at the store organized by department, category, brand and/or according to the store planogram for efficient putaway, is often overlooked though it represents the greatest potential impact among shelf-ready initiatives. It has significant upstream impact to the distribution center (DC) processes and systems and often requires alignment with suppliers, as well as between the distribution center and store operations. But improvements in this area can both speed up the shelf replenishment process and reduce the amount of time store associates spend on this non-value-add task.
For most companies enabling better product organization starts with selecting the appropriate fulfillment strategy, technology and systems at the DC, especially as you understand the value and impact of speed to the shelf and the overall impact to the business. Do you want your store associates sorting or selling? What does a delay in getting product to the floor cost you in terms of lost sales due to out-of-stocks?
Even the simple act of applying a visual cue like a label to each carton indicating the department and keys items inside can make sorting cartons and identifying time-sensitive promotional items easier for store personnel. You may already be organizing some products by major department category as you pick and pack at the DC, but have not yet achieved a seamless flow where goods arrive organized by sub-category and free of excessive packaging. If you are already doing these things as part of Stage 3, you may want work toward Stage 5 which involves removing individual polybags at the DC and packing product with a single carton liner poly bag to get the least number of touches from the door to the shelf.
Presentation Ready
Presentation ready merchandise, with value-added services (VAS) like price ticketing, security tags, hangers inserted and/or folded to shelf-specifications, is what most often comes to mind in discussions about shelf-ready fulfillment. It’s one of the basic building blocks of the strategy based on the cost savings and efficiencies associated with utilizing DC labor to perform these tasks more efficiently. But the way we see it, the opportunity to reduce the amount of expensive real estate backroom operations take up with processing and storage and unburden store associates with these tasks, allowing them to focus on the customer experience, arguably represent the real benefits of presentation readiness. Sales per square foot improvements may be a significant element in the business case for your company.
If you are still applying price tickets, hang tags and security devices at the store level, consider this; a best practice among leaders is 70% to 90% of the merchandise received is point-of-sale ready from the distribution center. That is, prepared to full specifications including folded in a shelf-ready manner with hangers, price tags, and perhaps even RFID tags already applied.
Stage 5 leaders also benefit from improved store allocation procedures with localized assortments prepared for each store. Think: no more will there be a glut of sweaters in the balmy South Florida spring season while lost sales abound due to out-of-stocks in northern regions. Look at the types of VAS services you typically perform in the store and consider not only whether those could be performed more efficiently at the DC, but the time that frees up for sales associates to engage with customers and perform store maintenance tasks.
Your company size and volume may influence where value-added services are to be performed. Large retailers may have the clout to require key suppliers to perform some of these value-added tasks for them, while smaller companies may have to consider whether they can afford this level of organization.
For a moment, consider the impact to store merchandising by combining product organization and presentation-ready:
· An employee takes a carton to the point of sale
· Removes an organized group of items from the carton
· Removes one master polybag
· Places the items folded to spec (or on hangers) and ticketed to the planogram-specified point of sale
· Returns the carton and poly to the backroom
Season Initials
Season initials arriving just prior to display date, coordinated with promotions and organized in cartons ready for display can mean the difference between a home run and a single. When products arrive out of sync with promotions, both sales and customer trust is quickly eroded. And because companies don’t have good way to measure that opportunity cost, the impacts are usually grossly underestimated. This is especially critical during peak seasons when busier store associates combined with higher shipping volumes can lead to backroom chokepoints that delay product from getting to the sales floor in a timely manner.
Season Initials are an often overlooked area where big gains can be made with additional effort upstream in the supply chain – either at the supplier or at the DC. Do you have the ability to prepare unit pre-packs at the DC or further upstream at the supplier or consolidation centers so that product can be cross-docked at the DC to eliminate touches?
Leaders in Stage 5 are taking advantage of supply chain postponement strategies to optimize their pre-pack allocations and delivery timing for the ideal store season initial deliveries. They are using “ship to mark for” labeling to flow cartons through the DC and asking suppliers to perform value-added services like kitting and garments on hanger. If you’re not there yet, you can start by aligning the supply chain, planning and store operations teams on the potential business impact.
Go-Togethers and Launch Sets
Similarly, shipping of go-togethers or launch sets can be coordinated to ensure that the slacks your Merchandising team went around the world to source for the Fall promos don’t languish on the markdown rack because the matching jacket sold out before the rest of the ensemble arrived at stores. Marketing and merchandising teams work to create optimal floor display and promotion plans. And those plans hinge on the precision of having the products arrive at just the right time for a complete display. The potential for lost sales increases exponentially when coordinating items arrive in separate shipments. Something as simple as holding product at the DC for a coordinated launch of go-togethers can mean a greater likelihood that the store will adhere to those merchandising and marketing plans, which should drive higher sales and better margins.
Look for opportunities to marry coordinating products from separate suppliers in your DC and hold those until all the components have arrived. Work with suppliers to optimize delivery timing. More advanced retailers can take advantage of Fast Flow or JIT/ready modules to quickly fill temporarily held portions of a set upon receipt of the balance of goods.
Getting to the Next Stage
Achieving the most advanced level, Stage 5, is not the right answer in all categories for all retailers. A more detailed analysis is needed to define the best approach for your business.
Keep in mind that shelf-ready initiatives are often overlooked due to functional business silos. While store operations enjoy remarkable benefits, the investment and increased cost to deliver the results lie within the supply chain organization. Leading companies have overcome these challenges—by bringing together executive, store operations and supply chain leadership—to gain a broader view of the business benefits and focus on shared metrics for results.
After determining where your business lies on the assessment scale, it is important to determine the benefits and costs of getting to the right level for your business. There are plenty of roadblocks to adopting a best-in-class shelf-ready fulfillment strategy, ranging from big-picture issues around development and deployment, to potential costs, inventory concerns, and partner relationship issues.
Common Challenges
Shelf-Ready fulfillment initiatives face some common challenges:
1. These initiatives require broader thinking to rationalize benefits. Aligning company leadership and obtaining buy-in across traditional organization silos is the key—but that’s never easy. These projects are most often successful when deployed as part of supply chain transformation projects impacting merchandising, supplier, transportation, and distribution operations.
2. In moving from lagging to leading, there are potential costs involved that must be reconciled across the entire business against the service and bottom line benefits, including:
• Labor
• Systems
• DC Impact
• Transportation
3. Key shelf-ready drivers, revenue lift and lost sales, involve metrics that are challenging to isolate with many factors influencing them.
4. Another major challenge is determining where the value-added services that power shelf-ready fulfillment should be performed. Should hangers, security tags, and tickets be applied at a retail DC, consolidation center or further upstream with supplier partners?
Is Shelf-Ready Right for Your Business?
Shelf-Ready fulfillment strategies require holistic thinking across the organization. Retailers considering them should look at their product attributes and packaging, the volume and complexity of the business, and the impact of speed, then assess the cost, benefits, and risks when deciding if shelf-ready is a good fit.
• Are your products fast moving or seasonal?
• Do promotional sale products drive your business?
• Are there lost sales opportunities or increased markdowns due to delayed delivery of time sensitive product?
• Do your products have a short lifecycle?
• Are you currently using a high number of touches to get products to store shelves?
• Are you constrained for space in your retail backroom?
• Do you run lean in labor and/or inventory?
• Do you believe in the merit of strict about adherence to merchandising planograms?
Getting Started
There are several crucial steps in the journey from considering shelf-ready fulfillment to putting it into action. These projects are usually part of a larger business transformation strategy that considers the upstream and downstream impacts. This five-step process can help ensure organization alignment—a key predictor of success. By identifying the potential benefits, defining the impact of shelf-ready fulfillment and testing the water with a pilot before fully committing, companies can avoid the organizational disconnect that often kills these ambitious projects.
1. Examine the characteristics of companies that are likely to benefit from shelf-ready fulfillment.
2. Assess where your company lies on the scale of shelf-readiness and determine the challenges and benefits of getting to the next stage.
3. Understand the business case, determining which value-added, presentation-ready services you want to adopt, and where those services should be performed. The business case should examine not only the costs and benefits, but inclusion of the opportunity costs associated with the status quo.
4. Do a pilot to validate business case. Successful implementation requires a phased approach to align the organization and gain confidence. A pilot is the best means to that end.
5. Consider how shelf ready may fit into your broader supply chain strategic planning.
Is shelf-ready fulfillment on your radar? If not, consider that the benefits are real and are already being reaped by early adopters. Get started now.
Contributed by Marc Austin, Managing Director Fortna EMEA (Pty) Ltd
