With a barrage of new products hitting the market every day, managing the dairy case is no piece of cake. Retailers are finding new ways to keep cases filled with the right mix of items.
Statistics suggest dairy department managers are doing a good job. The average rate of out-of-stocks in dairy falls in at less than 4%, which is low compared to other categories in the supermarket, industry sources said. A recent study sponsored by the Grocery Manufacturers of America shows that fluid milk had the lowest incidence of out-of-stocks -- 3.2% -- out of seven direct-store-delivery categories covered by the study.
But milk isn't the most challenging subcategory -- yogurt is even trickier to manage, industry sources told SN. This group of products is exploding with new varieties, types and sizes, not to mention the relative newcomers like organic and soy-based drinkable yogurts.
"There are so many new products, but at the same time you have to keep some of the already successful items on your shelf because customers want them," said Greg Larsen, merchandising operations director, of eight-unit Dick's Supermarket, Platteville, Wis. "There are a lot of decisions to be made within very small sections. You can't just go out and pop in another 12-foot dairy case." Yogurt alone is a "huge, huge subcategory," one that's particularly vulnerable to out-of-stock situations, a West Coast retailer told SN.
"Just with Yoplait, their regular, red-label product, not counting their custards, lights and whips, I have 22 flavors out there," said Mike Brooks, perishables grocery manager at Central Market, Shoreline, Wash.
"You're apt to wind up with 150 varieties of yogurt, each with a single or double facing. It's harder and harder to backstock on every single item."
So if a consumer's favorite is one of the slower movers, and she grabs eight or 10 from the shelf, that could wipe out the supply in a minute, he said.
"Yogurt is pretty much the item that got me to commit or pre-order," Brooks said, referring to a procedure that has helped him keep a pretty full shelf.
"Generally speaking, the out-of-stocks are mostly ad items, so when I started with an ad commit, it was a tremendous help to me," he said. "I tell the warehouse a minimum of two weeks ahead what I want [when an item is going on ad]. If you've committed to it, you're pretty much guaranteed to get the item. The commit process has always been available. I don't know if a lot of other stores utilize it, but I certainly am. It works."
Brooks and other retailers told SN that yogurt is big in some areas and so-so in others but customers in both cases want variety, which makes it necessary to keep a very close eye on what's moving.
From store to store, the mix of product and the amount of space devoted to yogurt can differ radically, said Tom Schwintek, retail/dairy specialist, at Kowalski's Markets, St. Paul, Minn.
"Yogurt is very big here," he said. "At our Grand Avenue store, we sell as much yogurt as we do at our Cub store, which has three times the [traffic] volume. Basically we order every day because we're cleaned out every day.
"Comparatively speaking we sell hardly any milk at Grand Avenue," Schwintek continued. "On the other hand, at Cub, one person never leaves the milk case on a Saturday or Sunday. He'll start stocking at one end of the case and by the time he gets down to eggs, he'll have to go back and start at the beginning of milk again.
"Dairy is just particularly related to the neighborhood's demographics, and as far as adding new products, it's a big decision," he continued. "It's the same piece of pie, just divided into different pieces."
Larsen at Dick's Supermarkets said he sees the volume of new products as the root cause of most out-of-stocks.
"There just aren't enough facings on everything," he said. "It's a no-brainer. They can be out quickly, but it also depends on the store's philosophy. It makes a big difference whether a store feels it needs to carry everything its warehouse has or whether it creates an efficient assortment of items important to that particular geographic area."
He said Dick's is doing more efficient assortment reviews for each of its stores. Bringing the process down to the individual store has been beneficial, he said.
"As we write our orders, we identify and monitor out-of-stocks," he said. "So the dairy manager is killing two birds with one stone. When we get to an out-of-stock, we flag it at that time. We get reports printed out weekly and those that show out-of-stocks three or more times in 90 days, for example, get quick attention. We'll drill down and find out what the problem is."
It could lie with the order-taker, or the warehouse, or the supplier, but what's important is that the problem has been identified and the report at Dick's shows the number and lost sales potential as a result.
"When a department manager is asked why sales are down [a certain percentage], he can say what the reason is," and it enables him to remedy the situation and take steps to prevent it from happening again, Larsen said.
While a number of retailers do have computer-assisted ordering systems for fluid milk, many are not using the most advanced technology for ordering other dairy products. "We have computer-assisted ordering for milk," Larsen said. "Dean's manages that for us. All we need to do is take inventory in the cooler on Monday and call it in and their system generates the week's orders based on history."
At Kowalski's, fluid milk out-of-stocks aren't a problem either, but Schwintek, like other retailers, said milk is easy because its sales patterns are so predictable.
"People are such creatures of habit," he said. "When I go on vacation, I write a bogus milk order for the week, based on how much we sell on each day of the week. When you see it on paper, it's amazing to see the numbers for 2% milk, for example, on one Monday are so close to those on the next Monday. There's such a small window of difference."
Not so with other subcategories.
What's surprising is, even with all the technology that's available, the human eye still plays a key role in keeping the dairy shelves filled with merchandise. Indeed, retailers and other industry sources told SN that having one person only do the ordering is the most important factor in reducing dairy out-of-stocks.
Larsen goes one step further.
"Not only do we have one person doing the ordering, but we try to make sure the person who did the ordering is scheduled to work the load," he said. "If he comes in on Monday and writes an order and then he's not back in again until Thursday, he doesn't know how well he did with the order. It has to be a learning process."
For example, if he saw that the allotted space for a particular brand and flavor of yogurt was full, or three-quarters full, when he placed the order, but today when the order comes in the space is empty, he'll know it's time to tweak things. He'll re-order when that product is still at a high level, every day if necessary.
"It reinforces the training process," Larsen said.
At Central Market, associates recently had to adjust to ordering for a bigger store.
"We're a large-volume store anyway, but we were closed for six months during a really major expansion and remodel," Brooks said. "Coming back into it, with the store twice the size, it took us [in dairy] a good six months to get a handle on things again."
With 52 feet of milk, yogurt and puddings in the remodeled store, the expanse itself presents its own challenges. It's not just ordering the right quantity of the right product, it's knowing which products they can dedicate a full shelf to, without running into products with expired freshness dates, Brooks explained.
The store, which had been getting three deliveries a week, just went to four deliveries a week. With that change came another that will help maximize sales, too, Brooks said.
"We're shifting our stocking back from 6 a.m. to 3 a.m. so we'll be off the floor when we open at 7. Some of the cases are back-filled, which we continue to do, but in our customers' eyes, we're already stocked and ready for business at 7."