Focus on Promotions
In approaching the pilot with Food Lion, PepsiCo was also interested in letting POS data drive replenishment in some cases, said PepsiCo’s Lyktey. “We want to take VMI to the next level,” he said. “We see a lot of benefits to having visibility to store POS and inventory. In particular the company wanted to focus on how this would improve promotions. Overall, “we want to replenish off POS data or warehouse withdrawals, whichever is more accurate,” he said.
Under traditional VMI that looks at only warehouse withdrawals, PepisCo would only see the results of promotional activity after a three-to-five-day lag, which thwarted the company’s ability to understand how the promotion was doing in real time, said Lyktey. By contrast, POS data “identifies consumer demand three days earlier at a minimum, so we can change what we’re doing during the promotion to adapt to the environment. That’s a powerful thing.”
In one example of a 21-day promotion, PepsiCo originally planned to ship half of its product on day one, 30% on day 10 and 20% on day 16. Then on the fourth day, the store data showed the promotion was exceeding expectations. “We decided to pull up the day-10 shipment by three days so we wouldn’t miss any sales,” said Lyktey. “And we moved day 16 up three days.” In fact, the promotion was so successful that PepsiCo added an additional 10% on day 19 “so we wouldn’t leave any money on the table.”
On the other hand, if sales during a three-week promotion fall below projections, PepsiCo has the ability to push shipments forward by three days while reducing the amount shipped by 30%. “We’re not going to overload [Food Lion] with product they don’t actually need,” said Lyktey.
In addition, by having visibility to stores’ promotional inventory as well as the DC inventory, PepsiCo can base shipments on what the overall network needs rather than just on what the DC needs, as it would have normally done, he said.