DMI DAIRY STUDY: ORDERING IS KEY

ERIC THORSEN

TYLER, Texas -- Brookshire Grocery here recorded an 18% improvement in the in-stock rate of dairy-department items during the busiest shopping time, due in part to a new study that advises department managers to leave shelves temporarily empty.

This forces the creation of timely, accurate reordering procedures and opens the door to true category management practices, the study, sponsored by Dairy Management Inc., Rosemont Ill., concluded.

The report gauged the effectiveness of a retail-level initiative created in 1990 by Dairy Max, an Arlington, Texas-based dairy-promotion organization covering the Southwest. One of three suggested strategies urged retailers to leave shelves temporarily empty, a method that forces managers to adopt a category-management attitude, said Pat Rheel, assistant manager of Dairy Max.

"There are some district managers who just want the cases to look good," said Rheel. "They bring over an adjacent product to fill up the hole." As a result, reorders can be delayed. Leaving the space empty "is a way of assuring an out-of-stock product is reordered," she said.

To this end, The 1997 Dairy Max Retail Validation Study found that the vast majority of dairy case OOS -- 70% -- can be attributed directly to labor-related issues like ineffective ordering, which was tagged as the single biggest contributor to the unavailability of products, at 47%.

At Brookshire, the in-stock weekend rates for perishables in the dairy case rose to 88%, up from 70%, after strategies outlined in the study were implemented, according to Wes Williams, who was supervisor of manufacturing and merchandising for the 128-store chain at the time of the study.

Brookshire has since built a freshness program around designated dairy personnel. They call it Fresh at Five.

"We stock at 3 p.m. That's a policy we have in all of our retail stores," said Williams. "We work in our perishables departments -- stocking them, straightening up -- and have everything done for that 5 p.m. rush."

Indeed, the study substantiated a direct link between sales and OOS rates. A retailer's sales jumped 2% when the average dairy-case OOS rate was reduced by 6%. Likewise, sales in individual product categories rose 5% when their OOS rates were reduced.

For all the stores that participated in the dairy-case efficiency program, Dairy Max officials said the new attention to managing the case reduced OOS 4% to 6%, down from 7% five years ago.

"Ordering is a real big aspect. We find that the majority of the OOS items are inadequately ordered," said Beverly Clark, Dairy Max's coordinator of trade services. "Definitely, milk is the challenging category. The volume on fluid milk is so great that you've got to understand ordering and keep up with it, or you will run out."

Clark said that dairy managers typically allow items to go OOS on the shelves before reordering. She said she consults with retailers on the importance of knowing sales volumes of particular items, especially fluid milk, and having those items ordered before they go out on the shelves.

More efficient ordering helped Brookshire Grocery combat its rising OOS situation, which occurred daily between 3 and 7 p.m., when the most profits were at stake, said Williams. "The dairy case is a high profit center," he said. "If it's not taken care of properly, the store is going to lose a lot of money."

The study found that the average supermarket shopper finds 8.2% of the store's fastest-moving items OOS. The study found that the OOS rate results directly in two-thirds of a retailer's total lost sales over a one-year period, as well as a corresponding 3.1% reduction in the amount consumers spend annually.

"Almost 80% of shoppers reported never having experienced OOS in milk," said Greg Rotunno, director of milk marketing at DMI. "But when they are confronted with an OOS situation, nearly 20% do not purchase a substitute product in the store that day.

"It really magnifies the situation of in-store condition problems with the dairy department, and the bottom line -- the impact it has on the retailer's bottom line," he said.

The study also looked at other labor-related problems keeping stores from maximizing dairy-case profits. For example, dairy sales drop 4% because of expired fresh codes. Dairy Max attributed this to inadequately trained personnel who don't properly monitor inventory levels.

"We encourage [retailers] to keep a person overseeing the dairy department to manage the stock levels, the rotation, the cleanliness," said Dairy Max's Rheel.

Another statistic points out an alarming oversight: About 16% of OOS occurs simply because items are left in the retailer's walk-in unit and are not put on the shelves, according to Dairy Max's own research.

Dairy Max also advocates stationing personnel in the dairy department in order to maintain appearance.

"We encourage them, on a daily basis to, in the case -- keep spills and spots cleaned up," said Rheel. "And then, on a monthly basis, go through and do a deep cleaning in certain sections, so that at least once a year they will have cleaned the entire case."

Dairy Max suggests supermarkets use the following steps to reduce OOS rates and boost profits:

Do not fill in holes. Use trained labor to monitor dairy inventory. Allot more time when ordering products to ensure accuracy. Issue priority stocking for fast-moving items. Alert management to warehouse and direct-store-delivery issues.