Food Lion, PepsiCo Pilot Boosts Stock Levels

ORLANDO, Fla. — Food Lion was able to cut distribution center inventory and out-of-stocks for PepsiCo’s Gatorade while reducing store out-of-stocks in a pilot conducted last year in which PepsiCo was supplied with POS sales data that it could use to forecast sales.

The pilot, conducted in the second quarter of 2011, was based on POS data from about 300 Food Lion stores for promotional sales of Gatorade. Food Lion and PepsiCo sought to determine how this would compare to the standard practice of supplying goods via vendor-managed inventory (VMI), which uses data on withdrawals from DCs.

“Our big bet was replenishing DCs and stores based on what is forecast to sell vs. filling DCs based on DC pulls,” said Scott Craig, director of supply chain, Delhaize America, who spoke about the pilot Monday at the Supply Chain Conference here sponsored by the Grocery Manufacturers Association and the Food Marketing Institute.

The pilot showed that the chain’s DC inventory was reduced between 12% and 27%, DC out-of-stocks were cut between 21% and 77% and store out-of-stocks were trimmed by 20%, he noted. “These are staggering results,” said Craig. The pilot underscores that “VMI doesn’t give great visibility to what is selling in stores.”