GIANT EAGLE REDUCES DSD STOCKOUTS VIA VENDOR PROGRAM

Michael Garry

WASHINGTON -- As part of a systematic attempt to reduce out-of-stocks for direct-store-delivery products, Giant Eagle has begun partnering with manufacturers like Anheuser-Busch, as well as addressing a host of internal business practices.

"We encourage other DSD vendors to bring us their ideas and new technologies [for addressing out-of-stocks]," said Diane Roberts, director of merchandising systems, Giant Eagle, Pittsburgh.

Roberts described the chain's aims last week during a session at Food Marketing Institute's Marketechnics show, held at the Washington Convention Center here.

Giant Eagle began a systematic look at out-of-stocks in 2003 when Bain and Co., Boston, estimated that poor in-stock levels represented "a $20 million annual profit opportunity for Giant Eagle," which runs 140 corporate stores, said Roberts. Two areas -- store ordering and DSD management accounted for 70% of this opportunity, she added.

In pursuing its program to address out-of-stocks, Giant Eagle joined an effort launched by Anheuser-Busch to reduce beer stockouts through partnerships with top-tier retailers.

In a pilot program with Anheuser-Busch, Giant Eagle was able to reduce out-of-stocks of beer inventory supplied by the vendor by 45%, Roberts said.

Giant Eagle's pilot, conducted at six Ohio stores, ran from last September through Jan. 24. Average out-of-stocks for Anheuser-Busch products fell during this period to 3.4% from 6.6%, according to Roberts. "The results to date have been very impressive."

The pilot was part of a program, called Efficient Order Writing (EOW), developed by Anheuser-Busch to address out-of-stocks. Managed by Anheuser-Busch and its distribution network, the program uses software from Market6, San Ramon, Calif., to create perpetual inventory calculations, sales forecasts, and suggested store orders based on daily POS data and store conditions.

Giant Eagle provided two years of POS data history to Anheuser in order to "prime the forecast engine," she said. In addition to the out-of-stock reduction, sales of Anheuser-Busch products in the test stores grew 2.5%, while beer category sales grew 4.3%.

The retailer has also assembled an internal team to address out-of-stocks and began to implement new business processes aimed at DSD products, including assortment review, revised delivery schedules to align with ads, and getting vendors to adhere to planograms.

Giant Eagle is continuing the program at the six test stores and plans to expand it to another 55 to 60 stores in the next 30 to 45 days in the Ohio region served by the same Anheuser distributor.