MEIJER TO SUPPLIERS: HELP US WITH OUT-OF-STOCKS

MICHAEL GARRY

GRAND RAPIDS, Mich. - While acknowledging that Meijer here is largely responsible for the out-of-stocks in its stores, Robert Mooney, the chain's vice president of distribution operations, still wants manufacturers to help keep its shelves well-stocked.

In a presentation before mostly manufacturers at the Grocery Manufacturers Association's Information Systems/Logistics Distribution (IS/LD) Conference, Mooney provided a variety of suggestions on how they can prevent out-of-stocks at Meijer's more than 170 supercenters, while pointing out what Meijer is doing as well. The conference took place April 3-5 at the Loews Ventana Canyon Resort in Tucson, Ariz.

"Ninety-five percent of out-of-stocks are Meijer's fault," he said. "Yet, we split the lost sales 50-50 with manufacturers."

Mooney noted that because Meijer cross-docks half of its grocery products through its distribution centers, the manufacturer plays an important role by ensuring that orders come into the DCs on time. "It's easy to have out-of-stocks if we miss a [cross-docked] order," he said.

If a grocery manufacturer has an issue that could affect delivery - such as a new plant or an anticipated production problem - it should "let our buyers or replenishment people know so they can buy those products [for storage] in the warehouse," rather than for cross-docking directly to stores, Mooney said.

He also encouraged manufacturers to shorten their cycle times for getting orders delivered to Meijer's warehouses. "The more you tighten up your cycle times, the more your product will be in stock," he said. It would also benefit Meijer for manufacturers to make deliveries on Saturday "so we can get it to the store on Sunday," he said. In an ideal world, he added, stores wouldn't need to over-order because "they would get everything in 24 hours."

Manufacturers can also help Meijer keep promotions in stock by providing promoted products on ready-to-display pallet modules. "Stores love them because they don't have to stock cases," Mooney said. "I guarantee stores will get them on the sales floor."

However, he warned that pallet modules, especially for HBC merchandise, tend to come with equal quantities of different products, even though those products sell at different rates. This contributes to excess back-room inventory, making it hard to locate items - the No. 1 cause of out-of-stocks, Mooney said. "If a product is out of stock, there's an 80% chance it's in the back room," he said.

Mooney added that manufacturers could help stockers locate items in the back room by making cases more identifiable. "Years ago you could identify cases, but now they're all brown boxes with maybe a bar code," he said. "Anything, like a green stripe, that makes the case unique, increases the chance the item will be in stock."

Another positive step, Mooney said, would be for manufacturers to make cases smaller or, as HBC suppliers have done, offer blister packs, a selling unit that can be sent to the store with smaller quantities. Grocery manufacturers send 12-24 items in a case, "even though they sell one-tenth as much," he said.

Recent Improvement

While asking for suppliers' cooperation, Mooney stressed in his talk that Meijer is very serious about its own responsibility for out-of-stocks, which run between 1.5% and 2% of sales for turn grocery items and about 5% for promoted items. "We've seen a big improvement in the last few months," he said.

To track this, Meijer does a weekly out-of-stock audit of 35 items at 20 stores. Last year, the chain started an audit focused on GM products. "We go through the store and, if there's a hole, we scan it and then analyze why it was out of stock," he said. Reflecting the chain's seriousness, Meijer makes prevention of out-of-stocks part of the incentive structure for store managers. "When it's part of their pay, it gets their attention," Mooney said.

Another strategy Meijer uses is to rein in excessive ordering at stores. "Everybody at stores wants to order stuff," Mooney said. "I try to convince retail not to let them [over-order]. If they need something, they can get a rush order out of the warehouse." In some cases, stores adjust store inventory levels to justify excessive orders. The chain's buyers also have to be limited to ordering items included in a store planogram.

Meijer encourages stores to adopt best practices in stocking shelves, such as anticipating where out-of-stocks may occur. "You need a plan," Mooney said. "What are the problem items? Before holes occur, take out a cart full of those items." Ultimately, there's no magic solution to stocking shelves, he noted. "It's just basic blocking and tackling."

Meijer is also grappling with the larger issue of SKU proliferation that often leads to cluttered back rooms and out-of-stocks. "The consumer wants choices, but where do you draw the line?" Mooney said. "Should we make grocery departments bigger, or cut back on items?"