Empty shelves caused by 'one-size-fits-all' approach

28 March 2002
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28 March 2002 | Robin Parker

One in seven items in shops are out of stock because most retailers operate a "one-size-fits-all" supply chain, according to a new report.

UK retailers are losing £4 billion in sales a year - equivalent to £1 billion in profits - from poor product availability, a study by consultants AT Kearney claims.

The report says that suppliers are less to blame than retailers' own supply chains, which account for around 70 per cent of poor availability.

The warning follows the bankruptcy in January of US retailer Kmart after key suppliers stopped orders because the firm was unable to pay them.

Product availability was a major contributory factor to the company's problems, and reports suggest it sometimes took a day or more before pallets arriving at the warehouse got logged on to Kmart's central tracking system.

Charles Coates, European head of AT Kearney's retail practice, said he was surprised at the extent of out-of-stock products, and the lack of accurate information to determine where in the supply chain products were unavailable.

"Nobody we spoke to knew what 'best practice' is in this area," he said.

Retailers found it hard to measure availability and in many cases did not know if they were good at it.

"Most companies are still operating a one-size-fits-all supply chain and it's beginning to damage brands and customer loyalty," Coates said. "Retailers have to think about different consumer needs and product cycles, as well as where they source from."

The study examined the supply chains of 12 retailers, and several manufacturers that supply each, across Europe and North America.

It says retailers should concentrate on communicating with suppliers.

They should ensure they have a cross-functional team to monitor availability from shelf to supplier, and greater segmentation of the supply base to commit more resources to suppliers of strategic importance.

SMmar2002

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