How to bar bare shelves: The need for Order-to-Shelf technology

I recently got a chance to sit down with Pierre Rallu, our VP of Presales for Retail Solutions, to chat about what’s going on with the hype around Order-to-Shelf (OTS) systems and grocery retailers’ empty aisles. Take, for example, this article from Supermarket News, Why more retailers are using an order-to-shelf system to manage inventory, which mentions how Whole Foods and Target are rolling out OTS systems.

Peirre Rallu portraitPierre-Marie Rallu serves as VP Presales North America for Symphony RetailAI’s Retail Solutions Division. Mr. Rallu has an extensive background in software and technical services, as well as business optimization knowledge through experience in supply chain, ERP, retail and warehouse sectors.

There’s been some noise recently around Order-to-Shelf (OTS) and the viability of these solutions as we’ve seen empty shelves advertised at food retailers using this methodology. You work with grocery retailers every day, what is your perspective?

We are working with many of the largest grocery retailers around the world and we’ve been supporting this OTS type of methodology for many years now. We’ve been doing near real-time inventory in Europe for 20 years to support retailers because, particularly in Europe, most stores don’t have back rooms for storage, so the product goes directly from the truck to the shelf. When most define “OTS” it’s about supporting just-in-time quantities to support need. This concept is crucial when ordering for short-life and date-sensitive products, especially perishable.

We have customers that have been ordering perishables, delivered several times a day, and quick turnaround is necessary. Whether the supplier is ordering for the retailer, the store manager is ordering for the store, or the product is managed at a corporate headquarters centrally with a buyer doing replenishment, there are some key components and coordination needed to successfully get a product to the shelf.

Can you walk us through what you mean by order-to-shelf?

Sure, let me talk about ordering to shelf and some basic requirements:

For order-to-shelf, a requirement of ordering is to order exactly what the store needs. At Symphony RetailAI we are mimicking a “just-in-time” process. For this to work, you must have:

  • Accurate demand forecasts
  • Accurate inventory, and perpetual inventory
  • Just-in-time delivery to the store
  • Preparing need for PO in warehouse without rounding up to case

All of this assumes you have the accurate sizing of a store planogram and that it’s regularly updated to reflect actual demand. In addition, that you have a forecasting engine that feeds assortment optimization as well as store replenishment.

We have an online assortment optimization tool that enables the store to update planograms frequently. This planogram feeds the store replenishment system with the parameters. The best part is that all of it is dynamic! When assortment is optimized, presentation stock, shelf display and other requirements feed the store replenishment tool so everything is aligned.

I mentioned perpetual inventory earlier and that we’ve been doing it for 20 years now. It’s very accurate because we have exception-based store mobility tied to the process for the store associate.

All these things combined constitute the first part of OTS process which is accurate demand.

Can you talk about what all this means for a grocery retailer and how they can keep shelves stocked?

In the retail grocery world, it’s not just about preparing the exact quantity of orders for the store. You need to manage fast-moving, with low-margin and date-sensitive products. A challenging environment where, for example, you want to make sure that you have an inner pack that’s available for ordering and for the shelf. This requires coordination and connections between both ordering systems and shelf systems. This is key.

So, after the basics, what comes next in your opinion for a successful OTS?

Well, I see the 2nd part as the fulfillment of demand (preparation and delivery). The actual order execution.

Once a store has accurate order needs, the warehouse needs to fulfill this. We have warehouse management system (WMS) with preparation capabilities to prepare quantity on demand and that executes picking using voice, and even augmented reality. Once orders are prepared an ASN (advanced shipping notice) is sent to the store alerting the store to an order. The store receives a serial shipping container code, bar code (commonly referred to as license plate receiving) to track in detail.

There is definitely a lot involved in keeping shelves stocked, from demand generation to fulfillment as well as tracking transactions.

Yes, there is substantial orchestration. And, sure, I’m biased, but the beauty of this is that Symphony RetailAI Supply Chain systems can support all of this in one platform, with real-time information between systems. For example, where WMS and store-enabled systems help retailers react quickly and have full visibility into their supply chains.

The real challenge in the market in all of this is that retailers often don’t have systems in place to align the planogram and demand forecast needs to keep the right quantity on the shelf. That creates a vicious cycle where the MIN or presentation stock is off and then you are perpetually out of stock or overstocked.

For more information on managing perishables, read the blog, Retail reFRESH: A look at support for date-sensitive products

Read viewpoint on why AI and Machine Learning are the answer to Demand Forecasting Accuracy.

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