Tuesday, February 11, 2014

Coles’ Appalling Stock Control

Coles is the second-largest grocery store chain in Australia. Unlike the United States, we do not have that many supermarket chains. The market is dominated by Woolworths and Coles, which means we do not have many alternatives when it comes to low-cost grocery shopping.

Our concern with Coles is not just ridiculously high prices for basic groceries (if you compare with prices in the US), but also the high rate of stock-outs. Earlier last year, Coles collected data on customer feedback from 17 million customers who visit the company’s 742 supermarkets and hundreds more Coles Express fuel outlets every week. Customer complaints regarding stock-outs overwhelmed the data – in most cases, people had come to the store or the online store to buy something, only to find that the product was out of stock. If you check the most recent customer review for Coles on www.productreview.com.au, it is a complaint about Coles’ stock-out problem:

The customer is not satisfied with the customer service at Coles because it is consistently out of stock. Every time Coles runs out of stock, it loses a sale, and the incentives for the customer to go somewhere else increases. If this continues to happen to a customer, he or she would consider switching the store, or even the brand, altogether. This would have serious repercussions for Coles, along with its suppliers who provide the goods to be shelved at Coles. In case of most grocery items, there are usually many substitutes; if stores consistently run out-of-stock, it would make demand and sales planning for these items even more complicated.

It is only very recently that Coles has attempted to tackle this issue in an aggressive manner. Coles realized that the problem is not just an inefficient supply chain management strategy, but poor data management as well. As part of their supply chain optimization effort, Coles has strengthened collaboration with its partners. It has improved data sharing with 60 key suppliers in an effort to eliminate stock-outs and improve inventory management. They want to engage their partners in a more intimate form of information sharing than they were previously used to. They are striving to keep data accurate and consistent across the supply chain. Such a high level of collaboration with more than 60 suppliers is very difficult, and would require a whole lot of business processes to be tweaked. We will have to wait and see how this works out for Coles, in terms of operational cost effectiveness, in the long run.

Coles has also placed a lot of emphasis on developing a data-driven internal culture. In 2013, they made significant investments in information systems. These range from improved analytics and forecasting systems to improved customer-loyalty analysis tools. The company claims that it would give them more information on consumer behaviour and buying patterns.

Coles is confident that the supply chain revamp would help the business achieve a DIFOT (Delivered In Full, On Time) score of 100 percent. DIFOT is the metric of supply chain performance that the company uses. The metric is a popular way of measuring how often the customer gets what they want at the time they want it.

Coles supply-chain revamp means stock-outs are down (down, down), http://www.zdnet.com/coles-supply-chain-revamp-means-stockouts-are-down-down-down-7000019419/

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