At a certain point in 2010x, Metro decided to reorganise its sourcing and to replace direct suppliers in the fresh and ultra fresh categories with a central stock supply. This decision was implemented step by step in Fruit&Vegetables, Dairy&Delicatessen, Meat and Fish. At the same time, the government tightened trade legislation, restricting payment terms and removing the return option from contracts.
Shrinkage (especially wastage) increased by up to +50%
In these changed conditions, like-for-like shrinkage (specifically wastage) increased by up to +50%. Stores were unable to return or exchange products to suppliers, including quality issues, or receive free products as compensation. The estimated margin didn't suffer from these actions and even improved slightly. Nevertheless, we saw the overall negative net effect on PL. The pressure from the board was obviously on the operations to reduce shrinkage.We definitely had to develop new practices for success and we saw the two pillars of improvement: the adjustment of order volumes and the use of markdown procedures.
For the first, in addition to crunching the numbers, we had a weekly call with the underperforming teams in the stores. I made a curious list of the typical, most repetitive answers from department managers and fresh specialists.
Let me share the top comments that "explain" the increase in shrink:
- Everyone steals...
- The customers somehow didn't come this weekend.
- The weather was bad.
- I was "on holiday", "not in the store that day".
- "A deputy manager/senior employee placed an order, he/she is not well trained".
A perfect view with "easy" external reasons, right? The concept of data-driven retailing was not popular at the time, so we worked with the proved method of persistence and toughness. Over a period of several months, we managed to improve the shrinkage rate and thus the realised margin.
Akuret solutions significantly improve the way store employees work with daily stock issues.
Correct system-based replenishment orders, proper & sufficient best-before date management and daily stock checking & adjustment routines are the key elements when we talk about reducing wastage for grocery retailers.
Check out the site and ask Jesper and Daniel how a highly automated and productive system can help in this difficult area of stock management.
Hope this helps,
Pavel Ryukhov
Paul Ryukhov
CEO/COO Ledo Supermarket
