Join Mike Graen as he continues his series of open, informal, and topical discussions... each focusing on the teams, techniques, and technologies that are driving meaningful improvements in the area of On Shelf Availability.

Mike Graen provides a 2023 OSA – State of the Industry. He addresses key questions such as:

• What is OSA?
• Why is it important to measure it?
• What are the methods to calculate it?
• What are the future opportunities for the industry?

Greetings, this is Mike Graen. Welcome to another

edition of the Walton Supply Chain Center, focusing on on

shelf availability. Today, I get the chance to kind of share my

ideas and my thoughts on the state of the industry as it

relates to on shelf availability. I've got a couple

of clips from this year's particular podcast. But really

it's focusing on what are the different people processes and

technology to be able to look at on shelf availability and make

improvements. Let's get started.

All right, well, good afternoon, everyone. It's a

beautiful day in Bentonville, Arkansas. We're so glad you're

here today, as Mike Graen continues his on shelf

availability series. Today he's going to focus on what he's

calling a 2023 state of the industry. We've got a big group

that is going to be joining us we've got more than 350 people

that have been registered and invited. So we're we're glad

that you're all here. This -a this series of Mike lunch with

us more than a year ago now is presented by the University of

Arkansas, which has the number one undergraduate supply chain

program for the second year in a row. You can learn more about

that at Walton.uark.edu. And we've got some great sponsors

that have been great to work with including brain Corp,

barcoding SCSI mega tag, and our friends at bops. Mike and I are

excited to announce today a gathering place and resource

center that we have created for the industry to come together to

discover industry expertise best in class solutions as well as

thought leadership. So as we wrap up today, we'd appreciate

you take a look at onshelfavailability.com. You'll

hear us talking about that more in the days and weeks to come.

And in case you missed it, one of the things you're going to

find on onshelfavailability.com is sort of an archive of all of

the conversations that Mike has been hosting, to date. So again,

we encourage you to look at our thought leadership at on shelf

availability.com. A reminder that this is a conversation is

intended to be a conversation and not a presentation. And we

would love to you to have love for you to join us and actively

participate. And the best way to do that is just to click on the

q&a button at any point during the presentation, the

conversation today. Use that q&a button in zoom to submit your

questions your comments in writing are one of the things

that we always like to share is from a compliance perspective,

it's really important that we comply with all federal

antitrust laws. So we'll be refraining from talking about

anything related to pricing, margins, discount suppliers,

timing to price changes, etc. And last thing is the opinions

and recommendations that are expressed by um by the experts

leading and participating these discussions are solely their own

and not necessarily those of conversations on retail. And we

encourage you before acting on those opinions and

recommendations to always consider their suitability for

your circumstances. So with all of that said, we're so glad that

you're here, Mike, let's get started.

Awesome. Well, Matt, thank you very much. Good

afternoon to everybody who is on the podcast. Matt doesn't like

to call it a podcast, you'd like to call it a conversation. And

it's it is certainly good to be back with you guys. Again, Matt,

we've kind of been reflected on this to make it a conversation,

I think it's going to be you and I having a conversation as we

sort of work through these various topics. And the folks on

the line, please, we encourage you, if you have any questions

at all, to go in there, raise your hand and ask it via the q&a

chat function. And Matt will be able to secure those and forward

on through. So first and foremost, we've been doing this

for about a year. And what I thought I'd do is we begin the

second year of going into these topics we've talked about a lot

of interesting things about on-shelf availability, a lot

more research has come out post COVID. So I'm going to kind of

update you on some of those kinds of activities. And also

some new capabilities have become available. So we want to

definitely jump into this and start to talk a little bit of

what what the opportunities are. The good news is for those

people who are trying to solve the on-shelf of availability

problem, it's still out there. We had a breakfast this morning

and we talked a little bit about on-shelf availability. And one

of the guys who has been in retail for a long time said the

great thing about OSA is it was here 50, 60, 70 years ago and

it'll be here 70 years later. It's something you're always

working on. It's things you're trying to continue to improve to

make sure that you have product available for the customer. So

what do you, one of the things that we're going to start with

is basically, I love this Sam Walton quote he did this one

years ago, Doug McMillon from Walmart has a similar quote, but

it's there's only one boss the customer and they can fire

everyone in company from the chairman on down simply by

spending his or her money somewhere else. And I think

that's very well said back when Sam Walton was running retail.

And it's still this case today, customers have more choices than

ever, everybody's walking around with basically a computer in

their hand where they can literally order stuff anytime

they want to and have it delivered to their house. So the

power is really in the customer, whether they're brand loyal or

retailer loyal, they have choices that they can go to. So

the the the other piece of this is, I think the other piece that

I think is really important is some facts that were produced by

the IHL group. Some of you may have seen this before. But some

of these sound bites are really, really important. From my

perspective, retailers are missing out on a trillion

dollars in sales, a trillion dollars in sales, Amazon Prime

customers facing empty shells are 52% more likely than other

consumers to take out their phones and buy what they need

online. I don't know about you, but I've been a victim of that

I've gone into stores tried to buy something, it's not there, a

specific printer cartridge or something specifically, you

know, a specific item that I'm looking for, they don't have, I

am very, very apt to pull out my phone and use that cut that

retailers Wi Fi to order that product from an Amazon or

somebody else. So basically using the retailer Wi Fi to

order from a competitor, I'm not proud of it. But I came all the

way to the store to get it I gotta have that particular

product, it's really necessary for what I'm trying to do in the

last ones 24% of Amazon's curve retail growth came from, from

customers who tried to buy it in a store first, I think those are

pretty amazing. A couple of things that I think are also

true, these are this is relatively new from Shopkick uh

Shopkick. chain store age is 81% of the shoppers have noticed

more shelves are out of stock or lower stock than usual

retailers. And if you're a few years ago, when when you start

to highlight some of the areas Oops, I'm sorry. There we go, we

can start to to unpack a little bit about what those particular

items are. You see things like meat products, dairy products,

box food, canned foods, etc. You also see what I kind of

mentioned before, which is brand loyalty is wavering 65% of the

consumer said they would buy the next best option. If their go to

brands are sold out and low stock and 59 said uh 59% said

they would be willing to go to a new brand and do it regularly. I

am not a shopper, consumer shopper expert, there are people

on the line like our friends of field agent that are better at

doing this kind of research for sure. But I'm sure this varies

by category. But the bottom line, it goes back to the

customer go back to Sam Walton is good. They're ultimately the

boss, they're going to choose to get what they want where they

want it. And, you know, if we don't have it available for

them, they'll have they'll find another options. So one of the

things that I wanted to ask you, which is you know, this

particular picture here, we'll talk a little bit about Walmart,

because we're both kind of know, you know, have some experience

working at Walmart working with the CPG suppliers who work with

Walmart, etc. But as you look at this picture, there's there's a

lady obviously leaving the store, when you think about this

thing called Walmart, what do you think about?

The place that I can go to buy almost anything

that I need.

Almost anything that you need? Exactly right. And I

think for years, that's what it has been in most retailers,

retailers have been, I would also argue that it's also

becoming a fulfillment center. Because you have and I remember

the statistics, that was something like 90-95% of the US

population lives within 10 miles of a Walmart store. That's

pretty hard to beat. So literally, it's not I get to

order it and I get it in two days, I literally can order it

and get it within hours, okay. And being able to be both a

traditional retail store and a fulfillment center that allows

you to digitally order product where you want it, etc. And

they're not the only ones. All of these footprints all these

retailers have many many more of the same thing. So customers

shoppers have more choices than ever retailers have had continue

to have issues with on shelf availability and supply chain

and things like that. And what this is this particular

conference is all about - or discussion is to talk about what

are some of the ways you could A measure it and B improve it. A

couple of other more sound bites here. This is something from

from the E-marketer folks, I've shared this in a previous

conference as well. These are the percentage of retail sales

that are being done through an E commerce platform. And you see

it's only 15% of the total U.S. our total business but in some

of these categories like apparel, it's almost 38% You see

toys and hobby you see 45% books music video, obviously that's a

big one with 69. So these particular things people are

using digital tools to do either research online and picking it

up in store or buy it online or picking it up in store or refuse

to fill it ordering it online and having it delivered to your

home. And this is a this is a graph that we used a while back,

which shows just the retailers and how their growth is. And

this happened to be in the electronics category. But now

you see this big blue line here. Any idea what that big blue line

is which is going from 9.3 to 41.26. Looks a lot like Amazon.

Sure does it. It looks like a lot of other retailers are

growing in the electronics category as well. But not nearly

as fast as Amazon. So the question becomes, okay, how do

you how do you compete with a fulfillment, which is something

like Amazon which have that brought a sore bed, I would

argue, really, really simple user interface. If my father

who's 85 can order stuff on Amazon and have it delivered his

home. When he struggles with basic email and texting

sometimes. There's their their site is certainly very easy to

navigate. And they obviously have a convenience factor as

well. So that's that's the thing, you got to have it on

shelf, these particular stores are becoming fulfillment

centers. Now, here's a couple of things that I think it'd be

interesting, Matt, we've got a we got a video of a screen

snapshot of target with Wrangler Jeans. And then I've got the

same thing from a few years ago from Walmart. So this one's the

target one. That one's the Walmart one you see anything

different about the two? At Walmart?

Yep. The high price difference jumps out.

Okay, so targets at $19.99. Walmart's at $18.87.

Yep. Anything else that you see that jumps out as a big ah-hah

or difference?

Looks like Target, you can pick it up at a

local store, or have it shipped.

Correct. They have this option here, which is you

can pick it up. So if I go back to the Walmart and Walmart has

changed since this, this particular thing was done, but

but they say we'll basically put it in a box and we'll mail it to

you. You'll get it in two days. Target saying yeah, we'll do

we'll ship it to you in two days. But we also only got three

left. This is a term called bogus buy online pick up in

store. And so for sure, one of the things that we're going to

want to be able to do is to be able to have that part of that

particular product available. Melissa just said better images

on target. And I agree with that as well. So some some of the

images were quality. The big thing I wanted to do here

though, is definitely highlight the ability to pick up online.

I've got a I'm gonna switch this to, to something that I think

will be interesting for folks to see, which is bulbous is

continuing to grow. And I'm gonna let we did a podcast

probably several months ago with Dr. Bill Hardgrave. He's kind of

the industry leader with online, buy up, buy online pick up in

store. He was at the University of Arkansas then he was at

Auburn. He's now the president of the University of Memphis,

but very much a retail expert. He's going to talk a little bit

about what some of the research is that he's personally done in

the buy online pick up in store area.

Pre-pandemic. Yeah, know retailers kind of

looked at both was kind of as a nice to have, like, Yeah, I

mean, you will offer it as a consumers. For the pandemic, it

became a lifeline, a lot of retailers. And many retailers

were absolutely not prepared for that. What I would do is knowing

that, that we had, they were they were executed poorly, I

would get here's how I would, here's why I do it after I

started realizing this is really bad. So I would go into the

store. And I would have my mobile device, I'd make sure I

wasn't on the Wi Fi. I wasn't using their app, so they didn't

know who I was. And they didn't know I was in the store, right.

And I would literally stand in front of a shelf, looking at the

product, and go online and say I'd like to buy this and pick it

up in store. And I'm standing there looking at the product.

And I saw I'll share with you some of the things that I got.

For example, in apparel. I'm standing here I'm looking at

there's five on the shelf on my mobile device that says sorry,

this product is unavailable at this location. I'm looking at

their store on the shelf. Online, it says there's one

left. Now there's another apparel item you're looking at.

There's three of them on the shelf. Online, it says it's out

of stock. Well another one I'm looking at it, there's nine on

the shelf. It doesn't even appear on their website. So Mike

that that I just want to share with you that's just a that's

just a handful that I've got. I've got tons of these where

it's like this is this is such poor execution, that you're that

you're leaving money or the retailers are leaving money on

the table. Yes, it's a combination of factors. The

biggest one, I believe, is that they simply don't know what they

have in store and they just don't have any confidence in

what they have in store. So when they don't, when you don't have

confidence, you do a couple of things, but either you just

completely hide it. Right? And so you just say, Oh, that's not

available, right? Or you don't even put it on the website to

even make it an option.

We got a couple of questions in here. The first

question, I think - oh sorry, wasn't a question - Melissa was

answering the question around the better images of Target.

Sorry about that. I think we've already answered that one. All

right. So all right. So customers ultimately are the

boss, they're gonna get the product when they want.

Retailers are becoming more fulfillment centers, in terms of

buy online, pick up in-store and be able to do things like that.

So what are the causes of product not being unavailable.

And there seems to be about three is the research I've done

number one, store operations, number two, the supply chain,

and number three, something who we're going to call on hand

accuracy. And we've got some potential solutions for each one

of those. Let's do a talk through store operations first.

And Matt, I'm gonna I'm gonna ask you some questions on this.

So we've got a shelf here, I went to take to a local store

took a picture of a shelf, and then I matched that shelf up to

I guess what should have been there. So from an obvious casual

observer from a customer perspective, as you go into

this, do you see anything majorly wrong? Or any kind of on

shelf availability issues? With this shelf?

Yeah, sure. That one one item, obviously, out of

stock dead center,

dead center. Yep. So that's the that's the first one

you see, that's the one most people will go to. So you see

the shelf tag, you see no product, you obviously say

there's an out of stock, any other thing and things that jump

out yet as issues that are with us?

Yeah, it looks like another out of stock on the

very bottom shelf dead center. But that's all that's easy to

Yeah. And now that one is potentially an out of

see.

stock as well, what you don't see is probably the bigger

issues, you have issues where you literally have a label

that's missing. And so suppliers call this distribution void of

supply, retailers typically call you call this modular integrity

issues. But let's just say on the top three shelves, here, you

see that yellow box, we're supposed to have labeled one,

two, four. And what we got is one two full, okay, we're

missing label three. So that yellow box indicates the label

is missing. And of course, if the label is missing, the

product is also missing. The other issue we have, is we have

pricing issues, we have issues where the price at the register

and the price at the point of sale are are registered and the

shelves are different. And hopefully the price at the

register is not more expensive than the point of sale, because

then people start to lose the integrity with with the pricing

situation. The next one is down stocking, there's products that

appear on the top that could come down. And matter of fact,

this red box right here, where we have the oddest stock could

be sitting up top, but it should be down stock because the tops

not really available for sale. And the last one is a one is

really hard to do, which is plugged items, plugged items or

otherwise called incorrect items was where you have a label, you

have product but they are in fact not the same. They're

different. Okay, so Mike is asking what are the thoughts on

one increasing the level of retail theft on OSA as per

LinkedIn posts from Tony? Mike, I think we're gonna get into the

onhand accuracy piece here in a little bit. I believe that the

retail shrink is part of the problem of why onhand accuracy

becomes incorrect. And we'll talk about that here in just a

little bit. Okay, if I don't come back to me. Thanks. So

let's keep on going here. So So we've also got supply chain

issues. That's another one. And we've obviously got everything

from products moving on, you know, raw materials through the

manufacturing distribution process. Well, the reality is,

in order for the product to move one way the merchandise flow

from the raw material all the way to the store shelves to the

shopper, information has to route back the other way. And

we're going to talk a little bit about the challenge of correct

item information correct on hand information at a store level.

But I would argue that this quality information is really a

challenge within the entire supply chain. So if you're

getting really bad forecasting data, or really bad on hand

data, etc, it's really hard to make sure the product is in the

supply chain. And we certainly exhibited that during the COVID

challenge where we had things everything so tight from a just

in time standpoint that a major things like a health scare, like

that really created ripples in the supply chain for months and

even years to come. And the last one is the onhand accuracy. And

Mike we'll jump back into this in a second. But these are four

specific genes. In a retailer. I've got a store on hand and

actual on hand, whether it's accurate or not. And the reorder

point is for or for those of you in the supply chain is really

says when it comes down to hitting the number of the

reorder point, I'm going to kick off another order to get some

more product. Well, the first two, the first one is obviously

right that a problem with that one. The next one, that's what

is what we call understated. You're understating what you

have you think, you have three, and you really have four,

probably not a major issue unless you think you have three

and you really have 400, or something like that. But the

last two are the real issues, which is where you have a store

on hand that says I have three and I don't have any at all on

this last example. Matt, if I don't have any yet, obviously

don't sell any. And if I don't sell any, how many do you think

I should order? If I don't have any product? Matt?

I'm sorry, I'm sorry, I slipped away there for

a second. Go ahead, answer this.

Okay, so if I don't have any product as last product

in the store, if I don't have any, how many should I order?

With? Three, right? Yeah, could be three. The problem is, the on

hand of store on hand is three, it thinks I have three, but I

don't have any reorder point is two. So it says when your system

goes down to an audit and have to go ahead and reorder three,

right? But you're on hand is actually zero. So you're never

going to loop you're never going to remove that somebody changes

it, or unless a system changes, or unless somebody sells one,

which you're not going to sell because you don't have any year

on hand is always going to be three, and nobody's going to

change that. So you're never going to order that product. So

inventory accuracy, and retail outside of this RFID thing that

we'll talk about in a little bit is still in the 50s and 60s. In

some cases, that's probably okay. But another key high

velocity items where you have a lot of holding power and a lot

of velocity at the shelf 50 to 60 percents, okay. Other

categories that are very, very important to customers, you may

only have one or two on the shelf. So if you're off by 50%,

you're probably going to not meet their expectations. So

let's keep let's keep going through this. One of the other

things, and this was a study that was done a little bit

before COVID 2019, by you know, folks with Mike price over there

in Europe and ECR community over in Europe. But I thought this, I

think I've showed this to a few people. And this has been like

interesting to them. And I think I want to make sure I

highlighted green dots you have here basically is the orders or

the on hand that you actually have available in the store. And

the green solid line is what the actual on hand of the system is.

So it's the green line is said in other words, is what the

system thinks you have. The dots are what you actually have. And

as you see, there's a difference between what you have what you

think we add that in with the lead time you end up with a

second scenario over here where you didn't order it enough time

to get it on the shelf. And it ended up becoming an out of

stock. That's one of the downsides. Even if it's not a

phantom inventory where it's a zero situation. It's definitely

a problem for the for the for that particular opponent for a

while hope you enjoyed part one of my state of the industry

comments on on shelf availability. Please join me

next time as we wrap up this discussion and talk a little bit

about some real life examples in the space of RFID and other

technologies to drive on shelf availability. See you then