Consumers warn collaborate on supply chain or lose 46% sales

This article is brought to you by Retail Technology Review: Consumers warn collaborate on supply chain or lose 46% sales.

Consumers have issued a warning to the major brands that low on shelf availability regularly puts 46%* of sales at stake, a high profile survey into Grocery and FMCG consumer buying habits has revealed. Nearly a sixth (15%) of the major multi-national brands surveyed reported no idea of what levels of on shelf availability they achieve, while the remaining 85% admitted to holding only vague estimates, raising serious concerns for the industry regarding their capability to control and influence availability to the consumer.

The study, commissioned by leading supply chain consultants SCALA, questioned over 1,000 consumers and a cross section of major brands and suppliers across the grocery and FMCG sector. John Perry, managing director at SCALA said: "The research provides evidence that low on shelf availability directly correlates to loss of sales and customer loyalty, with consumers revealing that if on any one visit their product is not on the shelf, they will simply pick an alternative. Clearly this is an issue for the industry, however while the business benefits to improving on shelf availability are massive, there is a lack of good quality data and collaboration between suppliers and retailers is essential if real improvements are to be achieved."

The research also revealed that over a quarter (26%) of brands did not view on shelf availability as a key success factor for their company, and a third (33%) didn't have on shelf availability as a key KPI.  John comments: "It would appear many brands really do not focus strongly on "on shelf availability" and the impact it can have on brand perception and sales potential."

Although over 90% of surveyed brands collaborated to varying degrees with their major retail customers, only 19% viewed their collaboration levels as extensive.  This looks set to increase however, with a 78% majority of brands predicting the number of businesses and levels of collaboration across the supply chain will rise, driven by commitment to improving customer service (91% of surveyed brands gave this high importance), increasing sales (66%) and improving on shelf availability (76%).

Guest speakers representing major brands including Tesco, Pepsico and Cadburys are among the 150 supply chain professionals who will be debating whether supply chain collaboration can improve on shelf availability at SCALA's Annual Logistics Debate that will take place on 8th July at Wroxall Abbey.

Neil Ashworth, Supply Chain Director at Tesco.com, who will be one of the speakers leading the debate comments: "Supply Chain Collaboration is a perennially pertinent issue facing FMCG brands and retailers alike as both strive to deliver improved levels of on shelf availability and maximise customer satisfaction and sales opportunities in an increasingly competitive market.   Whilst there are multiple case studies that demonstrate that significant gains can be achieved by suppliers collaborating and working closely with the retailers, it would seem a common problem for many that highly sophisticated networks break down at the final on-shelf moment of truth."

The research showed that less than a tenth of brands were confident in maintaining high levels of collaboration at the final point in the chain. John continues: "The margin for human error in the last 50 metres to shelf can ultimately determine the reputation of our favourite brands. This final stage en route to maintaining high levels of on shelf availability between a product being taken off the shelf and being scanned through the till is the least efficient stage of an otherwise highly refined process."  

The vigilance of a retailer's local manager and shop floor staff are of course not the only factors impeding the clarity around on shelf availability.  Over two thirds of respondents identified mistrust and unfair distribution of benefits between parties as being the barrier to collaboration, and it would appear that the power to successfully collaborate is perceived to sit with the retailer, with major multi-national brands feeling compromised by retailers taking the upper hand in negotiations.  A source commented: "The harsh reality is that most retailer initiatives still drive cost toward the supplier with the benefits kept largely by the retailer."

More than half the total number of brands surveyed (53%) reported that the retailer alone determined replenishment levels.  The lack of trust and transparency of information has caused 67% of brands to withhold detailed supply chain costs with major customers, further obstructing collaboration.  The source continues: "Sadly many suppliers are therefore inclined to focus on inward facing initiatives at the expense of potential collaborative opportunities that may provide equal benefits for the retailer and supplier."

John Perry concludes: "Over 91% of surveyed companies believed they could positively influence the on shelf availability of their products with greater supply chain collaboration.  New and innovative thinking is required to address these long-standing issues in the final link of the supply chain.  One of the key requirements raised by this study is the need for appropriate measures of on shelf availability and the impact this potentially has on sales for both parties."

Brands and retailers are invited to attend the SCALA Logistics Annual Debate on 8th July at Wroxall Abbey, to join the discussion and potentially help to mould the future direction of the industry. 

*Research questioned over 1,000 consumers from across the UK through Your Say Pays.

About SCALA
Working for many top UK and international companies SCALA delivers high quality supply chain and logistics consulting.  Founded by John Perry in 2001, SCALA's approach combines knowledge and expertise with innovation to assist companies to develop their business, to reach new heights and drive benefits for their clients.