How To Approach Tackling Spoilage In A Mid-sized Grocery Chain

I think we’d all agree, not everyone’s supply chain challenges are the same, but in retail they almost always have elements in common. Other companies’ initiatives are often a great source of ideas and that’s why I’d like to share an example of how a mid-sized grocery chain in the UK went about tackling a problem with spoilage.

Booths was one of RELEX’s first British customers and I had the privilege of working closely with its team to transform the company’s supply chain. It is a family-owned, premium grocery chain in the North West of England with around 30 stores, 3000 staff and a turnover of just over £250M per annum.

Spoilage and shrinkage are huge profit-killers in the fresh-food sector. Managing fresh produce replenishment is one of the toughest challenges both for supply chain professionals and supply chain systems. With around 13,000 fresh and perishable SKUs and a complex supply chain to manage, Booths decided to take action.

TESTING YOUR TECH WITH A ‘TOUGHEST CHALLENGE FIRST’ APPROACH

Though Booths felt it was already doing pretty well, more fresh, chilled and other short shelf-life products were being marked down or thrown out than the company was willing to tolerate. The grocery chain knew that improved replenishment processes, more accurate forecasting and better visibility would all benefit promotions, new-line introductions and events. That in turn would reduce waste and improve freshness and quality – a key part of Booth’s up-market offering.

One of the contributory factors behind Booth’s spoilage challenge was its size. By the standards of the UK grocery sector, it’s a medium-sized company operating in a sector dominated by large chains, which also means it’s hard to get big suppliers to deliver as often as one would like. Meanwhile, Booths’ local suppliers, whose products help add to the store’s distinctive appeal, are often not large enough to run a sophisticated supply chain infrastructure.

This might sound familiar to many mid-sized retailers, but what’s interesting about this particular project was the way Booths used technology to address the issues, integrating a supply chain system with their in-house system. This helped the Booths’ team make the maximum use of their data by giving them the ability to analyse it quickly, however they chose. It also made it easy to automate daily replenishment routines. They were also able to manage changes in demand due to i.e. seasonality, promotions or even weather far more effectively and with far less effort than before.

However, a key part of the approach Booths took was to ‘tackle the toughest challenge first’. As Mark Gaw, Head of Supply Control at Booths, explained in a webinar we organized, ‘doing the worst first’ let the retailer check that the new system could handle anything that was thrown at it.

“We started off with our fresh areas and worked on from there,” Mark explained, “making sure that we could tackle our toughest most complex areas first and, if it worked for those areas, it would be easily replicated across the business.” Booths decision quickly led to great results which meant that they could roll out the system to all areas, 13000 SKUs, with confidence and within six months.

In the end, Booths was able to cut shrinkage by 10% across the board, with a reduction of 20% in key areas such as chilled products. Availability also remained high at over 95% and Booths is consistently rated in the top three UK supermarkets for service levels in secret shopper surveys. And, critically, taking on its supply chain issues head on had a direct impact on profits – they rose sharply as a result of the project.

The work eventually led to Booths winning the ‘Supply Chain Solution of the Year’ and a number of other awards in the UK.

LEARN FROM THE EXPERIENCES OF OTHERS

Examples like this can be found all over the sector and there are of course multiple factors that should be taken into account when applying a retail and supply chain planning system. However, by looking into businesses that are similar to one’s own, one quickly finds that the underlying challenges are, in many respects, the same. So, taking the same approach as Booths might be a good way to approach issues in your business.

I’d encourage you listen to the ‘State of the Retail Suppy Chain’ webinar with Martec International’s Fran Risely and Booths’ Mark Gaw to see if their thoughts about managing inventory, product availability, promotions, and new product introductions (among other things) spark any of your own. In the end, sharing experiences and expertise is perhaps the best way to make sure you are set to make well thought out decisions for your own company.