Fixing On-shelf Availability

(OSA) Issues White Paper

Improving On Shelf Availability (OSA) has rightly been an obsession for Retailers and Brand
Owners alike for many years. The shopper always expects to find the product in store and when
there are gaps on shelf the consequences are poor for Suppliers and Retailers. Most shoppers will
choose an alternative product and eventually even change retail store when faced with persistent
issues of OSA. So why have OSA issues hovered stubbornly at around 8% over the last 10 years*?
This White Paper explores the root causes of OSA problems and considers how an insight-led
approach can make major inroads.

SOURCE: *SOLVING THE OUT-OF-STOCK PROBLEM: A FMI/GMA TRADING PARTNER ALLIANCE REPORT
 Introduction – A Definition of OSA

OSA is a straightforward measure of a symptom whose cause is a problem with complex roots. On-shelf Availability is simply
a shopper’s eye view of that problem – is the product on the supermarket shelf and available to buy?

When this measurement is applied to the 30,000 to 50,000 products in a typical grocery store the result is typically shown as
a percentage. So, if OSA is 92%, that means that, on average, 8% of the total products ranged by the retailer are not available
to buy at any given moment.

That’s bad news for the Brand Owner offering incentives for to the retailer for an optimised assortment to be displayed in
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store. It also has a detrimental effect on the retailer, which suffers a hit to its brand health in the eyes of the shopper.

Worse still, for promoted products the figure is in excess of 10%. So, at precisely the moment when a Brand Owner is investing
in growing sales and market share, maybe also attempting to recruit new users or spike a competitor’s launch – the product
isn’t available in store.

Critics of this OSA calculation methodology point out that it is rather crude. It measures the total number of occurrences of
OSA rather than providing a weighted measure which recognises the potential lost value. If a top selling product is off sale
the consequences are significant, whilst for a slow seller the lost sales are far lower.

In the first instance an OSA figure of 92% could be masking lost sales in excess of 20% for example. Of course, the reverse
could be true if availability of the top products is good with a plethora of slower selling products contributing to lost sales
levels which might be under 5%.

Inevitably this means that the devil is in the detail. The definition of OSA is important and so is the calculation method. Some
occurrences of a gap on shelf are insignificant in terms of sales but may still have an impact on brand health or reputation.
1
Conversely there may be high lost sales behind a high OSA percentage.SOURCE:* SOLVING THE OUT-OF-STOCK PROBLEM: A FMI/GMA TRADING PARTNER ALLIANCE REPORT 2018
1
1 **E2Open 2016 forecasting benchmark study
What Are The Root Causes of OSA and Why
Isn’t It Improving?
Despite the enormous focus on improving OSA, the situation
isn’t improving. Top Retailers and Suppliers have been
working transparently and collaboratively to diagnose and fix
the issues, but progress has been disappointingly slow. This
is surprising given the numerous projects designed to work
together in joint forecasting and especially the advances in
technology in retail to support these processes.
So how can we explain this? It is generally recognised that
inaccurate forecasting lies at the heart of many OSA related
problems. It is a fact that the sheer complexity of retail is
problematic when attempting to improve forecast accuracy.
For example, from 2010 to 2016 the number of products in
grocery retail increased by 31%, growing at a rate 5 times
faster than sales revenues.
This explosion in products ranged is made up of new products,
seasonal items and special promotional items and is a potent
combination for the forecaster to contend with. Effort tends to
be focused on the 10% of products which account for 78% of
sales, so the long tail is part of the problem.
However, range proliferation is only part of the explanation.
The number and duration of promotions also have a major
impact. As both Retailers and Suppliers work to increase cate-
gory sales and margins, so the original promotional calendar is
often adapted with many late changes to promotional events.
That can mean more products are included, adjustments are
made to the dates and duration of promotions or a different
offer is presented to the consumer just to give a few examples.
Often other promotions may be cancelled to make way for the
change, resulting in a double hit to forecast accuracy.
The intentions are laudable. Both parties are working
towards similar goals in terms of sales and profits, and
an organic approach to promotions is a useful tactic in
maximising both elements.
Of course, these changes have an impact on sales across the
entire category, so the original forecast will be inaccurate,
not only for the supplier making the change, but also for the
other branded suppliers in the category and for the retailer’s
own label products.
The net effect is that just as OSA levels have remained at 92%
over recent years, forecast accuracy has been recorded at
around 50% in the same period. (**)
Inevitably therefore, inaccurate forecasts lead to lower OSA.
Other factors are also significant. Poor replenishment
processes can have a major impact. Stock may be sent in
good time from regional distribution centres to the local
stores, but the stock may be slow to move from the store’s
warehouse to the shelf. The stock is nearly in the right place,
but problems with the famous ‘final 10 metres’ mean that
the retailer fails to get the product on the shelf and available
for the shopper to pick up.
Replenishment processes can be further damaged by incorrect
store level stock information. This may prevent much needed
product being sent from a well-stocked distribution centre
to the local store when it needs it. This occurs when the
information entered on the store’s stock control system is
inaccurate, and results in a ‘Book Stock Error’ (BSE). If the
retailer’s systems think that the store has stock, it will wait
until sales reduce the level of stock to the level set to trigger
an order before sending replenishment stock.
In this way the product can be caught in a loop until the next
stock check or even be locally delisted because the systems
show zero sales over a prolonged period of time.
We’ll examine BSE and its impact on OSA in more detail later
on in this paper.
SOURCE: **E2Open 2016 forecasting benchmark study20 22
How Analysing Retailers’ EPoS (Scan)
Data Can Help To Identify Current Issues
And Fix Them Promptly
Let’s now look more closely at OSA from the supplier’s
perspective. It is clear there are some fundamental
actions Brand Owners can take to reduce the chances of
OSA.
They could reduce the number of products ranged,
cutting the long tail of slower moving SKUs and making
forecasting simpler.
Linked to this, the number of new products launched could
be reduced, or a policy of ‘one in, one out’ introduced so
that ranges don’t increase.
The number of promotions could be reduced and their
complexity minimised.
Of course, there could be a price to pay for the supplier
choosing to make such a move unilaterally. Sales might
be negatively impacted; market share would then slide
downwards and category influence would reduce.
So, although these actions would certainly attack the
fundamental root cause of poor OSA, the negative
consequences make them relatively unlikely.
This is not to say that it is impossible to treat to causes of
the problem, but faced with the obvious downsides, what
can the Brand Owner do to treat the symptoms rather
than attempt a cure?
The most obvious symptom is a
gap on the shelf. Suppliers with
access to the retailer’s EPoS
data (Electronic Point of Sale
or Scan data) can identify and
treat stores with clear issues by
looking at patterns in the data.
An acute example occurs when the data shows a ‘double
zero’ for a particular SKU (stock keeping unit or individual
product) in a store. That is when the sales in the last
24 hours were zero and the reported stock in store is
also zero. Often referred to as ‘Out of Stock’ (OOS) or a
‘Distribution’ issue, it follows that if the stock on hand for
a SKU in the store is zero, the store can’t sell any product.
Brand Owners have choices having identified issues of this
type. One way forward could be to manage the problems via
the retailer’s supply chain teams. At the simplest level the
Brand Owner can share data from the retailer’s own systems
which demonstrate a series of local issues and leave the
retailer to apply the fix.
Alternatively, suppliers with a field sales or merchandising
team can assist at store level. Overnight analysis of the
previous day’s sales and stock on hand data enables suppliers
to generate OOS alerts and send them direct to the relevant
field sales person. These alerts can show the recent rate of
sale, show graphically to date at which sales reached zero
and highlight that stock on hand is also zero.
The lost sales value can be calculated by reviewing previous
sales in the store, maybe also comparing them to the sale in
similar stores in the retailer’s estate.
If the supplier is working closely with the retailer, the Brand
Owners’ supply chain team may know where deliveries are
about to be made to stores and eliminate these from the list
of alerts to be sent.
The remaining alerts can then be investigated and verified
by the sales person once an audit of the store is conducted.
Action can then be taken to draw store management’s
attention to the issue and corrective action agreed.
If for any reason the fix is refused at store level, these
instances can be aggregated and a report sent to the Key
Account Manager for escalation in the retailer’s management
structure.
3
So much for ‘double zeros’. What of other data patterns?
Another clue in the data is provided by instances of ‘stock,
no sales’ in stores. Here the symptom is still zero sales
recorded by the store, but this time the stock on hand
showing in the system is greater than zero.
For slow moving products a single day of zero sales may
be expected, so the alerts algorithm needs to be sensitive
to the anticipated rate of sale.
Once the alerts have been filtered to remove these
potentially false alerts, the action required by the sales
person in store is similar.
These errors can arise for a number of reasons, but the
most common are pilferage or damage.
Whatever the reason, having identified a BSE the sales
person can then meet with the store’s stock controller,
explain the issue and request that the stock on hand be
corrected to zero.
This then triggers an order and once the stock arrives in
store. the problem is solved.
6

First investigate the shelf. Is any stock visible in the right

place on the shelf and reflecting the agreed planogram?

If not, is there any product in the wrong place on shelf?

Stock may be hidden behind a facing of another product

or discarded and misplaced by a shopper.

OOS and BSE are serious issues whose effects regarding

the consumer’s perception can be felt in equal measure
both for the supplier’s brand and that of the retailer too.

The scale of the issue alters significantly if the product is

on promotion. Not only are more sales lost because of the
increased promotional rate of sale, but also the negative
brand health impact is multiplied for a shopper who feels
‘cheated’ out of an attractive offer.

It’s clear that the stakes are high. Reacting to an identified

If still no stock is found the sales person should search in
the store’s warehouse area. A clue may be provided by
the number of units stated in the alert. If there are 6 units
on hand and the products are packed in cartons of 6, it is
likely that you’re looking for a box.
problem is better than not doing so. But can an even
greater level of insight be extracted from the EPoS data to
predict issues before they occur?

If there are only 2 or 3 units showing on the system,

the possibility of a Book Stock Error (BSE) should be
considered. A BSE arises when the stock showing as ‘on
hand’ in the retailer’s stock control software is at odds
with the actual stock in store.

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 Fixing Problems Before They Arise
As we’ve already seen, poor forecasting is closely linked with poor levels of availability. Brand
Owners can work either with Retailers or in isolation to perform a more forensic study of demand
(sales) looking for patterns of poor OSA to improve forecast accuracy.

But other factors are at play too. The Planogram (detailed shelf layout
showing the number of facings of each product diagrammatically in store)
can have a major impact on OSA.

The planogram outlines the position and quantity of every SKU sold in the
store. The shelf capacity (total number of units available to the shopper on
the shelf) is easily calculated – it is the number of facings multiplied by the
number of units behind each facing. So if there are 2 facings and the shelf
depth allows for 6 units, the shelf capacity is 12.

In principle this is OK as long as the replenishment routines match with the

SKU’s rate of sale.

Let’s assume that the store sells 72 units of a product per week. That means that the average
replenishment frequency is daily. However, sales vary from day to day. On Mondays sales may be 2
or 3 units, whilst a busy Saturday may generate sales of 25 units.

The impact is obvious. For some of Saturday and possibly some of Sunday too, the shelf will be
empty. The shelf capacity and rate of sale are mismatched.

The real rate of sale is an unknown. We know that the shelf was empty for part of the day, but we
don’t know how many shoppers were frustrated in their attempts to buy the product.

The real weekly demand for the product may be closer to 100 than 72.

That unsatisfied demand has a big ripple effect. When unable to find the product on shelf, research demonstrates* that the typical
shopper will substitute another item 70 percent of the time. That most likely hits the Brand Owner. On the second occurrence the
shopper is equally likely to substitute, make no purchase, or go to another store. This time both the retailer and the Brand Owner
suffer the consequences. On the third occurrence, 70 percent will go to another store. This time the Brand Owner may gain the sale
in another store, but the big loser is the retailer.

We can see therefore that the stakes are high, but how can the planogram problem be fixed?

One way is to increase the replenishment frequency at weekends. The store can simply deploy more resources to prevent OOS
occurring. This is a perfectly reasonable approach, but one which is at odds with the challenges facing Retailers’ profitability.
In fact, the trend is running in the opposite direction. Most Retailers are trying to reduce the labour costs, not increase them.

So, what else could be done?

Changing the planogram is the option most likely to increase sales and reduce OOS. Its other attraction is that it costs much less than
changing replenishment routines (the cost of rearranging the shelves one time versus increased labour costs).

If the true rate of sale is 100 units per week, and 30 units are sold on Saturday, then facings should be changed from 2 to 5 (even to 6
to be safe).

SOURCE: *SOLVING THE OUT-OF-STOCK PROBLEM: A FMI/GMA TRADING PARTNER ALLIANCE REPORT 5
Of course, other SKUs’ facings will need to be reduced to make way for our fast
selling SKU. This should be done according to daily and maximum daily rate of sale
until the shelf is optimised.

Sometimes an increased level of replenishment support is inevitable. During

busy periods – seasonal peaks, promotions land new launches for example. All of
these events are either predictable (seasons, weather, weekends) or manageable
(promotions or launches) because the dates and intensity of sales increase are
controllable.

Most Retailers recruit temporary staff to cope with these peaks. Most Brand
Owners provide store level merchandising support to cope with predictable peaks.

In this way impending poor OSA can be forecasted and mitigation action put in
place.

Suppliers face a real challenge when considering this type of support. The budget
will be finite. There will inevitably be more stores and busy selling days to cover
than the resources available.

Suppliers can mine the EPoS data to highlight where resources should be targeted.

One obvious approach could be simply to allocate the resources to the stores with
the highest sales in the category the supplier is trying cover.

If the aim is to correct poor OSA or to prevent it from occurring in the first place,
this approach is flawed.

Often the biggest stores are the least likely to have OOS or BSE issues. They typically have more shelf capacity, better quality of
management and stricter adherence to the retailer’s processes and rules.

On the other hand, there may be ‘rogue’ stores elsewhere in the retailer’s estate. Stores with more cramped shelves, a lower level
of compliance to the agreed ways of working and poorer management.

These stores will require disproportionate levels of support resource whilst the allocation to higher selling stores can be reduced.
The retailer’s EPoS and Stock on Hand data provides all the information required for a proactive supplier to make the calculations
which will optimise ROI on resources deployed.

We know that promotions produce more OOS issues. One more way for Brand Owners to help prevent OOS is to reduce
complexity. Collaborative working, especially in problematic categories can result in creative design of promotions which are easy
to implement – Shelf Ready Packaging, Price Marked packs, unique promotional SKUs, pre-filled shippers, dump bins, clip strips -
many of these ideas can be deployed to help increase the chances of a shopper finding the product on the shelf.

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 Conclusion – Targeted Effort Can Produce Significant Results

Poor OSA is not a new problem, but nor is it going away. Brand Owners can work collaboratively with Retailers to reduce
complexity and improve forecast accuracy in an attempt to reduce the number of issues at source.

Once the symptoms are apparent at store level, Brand Owners can gain actionable insights by analysing the Retailers’ data,
searching for patterns that indicate a problem or an impending problem.

Key Account teams can work with the Retailers’ supply chain staff to fix endemic issues, whilst local fixes can be provided by field-
based sales people and merchandisers.

OOS is running at 8%, so the prize is significant, even for making a marginal improvement.

20:20 Retail Data Insight can provide its Sales View dashboard to help Key Account and Supply Chain teams. OSA Alerts can be sent
directly to the field teams using 20:20’s Field View app or as an integrated function with StayinFront’s TouchCG retail execution
software.

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About 20:20 RDI
20:20 RDI was established to
provide actionable insights for
consumer goods companies by
analyzing retailers’ Electronic
Point of Sale (EPoS) data. In re-
cent years, a growing number of
enlightened retailers have made
this data available to suppliers, with the aim of driv-
ing mutual efficiencies, especially in optimizing re-
tail execution. More recently, the granularity of the
available data has increased, so that Brand Owners
can now see sales of every product, in every store in
a retailer’s estate, on every selling day of the year.
This means a mountain of data, presented in a
different way by each retailer. Our software allows
Brand Owners to interrogate this data, driving
insights and highlighting opportunities to increase
sales and improve salesforce ROI. We work with
data from major grocers, department stores, phar-
macies and convenience retailers in many markets
across the world. Our clients range from the 2nd
largest food manufacturer in the world to compa-
nies with less access to analytic resource keen to
discover what the latest thinking is in this area and
how it can apply to them in their situation.
In June 2017, we were acquired by StayinFront, Inc.,
a global leader in salesforce automation and retail
execution. This allows us access to significant prod-
uct development and customer support resources
and provides our clients with even better levels of
customer service. We also have a worldwide net-
work of offices providing sales and pre-sales sup-
port as well as ‘follow the sun’ help desk provision
across all time zones.
Visit 2020rdi.com or email info@2020rdi.com to
learn more.
About StayinFront, Inc.
StayinFront, Inc. is a leading
global provider of mobile,
cloud-based field force
effectiveness and customer
relationship management solutions for consumer
goods and life sciences organizations. Companies of all
sizes, in over 50 countries use StayinFront software to
streamline sales operations and reduce the complexity,
time and expense associated with field efforts.
StayinFront products are seamlessly integrated to
provide companies with timely, accurate field data and
actionable insights, enabling field reps and management
to Do More, Know More and Sell More. Headquartered
in Fairfield, New Jersey, StayinFront has offices in
Chicago, Canada, the United Kingdom, Turkey, Ireland,
India, Australia, Singapore, and New Zealand. Through
its 20:20 Retail Data Insight subsidiary, StayinFront
delivers stand alone and tightly integrated actionable
insights and guided selling by analyzing retail data to
brand managers and sales forces around the globe.
Visit stayinfront.com or email sales@stayinfront.com to
learn more.
8
 WHAT TO DO NEXT
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