5 Steps To Reduce Inventory, Trim Out-of-Stocks Through Computer Generated Ordering

By Kevin Stadler, VP of Sales and Marketing, SAF USA
In the drive toward customer-centricity, retailers are implementing Computer generated ordering (CGO) CGO solutions to ensure the right products will always be available for customers in the right quantity, at the right time.

In fact, a survey from the IDC Global Retail Insights 2008 Supermarket Benchmark study reports that more than 50%t of the retailers examined have or will activate CGO tests and pilots in the next 12 months. By initiating a CGO plan to perfect the ordering process and optimize inventory, retailers expect to achieve a return on investment and gain a substantial competitive advantage. Those that have successfully deployed CGO solutions have achieved benefits including a 60% to 80% reduction in out-of-stocks and a 25% to 40% reduction in store inventory. Further, these retailers automatically process more than 98% of their store orders.

However, many retailers are lagging behind and do not know where to begin or are apprehensive to implement an IT project that will change business processes. For those who would like to start catching up to the leaders, below are tips to initiate a CGO project and begin achieving significant business benefits.
  1. Begin a CGO. project today. Start by establishing a cross-functional team to identify and address the impact of migrating to store order automation. Since the store operations department will bear the brunt of the change, ensure that it will be provided with adequate support from the IT department.
  2. Take incremental steps. There are a number of ways to begin improving the store ordering process. However, automating the existing manual process is a useful first step. Retailers will benefit from computer assisted ordering (CAO), which provides store order writers with the historical product data to help them make better, more educated order quantity decisions. Forecast-assisted ordering is the logical next step that compliments CAO data by providing predictive information. These programs will enable retailers to begin perfecting the store order within the organization as they continue to move to full CGO.
  3. Designate full order automation as the end goal. While CAO and forecast-assisted ordering provide significant improvements, these practices should not be viewed as a final destination. Retail trend setters practice full automation, responding manually only to exception conditions. Full order automation should remain the end goal as it offers the optimal payoff and value cycle. Labor hours previously spent writing orders will now be spent ensuring inventory accuracy which will translate into better orders and fewer exceptions that need to be addressed.
  4. Select the right technology partner. As with many application areas, there are a number of solution providers that merit consideration when moving to CGO. However, many providers emphasize forecasting capabilities that were designed to solve different business challenges than automating store orders. Buyers need to remain focused on finding a tool that will produce high quality orders that users/management will allow to be placed automatically. Further, retailers should request that each vendor provide customer references that testify what percentage of order lines are processed with no manual intervention. Nothing will cause a CGO project to stumble quicker than implementing a new process or tool that adds labor requirements in the store.
  5. Deploy to stores quickly. CGO projects require significant change. Full teams could spend months attempting to identify the impact and prepare response to the implementation, but will still be surprised when they finally deploy to their first store. Instead, retailers should consider deploying more quickly in stores that are known to have good inventory practices and are enthusiastic about the prospects of CGO. Even if only a few departments are “turned on” at the start, the team as a whole will learn more about the value potential and requirements than they would otherwise have learned in a conference room. With this understanding, the team can fine tune their solution configuration, promote actual achievements, and build an effective rollout model built on first-hand experience.
While the thought of moving towards CGO may seem overwhelming for some organizations, retailers should consider these tips to ensure that the proper methodology and solution are selected. Doing so will yield substantial benefits in the move toward full automation.

Kevin Stadler is Vice President of Sales and Marketing for SAF USA, Inc. For more information, please visit www.saf-usa.com.