Replenishing stock and noisy demand patterns
For retailers with many stores across the country, demand and automatic replenishment can vary hugely between each location. As a result, supply chain teams a face a real challenge in ensuring not only the right products are stocked in each location but that each location holds appropriate levels of stock: too much could result in waste while too little could leave customers disappointed.
Understanding this demand challenge, Tesco took extreme measures last year to ensure that customers were able to buy exactly what they needed to make the most of the summer sun. With a super market within walking distance of one of the largest festivals in the UK, the super market chain replaced carrots and broccoli with crates of beer and cider in time for the Reading festival weekend. Anticipating over 35,000 festival going customers over the weekend, it seems Tesco understood exactly how this surge in demand would impact their operations and took the necessary actions to keep customers happy and maximise sales opportunities.
Considering that demand can be highly localised, it is important that retailers keep close control of their inventory situation at all levels of the operation: replenishing stock is essential! In the instance of Tesco, it made sense to hold extremely high levels of stock at one particular store in the run up to the Reading festival. However, in times of normal trading, this is unlikely to be the case. For retailers, determining exactly where in the chain stock should be held is one of the most difficult decisions to answer. After all, to what extent does demand fluctuate between stores? Should safety stocks be held at a store level or at one or all of the distribution centres?