Speaker John Fernie - Supply Chain Challenges

The Club’s Senior Vice President Professor John Fernie recounted some of his research work on the thorny questions faced by the grocery retail sector – namely OSA (on shelf availability) and OOS (out of stock).

Around the time of the millennium when John was teaching at Edinburgh’s Heriot Watt University he and his department were asked by supermarket chain Sainsburys to carry out work which could improve their supply chain. The mantra was “If it’s not on the shelves you can’t sell it”.

At that time it seemed the solution was to construct enormous warehouses and automate everything.

A few years later, IGD – an independent monitoring and development group formed by the grocery companies – determined that automation had led to a more significant difficulty. This related to the shortage of staff. This in turn meant storage, supply and shelf-stocking were suffering from a lack of willing hands. 

So further research was required. In 2004 IGD instigated a seven-year programme of auditors acting as “mystery shoppers”, continually tracking 200 products in 160 stores. The programme also looked at how this related to online shopping and delivery. A major finding was that, because of poor distribution from backroom to point of sale, retailers often delivered “substitute” items to those the customers had actually ordered. It was found to cause extreme customer dissatisfaction if it occurred on a regular basis.

It has also been realised that such online shopping can be a loss-making issue for retailers. The standard cost for the supplier is around £15 per delivery. So the “click and collect” system was introduced by many shops as it would then save the bulk of these delivery costs.

John explained that he had also been asked to do similar research in the fashion sector. He and his team found that the same rules applied. Staff shortages meant cluttered storerooms, erratic handling and therefore an ever-slowing method of getting product to the shelves or clothes racks.