How to avoid 20% Lost Sales in Garden Centres using data.

Written by infra

November 23, 2021

Plant assortment planning and related issues cause 12% lost sales and an additional 8% on sub-optimal placement of products. Read how a data-driven approach helps avoid both!

The Challenge

Did you know that not placing the right SKU in the right quantity that meets the demand patterns at every store is the biggest drain on Garden Centre revenues? It results in upwards of 20% Lost Sales. Despite the ‘amazing’ forecast accuracy numbers you see in every quarterly report, the reality on ‘Quality of Revenue’ is starkly different. And many aspects of the real cost of incorrect assortment are not even captured, grossly underestimating the cost of lost sales!

It is not just the Lost Sales due to stock-outs, but the opportunity cost of sub-optimal placement, e.g. selling low-in-demand or even low margin SKU/plants occupying space, cannibalizing high-margin sales opportunities is just one such example. This is just the store-front manifestation of this issue, the actual driving factors (causals) for this Sales Loss are a series of planning, re-planning and logistics decisions and actions. We all know that last-minute ad-hoc changes are a reality 100% of the time even with a well-oiled planning mechanism. But the rigidity of the processes and systems does not allow for quick corrective actions in response to such changes.

The other side of the issue – the cost and margins perspective – is even obscure, hidden in the shrouds of data. The incremental wastage and returns as a result of placing low ‘Quality of Revenue’ SKUs (read low-in-demand, no demand, low margin plants) eat into your margins. Moreover, the logistics cost of placing low revenue quality SKUs, ad-hoc changes resulting in expensive resource adjustments and simply the cost of moving unsold /undersold plants – all these are various layers of fiscal inefficiency triggered by lack of using data aptly! It should be more than evident now, that the cost of Lost Sales is much more than even 20%, even if one still believes in conventional Supply Chain KPIs’ value!!

The Data Sciences led Solution

It was not possible to solve this at scale for lack of technology and systems. Now it is very much possible to perfect the assortment plan at extreme granularity – e.g. per SKU/plant, per store, per week, using Horticulture specific supply chain systems that understand the context of each store, plant and demand patterns. More importantly, with integrated planning-execution orchestration, it is possible to respond to ad-hoc changes quickly, correct any gaps in planning and re-align with demand patterns continuously 24X7, at a fraction of cost of traditional supply chain systems. This will not only improve planning accuracy and hence revenues but also deliver unprecedented cost savings. The transformational impact it can have on your sales and margins cannot be understated, a McKinsey report below says it all.

On average, retailers with such planning systems report a 25% reduction in stock shortages .. at least a 10% decrease in write-offs, up to 9 % higher gross margins.. At the same time, the cost of inventory planning decreases by as much as 30 percent due to the higher degree of automation – Future of retail operations: Winning in a digital era, McKinsey 2020

Act on it:

While the amazing impact McKinsey study quotes above refers to fresh produce, in our experience, achieving a 12% – 20% revenue growth using data driven systems is very much practical. And the systems that can help you address this are not esoteric, expensive ERPs that take years to roll out.

Our STEER product, developed specifically for Horticulture Supply Chains, powers such incredible revenue growth and cost improvements. And can be rolled out in 4 weeks straight!

Reach out to us or even us dare us to prove the value with a POC in your operations at Supple.AI.

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