Technology

How Tops Markets Is Powering Through the Pandemic

Employs automated ordering to reduce inventory and out-of-stocks
Tops Markets logo

With COVID cases spiking once again, it appears the world may be moving into the dreaded second wave. As a result, many grocers have reinstituted purchase limits on products that spurred panic buying in March and April. But while Tops Friendly Markets recently placed limits on some items including toilet paper and household cleaners, thanks to computer-assisted ordering (CAO) and strategic planning with its partners, the Williamsville, N.Y.-based grocer said it is better prepared for round two, and has not placed purchase limits on as many items this time as it did early in the pandemic.

We have initiated a limit on certain categories that have been hit hardest by the pandemic to ensure that we stem the panic buying, but the CAO system did a decent job of reacting to the product demands from COVID,” says Thomas Durkin, director of operations for Tops. “Where we fell short, like most retailers, was in our warehouse procurement and the ability of our manufacturers to remain in stock. The difference now is that we understand and have planned for additional safety stock of the hardest hit categories.

We have spent tremendous time planning with our partners to ensure we can recover as well as planning for a future or second wave,” he continues. “We have ways we can leverage the CAO system to continue to write good orders despite less than acceptable service level from our warehouse.”

Tops partnered with Itasca Retail two and half years ago to implement its Magic CGO software solution to optimize replenishment and management of store-level inventory.

“Our primary goals of improved sales and in stock position have been exceeded; however, I will note that the measurement of these results has been a difficult task as our rollout coincided with the pandemic,” says Durkin. “We have also attained other improvements in the areas of reduced shrink and inventory at rest.”

While solving all out-of-stocks is difficult given the pandemic’s backdrop of product shortages and manufacturer’s allocations, the lessons learned early in the pandemic are helping retailers and their partners to better meet demand now and in the future, says Itasca President and CEO Jeff Kennedy.

“The COVID-19 surge last spring will allow for our application to learn from the unique change in consumer behavior. Itasca’s machine-learning technology quickly adjusts to change, allowing retailers to be the first to respond to the shift in demand seen in the marketplace,” Kennedy says. “In addition, Itasca’s Magic CGO provides forecasted orders for product many order cycles into the future. This helps the retailer and their vendor partners to plan in advance to meet the needs of their stores.

“While the COVID-impacted environment makes it more difficult and the results aren’t perfect, hopefully our customers can minimize the need to set limits on consumer purchases,” he adds. “On the flip side, as the impact of unusual consumer behavior subsides, it is just as important to not overbuy product that will not sell in the future. Again, adjusting quickly to demand change, reduces the need to mark down and/or shrink product.”

And while soaring sales across the grocery industry make it challenging to measure the true results of CAO implementation, Durkin reports that Tops has experienced a double-digit gain in sales for the categories it has placed on CAO, as well as a reduction in inventory and out-of-stocks. Tops also saw the biggest improvements in its dairy, meat side deck, frozen seafood and bagged salads; “however, the good results have spanned the entire portfolio,” he affirms.

In today’s highly competitive grocery landscape, avoiding out-of-stocks can be critical to customer loyalty. “Because inventory optimization eliminates out-of-stocks to the tune of 99.5% availability, grocers ensure they keep their guests coming back,” says Jason Wirl, director of marketing for Itasca, who points to e-tailer giant Amazon’s ability to meet customer demand by sourcing product across its vast marketplace.

“When there are multiple other outlets readily available to the consumer, retailers risk losing guests—maybe even for life—when an important ingredient isn’t available,” Wirl continues. “Knowing exactly how much product is in stores at any one time allows retailers to much more accurately purchase when volume opportunities are presented to them. They can buy to meet the demand of a promotion to maximize its impact without having residual inventory after the fact, which degrades the overall financial return of the promotion to the retailer.”

This product availability awareness also applies to e-commerce operations. Itasca’s Magic CGO refreshes the product selection list on a grocer’s e-commerce shopping application each day to better reflect what is in-store. “This means a customer can’t order something that’s not available—groundbreaking in the grocery industry,” says Wirl, who adds that one Itasca client now has a 94% as-ordered rate of fulfillment as a result.

Another benefit of automated ordering is improved labor management, adds Wirl. “Labor is always scarce, and even more so during a pandemic. When the stores are getting sometimes two to three times [typical] load sizes, they need labor to move that inventory. If the ordering process is automated and team members can cut hours of time from it, they are free to do other important things," he says. 

Itasca’s implementation plan allows retailers to begin generating automated orders within four to six months of an initial kick-off meeting, the company said. From there, retailers can roll out additional categories based upon the unique requirements of their stores.

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