A101 is a hard discount retailer that provides high-quality, cost-effective food and consumables at affordable prices at small chain markets throughout Turkey. As one of the fastest growing retailers in the world, A101 achieved a 60% year-over-year sales growth which has resulted in fiscal 2013 retail sales of $1.6B.
When your business grows at a meteoric rate, inventory costs often expand geometrically just to keep pace. A101 discount markets had just this issue as they grew from their founding in 2008 to over 3200 stores served by over 20 distribution centers today!
A101 operates with 900 regular SKUs and 2000 total active in their small-footprint stores. System-wide, this required over 3 M inventory replenishment decisions each day. For some items, they had too much stock, leading to excessively high inventory carrying costs. For other items, they had the wrong inventory in the wrong places leading to critical out-of-stocks in the stores.
On the other hand sales forecast from the stores proved to be inaccurate in part, because it was homogenized and demand varied by store and by region. Even though store replenishment was made three times/week, the explosive growth and inaccurate forecast resulted in a costly mix of rising inventory levels of the wrong products and increased stock-outs of the products in demand.
A101’s business objectives were to;
- Reduce lost sales due to stock outs
- Provide the right mix of display merchandise, shelf stock, and safety stock at its stores
- Provide the store manager a system to place replenishment orders efficiently.
The Solution: Demand and Supply Planning
Solvoyo implemented a Demand Driven Replenishment solution that A101 employs to automatically create accurate forecasts and optimize store inventory targets on a weekly basis, and produce replenishment recommendations for each store on a daily basis.
Solvoyo determines the optimal inventory profile considering demand, sales targets, open and in-transit orders, and display constraints, then sends replenishment recommendations to each store manager’s hand-held device for approval or enhancement as necessary.
On approval, the optimized inventory replenishment plans are uploaded to A101’s Store Execution system for store order fulfillment. The plans are generated centrally, reviewed locally, and filled regionally.
By implementing Solvoyo’s Demand-Driven Replenishment Planning solution, A101 realized significant annual savings. Their sales-driven replenishment planning has automated the ordering of the right products in the right quantity at the right time. The solution has rationalized the inventory replenishment to the stores and it is just the first step!
Solvoyo's Elevation Platform helped A101 initially reduce its standing inventory by 8% which translated into $8.1M. At the same time, they decreased their store stock-outs by 30%, resulting in an additional margin contribution of $1.7M. The Solvoyo solution also automated a previously-manual process and increased efficiency and effectiveness at all echelons in the organization and throughout the order-ship process.
Already in pilot, A101 is moving back up the supply chain and employing Solvoyo to optimize the Warehouse-to-Vendor purchase order process. A101 expects similar order-of-magnitude savings optimizing this process as well.
A101’s COO states,
“Solvoyo gives A101 the ability to perform all of our planning needs on the same platform - strategic, tactical, and operational planning. Further, we can seamlessly integrate their recommendations with our operational systems, minimizing costs and maximizing productivity.” Click here to read more.
A Closed-Loop Operational Management solution has the potential to represent the greatest single technology-mediated benefit that a retailer can implement.
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