Actually, there's nothing crazy about it. Seven-Eleven convenience stores in Japan have longed changed their merchandise assortment during the day. They feature breakfast foods up front in the morning, and grocery staples and prepared dinner items in the afternoon, for workers stopping in on their way home. Britain's Tesco grocery chain receives point-of-sale (POS) data throughout the day, with sales in the morning helping to determine what gets put on the truck for afternoon delivery.
In fact, the practice is "quite common" in the dense urban areas of Europe and Japan, according to Michael Liebson, director of value-chain planning (VCP) product strategy with Oracle Corp. Businesses in the big population centers, where real estate is at a premium, might be serving two to four times the number of customers that pass through an equivalent store in the U.S., he says.
Intra-daily replenishment isn't easy to do, despite the wealth of data that flows through a typical retailer's supply chain today. Merchandisers face two discrete challenges. One is technological, involving the systems needed to wed real-time demand data with planning. The other is physical - are the store and its distribution centers set up to pick, load and move product multiple times throughout the day, within extremely narrow windows?
The challenge is especially great in the U.S., where distances between stores and distribution centers are typically longer than those in Europe and Japan. In addition, the prevalence of direct store delivery (DSD) makes it harder to coordinate intra-day shipments, Liebson says. About a quarter of grocery volumes in the U.S. move from suppliers to stores in that manner. Retailers would need to coordinate their replenishment plans and physical deliveries with an army of vendors.
By contrast, nearly all Tesco product in the United Kingdom is stored in centralized warehouses. As a result, the retailer has an easier time processing POS data, planning replenishment and loading trucks in the distribution centers. "They're not worrying about multiple DSD vendors colliding at the store loading docks," says Liebson.
Intra-day replenishment works best when the stores are relatively small and strategically located. In Japan, Seven-Elevens and other grocery outlets often are placed near train stations, where they serve commuters headed home in the evenings, says Vikash Goyal, Oracle's senior director of VCP product strategy. Deliveries tend to be made by small vans, which can negotiate narrow, crowded streets.
Still, there's an opportunity for U.S. retailers to jump on the intra-day bandwagon. In terms of product, the best candidates would be those that are currently moving in DSD programs - perishables such as dairy, produce and other chilled items. But Liebson also believes that certain fast-moving items, such as product launches for consumer electronics, could become part of the mix. "If you're selling some type of new smartphone, DVD or gaming title, you might want the ability to replenish the shelf midday so you don't have stockouts," he says.
On what should a store base its intra-day replenishment plan - automatic shipments tied to demand forecasts, or actual POS patterns? Goyal suggests it's the latter. He says suppliers and retailers are becoming more sophisticated about making use of real-time sales data, even if the technique is far from perfected.
"The ability to capture that data and work with it in the middle of day is definitely a challenge," he says. "You can't just do everything in an overnight batch run." Retailers, many of whom are only just getting their arms around monthly planning and forecasting, would have to take their daily execution skills to a whole new level.
On the IT side, merchandisers need a system that can capture, cleanse and manage POS data, a process that is otherwise heavily labor-intensive. "You want to be able to automate that as much as possible, bring in new data more often and make use of it," says Goyal.
The technology to drive intra-day replenishment breaks down into three elements. First is the ability to sense - and make sense of - the demand signal. Second is taking that signal and creating a forecast, however short-range it might be. Third is the server hardware, requiring huge amounts of memory to support the flow and storage of data.
As with any major business initiative, the effort involves a combination of technology and process change. Retailers "need to design business processes in parallel [with systems implementations], and figure out which products and categories they want to do this with," says Liebson.
Intra-day replenishment isn't only for brick-and-mortar operations. E-commerce merchandisers can become more agile in their fulfillment strategies as well. Liebson points to Amazon.com, which maintains huge warehouses with pick-and-pack operations tied to rapid, frequent deliveries. E-tailers want to be able to plan shipments to the warehouse based on orders taken in the morning, to enable delivery that evening or first thing next day.
In a sense, intra-day replenishment is really just another flavor of same-day delivery, which is gaining popularity with customers of both e-commerce and store-bound retailers. Even brick-and-mortar operations are targeting home delivery, which already accounts for 5 percent of grocery consumption in England, according to Liebson. Retailers are servicing many home orders out of local depots, which need to be replenished constantly.
Intra-day replenishment might seem exotic to U.S. retailers today. As with every other advance in supply-chain efficiency, however, it's likely to become a critical part of many merchandising strategies. While the future is impossible to predict, you can count on one thing: retail supply chains aren't going to get slower.
Next: What's the least amount of inventory that you really need?
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Keywords: supply chain, supply chain management, inventory control, inventory management, supply chain planning, supply chain systems, demand planning retail supply chain, sourcing solutions
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