Can grocery re-stocking enter a positive feedback loop?
April 10, 2013 6:52 PM   Subscribe

I buy more of a product that is often out of stock. If others do this, won't that tend to make stock fluctuate more? Do retail inventory systems try to damp this effect?

Reading this thread on retail management, I'm reminded of something I've been musing. Post Selects makes several cereals available in various supermarkets around me, but Banana Nut Crunch is only available at Target and maybe Nob Hill Market.

I don't stop at Target as often as the regular grocery, so I used to buy two or three boxes at a time. Then I kept finding it out of stock, so now I buy five. It would be out but all the other Post Selects would be there.

I recently learned that I can check inventory at the Target website. I'm surprised that stock will stay at "out" or "limited" for a whole week. I've also noticed that the shelf space for this product hasn't grown with the seeming demand.

Putting this in "work & money" because it's sort of an economics question, but I'm also interested in complex dynamical systems hypotheses.
posted by morganw to Work & Money (7 answers total) 6 users marked this as a favorite
When I worked at a supermarket (albeit back in 1995 or so), we only restocked the shelves once a week, and they only placed stock orders every few weeks. (They ordered larger amounts to be kept in their warehouse). The ordering process was that a low level management person named Chris (just last week promoted from high school night shelf restocker!) compared a list of what we should have in stock to a computer generated list of what we did have remaining from our last order (in the warehouse and on the shelves). He then ordered an amount of that product that topped it back up to the "should have" level.

He was not given the information or the training to detect that we were running out of a product more quickly than previously, and so would not then increase an order. Presumably that information was in the system, but it wasn't his jurisdiction.

I imagine that at our supermarket, the ordering increases and decreases were decided on on a much longer cycle than the ordering cycle itself. I.e. maybe once a year or so they would review quantitities? I'm just guessing there, because I didn't know anyone any higher up than Chris or have insight into those processes.

Maybe now with better computer programs and electronic ordering there are better systems in place, but I wouldn't be surprised if not.
posted by lollusc at 7:12 PM on April 10, 2013

I've noticed that with food products too. The stores always seem to be out of one or two flavors. always the same ones.

Having worked in retail (though not in supermarkets): if you are part of a chain, what gets shipped to you and "modeled" (maintained in a certain quantity on the shelves) is done centrally. Supposedly with respect to your location, but it doesn't always seem that responsive to your own store's demographic. As an employee, I can request that more of something be sent if I notice it selling out, but it would take a lot of repeatedly ordering more, and selling out, to affect the "model" amount. This will all also be affected not only by the calculations of the company owning the store but by distributors who may have their own agenda.
posted by BibiRose at 7:12 PM on April 10, 2013

After I started buying poppy seeds by the case (wiping them out of stock every visit), my local grocery store started stacking unopened boxes of seeds ten high by the spice section, where they would have maybe two cases of black pepper.

I think a sympathetic junkie employee just noticed me ringing up bottles by the dozen at the self checkout though. I swear though, I just really like Polish makowiec and constipation.
posted by WhitenoisE at 7:27 PM on April 10, 2013 [3 favorites]

Best answer: So I can't say for sure, as I don't have firsthand knowledge of Target's order/stock management system, but I'd be willing to bet they run something closer to a true in-and-out inventory - i.e. they scan the product when it arrives at their loading dock, that number is added to a database of stock that is considered "in-store", and then when you buy it, the cash register system effectively reduces the the stock total by the amount of product you bought. Lots of things can screw this up, like a cashier misringing a quantity of product (like 3 x UPC code 123456789 when you only bought 2), or product that gets damaged and then not recorded as "shrink" (or waste) product, but big retail chains have access to more sophisticated stocking algorithms than you might think. That being said, "par levels" or the amount of product the company always wants to keep in the store, probably are managed centrally and it could be that your love of Post Selects is a bit of an anomaly that the modelling software hasn't caught up with, or accounted for yet. A sudden uptick in the amount you buy on a regular basis (and similar behavior by others) might not be addressed in the software for a bit, depending on how sensitive or "twitchy" the algorithm is. Some retail chains would probably try to damp this effect, but it sort of depends on the chain - it's my experience that different companies focus on different things, and super-close management of one or two types of cereal may be too granular for Target.
posted by gorbichov at 8:26 PM on April 10, 2013 [2 favorites]

Best answer: It's also possible that the supply of the cereal may be limited or variable for some reason. For example, if Post can't reliably get the right kind of bananas, or if the production process is somehow more complicated than other flavors, or if they don't have dedicated production equipment for it, so they can only make it if they first clean all the equipment that was used for the blueberry flavor. If this is the case, Target could be trying to order more, but Post can't always take the order. This line of thinking seems more plausible if the cereal is a niche product, with a pretty small share of the cereal market.
posted by pompelmo at 9:45 PM on April 10, 2013

Best answer: One of the systems my team developed and supports is a grocery store automated ordering system, so I'm actually a niche expert on this question. At least in our process, we don't consider the number of items bought per customer in our analysis. We use a lot of variables to model demand (cranberry sauce sells in November, beer sells on weekends, many people are paid on the 1st and 16th, people will hoard items on deep discount, etc) but the number of units purchased per transaction isn't one of them. If a shelf slot held 12 boxes of Banana Nut Crunch and they were all purchased over the course of a day, we wouldn't care if they were bought by 12 individual customers or by 3 different customers each buying 4 units. Both of those cases would represent the same demand.

However, both of those would be equally bothersome. The overriding goal of the ordering module is to have all products in stock at all times. It considers the number of units on the shelf and the projected demand for the product between now and the next ordering window and attempts to order product such that we do not expect to sell out in that interval. If a product is chronically out of stock, we are probably ordering it every night and getting rejected by the company every night. If we were ordering 12 units per night and selling them all, we'd order extra and keep it in the back or ultimately expand the slotting allotment to keep 18 or 24 of them on the shelf.

There are a number of constraints on our ability to keep products in stock, however. If the 1st is a Friday and a giant snow storm is expected on Sunday, we are going to sell out of broad sections of the store Saturday no matter what we do. If we are regularly selling out of some niche soda, but Coke and Pepsi are paying a small fortune in slotting fees to keep up their share of the shelf, we'd rather run out of the niche product than give up the pure profit for the slot sale.

I can tell you that if the store is regularly running out of stock of your favorite product, it is attracting attention. Paradoxically, if the problem persists and the vendor can't supply it, we might decide to stop stocking the product altogether!
posted by Lame_username at 12:37 AM on April 11, 2013 [7 favorites]

It may be that the cereal manufacturer only sends a certain assortment of product in set quantities to the distribution center. I know it happens with many other types of products.
posted by Requiax at 5:31 PM on April 11, 2013

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