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The substantial, unseen cost to retailers of out-of-stocks.

CHICAGO -- A significant --but often overlooked--cost to the chain drug industry is that of out-of-stocks. A report from IHL Group estimates that absent products in the United States cost retailers $47.4 billion annually.

That's in part because shoppers today are more sophisticated and demanding than ever, expecting shelves to be properly stocked so that they can find products quickly, easily and consistently.

"Retailers must be at the top of their game at all times. The battle to win customer loyalty and maximize customer lifetime value is fierce, and every store visit will move the retailer closer to victory or defeat. At each and every visit, ensuring a good customer experience is a must, and proper on-shelf availability is a critical linchpin in delivering excellence, " said Brad Shelton, president of IRI's retail collaboration solutions.

To give retailers a customerlens perspective of in-store execution issues that tend to lead to out-of-stocks, IRI has developed a proprietary on-shelf availability (OSA) optimization capability that quickly and inexpensively provides near real-time analysis of first- and third-party big data sets, using artificial intelligence and machine learning algorithms to pinpoint problems in the store, all the way down to the item level. With this system, daily item-level alerts are delivered directly to in-store personnel, pinpointing products that have OSA challenges, allowing for rapid remediation and setting the stage for an enhanced customer experience and, ultimately, higher top-line sales and maximum customer lifetime value.

"Today's shoppers are demanding. They are laser-focused on accomplishing their mission--buying the product they want, where and when they want it. This leaves retailers with a daunting challenge: They must ensure that the product is on the shelf and ready for purchase. This is difficult--on-shelf availability is a complex process involving buyers, suppliers, distribution centers and in-store execution, " noted Prakash Tilwani, executive vice president of supply chain and media solutions at IRI.

Consequently, said Tilwani, out-of-stock situations continue to plague the consumer packaged goods industry. The reasons are many, but the result is the same: If the product is not on the shelf, the sale is lost. Fully one-third of out-of-stock situations are due to empty shelves.

To arm retailers with the insights they need to conquer these challenges, IRI developed the IRI On-Shelf Availability Optimizer. The system flags items that should be selling but are not. It also identifies items that have an obsolete inventory count, which could result in outof-stock or overstock situations. "Retailers that are leveraging this alerting system have been able to fix millions of inventory defects, all leveraging science and data that replace manual shelf audits, " said Shelton.

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Title Annotation:State of the Industry: Industry Outlook: The Issues
Publication:Chain Drug Review
Date:Apr 29, 2019
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