Executive Update

Improving In-Stock Performance: A Delhaize / PepsiCo Case Study

This session discussed a pilot plan launched in 2011 between PepsiCo and Delhaize America to change the way CPG vendors replenish distribution centers (DC) and stores through increased visibility at the store level.

Typically, most retailers such as Food Lion provide vendors with information on products transferred from DCs to stores, but after products leave the DCs, vendors like PepsiCo are blind to what is happening.

Because of this, PepsiCo and Delhaize launched a pilot plan in 2011 that included about 300 Food Lion stores sharing data through a more consumer-demand-driven replenishment system.

“If you’re serious about a consumer-driven supply chain, you’ve got to react to what the consumer wants and to forecasts of consumer demand as opposed to just reacting to pulls from the warehouse,” said Scott Craig, director of supply chain at Delhaize America.

This pilot was based on a 21-day promotional period, where PepsiCo decided how much Gatorade to supply Food Lion, based on POS and store inventory data, and used it to forecast the demand, and then compared these results to the same period in 2010.

For Food Lion, sharing store data with PepsiCo had great results, including reduced DC inventory of between 12 and 27 percent, DC out-of-stocks were cut between 21 and 77 percent and store out-of-stocks were lowered by 20 percent.

PepsiCo also showed significant results from the pilot. With their goal being to focus on letting POS data drive replenishment in real time, rather than 3-5 days later, this allowed the company to make adjustments to the shipments based on the demand of the consumers. During this pilot, PepsiCo originally planned to ship half of its product on day one, 30 percent on day 10 and 20 percent on day 16. The fourth day the promotion was exceeding expectations, so they adjusted shipment numbers and added an additional 10 percent on day 19. It allowed PepsiCo to increase sales, without overloading the retailer.

“We were able to substitute inventory for intelligence, which was the key to this entire pilot,” said Mark Lyktey, vendor managed inventory / collaborative planning, forecasting and replenishment capability manager at PepsiCo.