Shelf Fill Rate Against a Full Backroom
A grocery retailer stocks 1,200 SKUs. In the top 50 SKUs, the shelf fill rate averaged 91% last month, while the backroom held ₹18 lakh of stock and total inventory was ₹62 lakh. The top 50 account for 55% of sales. For one SKU - 1 kg branded atta - daily average sales are 40 units, supplier lead time averages 4 days but has ranged from 3 to 7 days, and the store wants a 95% service level approximated by holding safety stock equal to 2 days of sales. Purchase orders are placed every Monday and Thursday. Last month the SKU had 3 stockout days and a physical count found 46 units less than the system record. The supplier invoices in cases of 24 units. The store currently holds 130 units on shelf and 96 in the backroom. The manager says 'we have plenty of stock, the problem is the shelf.'
1. Calculate the reorder point for atta and assess whether current practice is adequate.
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Reorder point (continuous review) = demand during lead time + safety stock = (40 × 4) + (40 × 2) = 160 + 80 = 240 units.
But the store orders only on Monday and Thursday, so this is a periodic-review system. The order-up-to level must cover lead time plus the review period. Average review period is about 3.5 days, so cover = 40 × (4 + 3.5) = 300 units, plus 80 safety = 380 units.
The 2-day safety stock is only 80 units, while lead time has ranged from 3 to 7 days - a 4-day spread, or 160 units. Against a 7-day lead time, demand alone is 280 units, so a 240-unit trigger would stock out. Current practice is not adequate for the supplier's variability. Either hold more safety stock, move to a fixed order-up-to level of about 380 units, or improve supplier reliability. Orders must also be rounded to cases of 24.
2. Interpret the 46-unit variance and the 91% fill rate. What are the likely causes and what would you check?
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A 91% shelf fill rate on the top 50 SKUs, which are 55% of sales, is a serious availability failure, yet ₹18 lakh sits in the backroom. That points to replenishment and data integrity, not insufficient stock. The store may be buying the right quantity but not getting it onto the shelf.
The 46-unit negative variance could be receiving errors (short deliveries accepted), POS scanning errors, unrecorded damages or expired stock, misplacement in the backroom, or theft. Check: negative on-hand balances, the last three goods-receipt records against invoices, dump/expiry records, and whether staff replenish before the evening peak. Physically count both shelf and backroom for the SKU. If the physical total matches the system, the problem is process; if physical is lower, it is shrinkage or receiving.
3. Recommend a shelf-availability routine with two metrics.
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Introduce a daily gap scan of the top 50 SKUs at 9 a.m. and 5 p.m.; every gap is filled from the backroom or escalated. Cap backroom stock of top-50 lines at a set number of days so replenishment cannot be postponed. Cycle-count the top 50 twice a month and investigate any variance above 2%.
Metrics: shelf availability for the top 50 (target at least 98%) and backroom-to-shelf replenishment time. Add known shrinkage as a percentage of sales as a secondary check. Review weekly with the person responsible for each aisle, not just the store manager.