Wednesday, 12 October 2011

Asda and EDLC (Every Day Lost Cash)

It’s been well documented that Asda have been struggling with availability for some time now – not just on well established retail blogs like Steven Dresser's but even some of the reports from industry bodies on the Supermarkets format have gaping holes on the shelves.

Asda backrooms are like no-one elses in the industry. Things have improved since I joined Asda in 2005, when I was shocked to find floor-to-ceiling racking and forklift truck being used in an 18k sq ft store taking around £150k per week, but they are still too big and too full. Unfortunately, they’re not tending to be full of the product that’s needed on the shopfloor. On a recent visit to Trafford Park Supercentre, poor availability on many grocery SKUs looked odd next to overflowing potato bins full of yellow-sticked stock reduced to clear.

Asda colleagues may not always be hot on service, but they do work bloody hard, so I don’t believe the problem lies in the final 5 yards. Stories emerged last week about consultants being drafted in to help, something that is also happening at parent company Wal-Mart. One of the solutions being mooted is the use of top-stock shelves similar to those rolled out by Tesco in the last couple of years.

Top-stocking does make your shop look awful. Those with long memories may recall the hoppers used by Asda in the 1980's, but nowadays it's just a wall of cardboard and barcodes. The theory behind them is that it brings one-way stock closer as cases that won't fit on the shelf can at least be stored down the aisle. With the product down the right aisle, should a line go out of stock then any passing store assistant can immediately plug the gap. The reality is different - take a look at any Tesco and you'll find at least one over-ordered SKU that has about 5 shelves of stock, as well as out of stocks with the case sitting on the top-stock shelf. That store assistant is busy elsewhere and the theory has fallen over. And of course, if your ordering and supply are working perfectly, your left with empty shelves and the customer perception is that you have gaps!

Tesco's reasons for introducing top-stock shelves were also linked to freeing up warehouse space, rumoured to be needed for more click & collect desks or space for their bank, not just replenishment.

Back to Asda, it is systems not physical movement of stock that is the problem. A product‘s replenishment profile can be impacted at all points of the supply chain. These changes can vary from fudging the capacity in-store to applying sweeping factors centrally. Everyone involved is doing the right thing, for their part of the chain at least, and because the various bits of sticky tape and string have worked for so long, no one’s challenged the actual system. Recently, it looks like the quick fixes are unravelling.

Another problem is the culture of Asda. Not the shiny, happy clappy world where all are equal and no one has an office, no the bit that is purely weekly target driven with no one taking accountability for the impacts down the line.

The depot manager will reject deliveries or push out stock if their inventory or service levels are under threat for that week. Meanwhile, the store team will be looking to fudge what they can to hit their targets to ensure that they get a bonus. The obsession with weekly targets, coupled with the pseudo-utopian culture which ensures too many people have a say yet no one takes accountability, creates an environment that even Kafka would think convoluted. If there is a problem somewhere, the primary objective for many is to make sure that it gets passed on somewhere else.

The systems themselves are also in need of a major overhaul, but they are essentially a WalMart system designed around keeping their US model full. The UK market is a very different beast and needs flexibility that they don't currently offer - amongst the reasons why Asda have never done c-stores and probably behind the slow pace of development for the Living format.

So, what's the solution? It would have to be a multi-streamed and well co-ordinated approach starting with Andy Clarke being a strong leader and holding people accountable. Assuming there would be no money for systems, the focus would be on building robust processes with the customer at the heart of them. This may mean Asda lose their claim to have the lowest cost-to-sales distribution network in grocery, but what good is that claim if your shelves are empty?

The process needs to map all the key stages and assign owners to each of them. People need to held accountable to keeping the shops full, not their own narrow weekly targets.

It will take a big effort all through the Asda business and will need some brave people to put their necks on the line. Taking accountability needs tough people - I just hope Asda still has enough good people willing to do their duty.

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