1. The document discusses using Vendor Managed Inventory (VMI) technology to improve out-of-stock avoidance (OSA) and contribute to business growth. It provides examples of OSA results from Danone Belgium that show increased availability and reduced out-of-stocks with VMI. 2. Key principles of VMI described include stock and sales integration, sales estimation based on trends and future events, and order validation/modification based on store specifics to improve forecasting accuracy. 3. Implementing VMI for Danone in the Russian grocery chain Billa is highlighted, showing a significant increase in OSA from 83.3% to 93.0% and reduction of out-of-stocks

1. VMI as
technology to
improve OSA
and to contribute
growth
By Olga Khruscheva,
SC Business Planning &
Customer Integration Director,
APICS CSCP

2. Content
Do you feel the difference?
How we do it…
What’s available to influence?
How it might look like?
OSA as a subject for consideration

3. What is available on shelf?

4. Consumer behavior if wanted
product is not on shelf
36%
Buys other
brand
19%
Buys in other
store
20%
Buys another
flavor
17%
Buys product
later
8%
Doesn’t buy at
all
+ = Retailer sales loss
+ = Supplier sales loss

5. Danone Belgium OSA Results
Dairy FMCG DANONE
Other
A Brands
PRIVATE
LABEL
Carrefour (Hyper) 93% 96,40% 90% 91%
LINEACOM
Colruyt (Hyper) 88% 90% 86% 89%
No LINEACOM
Delhaize (Hyper) 94% 95,50% 91% 93%
No LINEACOM

6. Are our products always available to our
shoppers?
Manufacturer Retailer

7. Why not apply VMI on Upstream part with
same benefits as upstream ?
FMCG
Plant
WAREHOUSE OF SUPPLIER
STORE

8. Improvement on the traditional
Preseller model
Order taking
Stock FIFO control
Price
Fridge POSM
Promo
Promo materials
Focus?
Sales Rep.
(50 stores)
Focus
Stock taking
Shelf FIFO control
OSA, PPED
Merchandiser
(1-3 stores)
Focus
Price
Fridge POSM
Promo
Promo materials
4P
KA Executive
(20 stores)
Focus
Stock control
Order Taking
Assortment
Promo management
OOS
VOLUME CONTROL
OSA, PPED
Order Creator
(40 stores)
CONTROL AND
FOLLOW UP
CONTROL AND
FOLLOW UP
CONTROL AND
FOLLOW UP
CONTROL AND
FOLLOW UP
SALES SC

9. • Development, testing IT ordering tool
• Creating Central ordering team
• Creating Key Account executive team
• Merchandizers team
• Start stock counting
• After 6 weeks of history – start ordering
Main changes in process

10. Billa is company for customers
One of the leaders in Europe Retail market, founder in 1924 and being
presented by 69 supermarkets and 3 hypermarkets in Russia since 2004 year.
• It is all about our customers
• Innovations and changes develop our business
• Best partner for our suppliers

11. 1. Stock & Sales integration
2. Sales Estimation based on Trends &
Future Events (National/Regional)
3. Order Validation/Modification based on
Store Specificities
Distribution Centre
Lineacom Principles

12. Order creation process
Count stock and loss
Send stock and loss
information to OC
Enter order to the
customer’s system
Enter stock and loss to the system
Check stock count accuracy
Create order based on history and
promo
Order-fax
- Merchandizer
- Order creator (OC)
Order
- SAP

13. Basic Forecasting principles
Based on the cleaned sales history an estimation for
the next sales period is made.
This estimated sales is influenced by:

14. Basic Order principles

15. Basic Order principles

16. Forecasting
Algorithmes
• Base Forecast
Moving Average 4 or 8 weeks Flat
Moving Average 4 or 8 weeks Trend
• Promotional Uplift
Specific behaviour
Pre-Bon On Pack (Lower Safety Stock)
Bon On Packs (Uplift)
Post Bon Pack (Sell-Out)
• Innovations
Align product with Benchmark
Combine Benchmark with Real Sales
• Stops
Adapted Safety Stocks

17. Basic Order principles

18. 245
-165
-480590
-225
-600725
400
BeginStockP1
DeliveryP1
SalesForecast
P1
ShortShelflife
CorrectionP1
Proposed
DeliveryP2
SalesForecast
P1
ShortShelflife
CorrectionP2
EndStckP2
Short Shelflife Stock Correction
Sales Order = (Sales Forecast)*(Safety stock Policy) – (Begin Stock + Delivery P1 – Short Shelflife Correction)
Quantity of Products already in
Store Stock where Shelflife is too
low to sell in Period

19. Basic Order principles

20. Safety Stock
• Defined by Product / Store Combination
• Dynamic & Automatic based on Sales Forecast (% of
Period(s) to Cover)
• Alignement with Business Strategy
• Alignement with Customer Expectations

21. • FOCUS on Dairy, No High Performaning Tool
available on market.
• IMMEDIATE & FULL listing of INNOVATIONS
• TRUST in Quality by working with dedicated and
experienced PEOPLE
• HIGHLY REACTIVE in a Fast Moving Environment
Why VMI by Danone?

22. Billa: something to compare
2. OSA in Billa stores with Central
Ordering
OSA 93,0%
OOS 7,0%
1. OSA in Billa stores w/o Central
Ordering
OSA 83,3%
OOS 16,7%
OSA
83,3%
OSA
93,0%
OOS
16,7%
OOS
7%

23. Billa: something to compare
Vertical Growth in Billa, 2009 vs 2010
16,7%8,7%
No central
ordering
Central
ordering

24. OSA is well contributed for growth

25. Thank you!
Olga.khruscheva@danone.com
Moscow, 2010