Asda's Fight Against Phantom Inventory: How Technology Improved Stock Accuracy

Table of Contents

  1. Introduction
  2. Understanding Phantom Inventory
  3. Asda’s Technological Solution to Phantom Inventory
  4. Benefits of InventoryInsight
  5. The Broader Implication for Retailers
  6. Conclusion

Introduction

Imagine walking into your favorite supermarket, only to find that the item you need is out of stock. This frustrating scenario is more common than you might think, and it’s often due to an invisible problem known as "phantom inventory." This term refers to stock that is listed in inventory records but is not actually present on the shelves. Today, we dive into how Asda, one of the UK’s largest supermarket chains, is leveraging advanced technology to tackle this persistent problem and greatly enhance its operations.

Asda operates over 800 stores across the UK, ranging from superstores to petrol stations, serving approximately 18 million customers every week. Given the vast number of SKUs it handles, the impact of inventory inaccuracies can be substantial, affecting sales, margins, and customer satisfaction. To address this challenge, Asda has implemented Retail Insight’s InventoryInsight technology, achieving remarkable results.

In this blog post, we will explore the complexities of phantom inventory, how Asda tackled this issue, and the broader implications for the retail industry.

Understanding Phantom Inventory

Phantom inventory is a ubiquitous problem in the retail sector, exacerbated by inaccurate inventory records. According to data from ECR Retail Loss, about 60% of inventory records are incorrect, leading to substantial discrepancies between recorded stock and actual stock levels. This can result from various issues including theft, process non-compliance, or mis-scanned items. If left unchecked, phantom inventory can contribute to up to 80% of out-of-stock scenarios.

Why Does Phantom Inventory Occur?

Phantom inventory arises for several reasons, making it a complex issue to solve. Here are some common causes:

  • Theft: The loss of inventory due to shoplifting or internal theft.
  • Process Non-Compliance: Employees not following inventory management procedures accurately.
  • Scanning Errors: Items incorrectly scanned at checkouts or during stock-taking processes.
  • Data Entry Errors: Mistakes made when inputting inventory data into systems.

Implications for Retailers

Phantom inventory has several far-reaching effects on retailers:

  • Lost Sales: Items appear to be in stock but are not available for purchase, leading to lost sales opportunities.
  • Customer Dissatisfaction: Shoppers’ frustration when they cannot find the products they need.
  • Operational Inefficiencies: Increased time and resources spent trying to locate inventory that doesn’t exist.
  • Falling Margins: Inaccurate stock levels lead to over-ordering or under-ordering, affecting profitability.

Asda’s Technological Solution to Phantom Inventory

To combat this pervasive issue, Asda partnered with Retail Insight to deploy its cognitive technology solution, InventoryInsight. This machine learning-driven software identifies and corrects inaccuracies in retailer inventory records, significantly improving performance.

Pilot Program Success

In July 2023, Asda piloted the InventoryInsight technology across its store estate. The pilot utilized existing store data, enabling swift implementation by integrating with Asda’s current data sets. Over nine months, Asda successfully removed over 1.6 million units of phantom inventory.

Full-Scale Roll-Out

Given the impressive results from the pilot, Asda decided to implement InventoryInsight across its entire store network. Neil Fairclough, senior director of retail transformation at Asda, noted that accurately identifying phantom inventory is a significant advantage, contributing to a better in-store experience for shoppers.

Benefits of InventoryInsight

Improved Stock Accuracy

The foremost benefit of using InventoryInsight is enhanced stock accuracy. By identifying discrepancies in inventory records, Asda can ensure that its stock data is reliable. This helps in both avoiding over-stocking and preventing stockouts, leading to better inventory management.

Enhanced Customer Experience

With more accurate stock levels, customers are less likely to encounter out-of-stock items. This improves customer satisfaction and loyalty, as shoppers are more confident that the items they need will be available.

Operational Efficiency

By reducing the time and resources spent on managing phantom inventory, store employees can focus on other important tasks. This leads to streamlined operations and cost savings.

Financial Performance

Accurate inventory records directly impact financial performance. By minimizing lost sales and optimizing stock levels, Asda can improve its margins and overall profitability.

The Broader Implication for Retailers

Asda's success with InventoryInsight has significant implications for the broader retail industry. Here are some key takeaways:

The Role of Technology in Modern Retail

Asda’s use of machine learning and cognitive technology highlights the pivotal role that advanced technology plays in modern retail. By leveraging data and algorithms, retailers can gain insights that were previously unattainable through traditional methods.

A Shift Towards Data-Driven Decision Making

The reliance on accurate data for inventory management signifies a broader shift towards data-driven decision making in the retail sector. This approach allows for more strategic planning and improved operational efficiency.

Potential for Industry-Wide Adoption

As more retailers become aware of the benefits of technologies like InventoryInsight, we may see a wider adoption of such solutions across the industry. This can lead to overall improvements in stock accuracy and customer satisfaction.

Conclusion

Phantom inventory is a longstanding challenge in the retail industry with far-reaching impacts on sales, customer satisfaction, and operational efficiency. Asda’s partnership with Retail Insight and the successful implementation of InventoryInsight technology showcases how leveraging advanced cognitive solutions can effectively address this issue.

By achieving significant improvements in stock accuracy and operational efficiency, Asda has set a precedent for the rest of the retail industry. The combination of machine learning and data-driven insights offers a powerful tool for combating phantom inventory and optimizing retail operations.

FAQs

What is phantom inventory? Phantom inventory refers to stock that is listed in inventory records but is not actually available on the shelves.

How did Asda address the phantom inventory issue? Asda partnered with Retail Insight to deploy InventoryInsight, a cognitive technology solution that identifies and corrects inaccuracies in inventory records.

What were the results of Asda's pilot program with InventoryInsight? The pilot program successfully removed over 1.6 million units of phantom inventory from Asda's stores.

What are the broader implications of Asda's success for the retail industry? Asda’s success demonstrates the potential benefits of advanced technology in inventory management, encouraging other retailers to adopt similar solutions for improved operational efficiency and customer satisfaction.

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