Presented by

Geoff ChaplinManaging DirectorWIS International

January 14 2021

How a 20 year-old theory has finallybeen proven by modern retailers

Introduction

Twenty years ago, Stanley B. Vogelsang wrotewhat would later prove to be one of the singlemost insightful descriptions ever of how tosucceed in retail. He wrote:

The physical inventory or merchandise in thestore is each retailer’s primary asset. How thatasset is managed will likely determine the successof the retailer.

Vogelsang wrote at a time when the onlinemarketplace was the territory of digital pioneers,notably a nascent Amazon that had been foundedin 1994 by Jeff Bezos. Online accounted for 1.4% oftotal retail sales (as opposed to 36% in 2020). Theconcept of a multi-channel retail offering was stillonly hypothetical.

Wal-Mart then Asda adopted multiplecounts with great success

Vogelsang’s article detailed how significant retailpartners in the USA had found that multiplecounts, at SKU and barcode line detail level,brought significant advantages - especially salesrevenue growth. He showed how better stockcontrol led to sales uplifts of 2%-6%.

Wal-Mart in the USA had adopted Vogelsang’sapproach with great success. And after acquiringAsda in 2002, they asked WIS International to setup in the UK - to provide stock taking services toAsda just as we had done to Wal-Mart. So, when Ijoined WIS as Managing Director in 2002 our oneprimary account was Asda Wal-Mart.

Fast forward eighteen years, and WIS has firmlyestablished itself as the most accurate and reliableservice in the UK. We still service 100% of Asda,but we have added other significant groceryclients to our portfolio too, including Waitrose…

Waitrose has driven sales using themultiple count strategy

Waitrose had a game plan. To take an oldprocess, largely driven by a year endcompliance audit, and introduce world-classstrategies that would drive availability andso increased sales revenue, just like Wal-Martand Asda had done. Just like Vogelsangpredicted.

In 2018 after two years of collaboration,working alongside Waitrose, WIS came upwith an inventory programme that includedstrategically counting the Waitrose estatebetween 6,5,4,3,2 and one cycles.

By analysing their store portfolio in greatdetail, Waitrose could see that, by simplymaking sure that the right product was inthe right store at the right time a multiplecount strategy realised a sales uplift ofbetween 2% and 6% per store.

Sales up by as much as 6% plusother significant benefits

Waitrose is a significant player, reporting£6.4 billion British Pounds in revenuesin 2019. And the case study included laterhere supports the conclusion that, bycounting key locations up to six times a year,they have added between £140 - £420 millionpounds of sales growth. Remarkable!However, the same benefits are available forany retailer prepared to look afresh at theirstock count cycle strategy…

I recently re-read Stan Vogelsang’s article.He was the father of WIS inventory control,and I had the pleasure of spending time withhim early after joining.

Retailers in the UK wake up to realise ‘StrategicInventory Routines increase sales revenues byup to 6% per year’

Multiple counts bring multiple benefits

It struck me that Stan was way ahead of us allback in 2001, with so many benefits to strategiccount cycles more than relevant today. Here are afew of them:

Reduced Inventory In-store: I guess having thewrong product at the wrong time in the wrongplace springs to mind.

Reduced Store Labour: References the pointabove. Never has it been more important toincrease efficiency in-store. Critical deploymentof experienced staff to drive customer service isimperative. Wasting resource to move overstocksis the definition of insanity!

Improved Merchandising: Once againreinforces the point of maintaining the integrityof the store’s Masterfile, allowing staff to focus onservice and “where am I going to put this.”

Improved Customer Satisfaction: Having theright products available drives loyalty andrepetitive shopping and creates a true USP - “theyalways have everything I want!”

Increased Sales Revenues: If I asked 100 storemanagers if they wanted between 2% and 6%sales increase, and all they had to do was toprepare their store for multiple outsourced stockcounts, how many would bite my hand off?

You can find Stan’s original article form 2001 inthe appendices of this document.

The ‘light bulb’ moment for retailershas arrived

This brings me to 2020 the challenges of multiplelock downs and the mass migration to onlineshopping. Maybe even a little click and collect!

Never has it been more important to have anaccurate, timebound Masterfile.

The importance of being able to pickaccurately for mass online orders is critical.Picking substitutes is intensively labour heavy.And then, when you do, the customer willoften reject the substitutes. Not only that, butalso guess where they are shopping next week?Well, it’s not with you!

If you think online pick accuracy is critical,have a think about click and collect. I havepersonal experience of this, driving 50 miles tocollect tins of fence paint only to arrive and betold we are out of stock! I am never going back!

And so, to my conclusion. Sharing the pastknowledge and referencing the success story atWaitrose has at last sparked considerableinterest within the UK grocery sector.

Finally significant players are workingthrough their numbers and having what Iwould describe as ‘a light bulb moment.’ It isthis…

For a small additional investment focussed onInventory frequency retailers can delivermultiple returns, and they can do this quicklyand efficiently, securing many benefits to theirorganisation at a time when every aspect ofevery business is under scrutiny.

I have seen nothing make such a dramaticimpact during this Covid-19 pandemic thanthe application of multiple count cyclestrategy.

And so I would urge you to think carefullyabout the strategy, read the case study andtestimonials and revisit your stock count cyclestrategy urgently.

For more information around increasing your sales revenues between2% and 6% please get in touch with me at WIS International.

Geoff Chaplin, Managing Director

gchaplin@wisintl.com +44 7766 566 709 www.countonwis.com

1. A Case Study – Waitrose

2. Data Integrity – The Physical InventoryIssue of Today...and Tomorrowby Stanley B. Vogelsang

Appendices

A Case Study –Waitrose

November 2020

Retail Inventory Services

Appendix 1

When it comes to managing their most valuableassets, Waitrose start with knowing what andwhere their inventory is.

Determining the quantity of items that they haveon hand within their stores and their price pointsis an essential part of running an efficientoperation. With WIS International’s help, theinventory counting process is completedaccurately, on time and efficiently.

Who are Waitrose?

A supermarket, a specialist food shop, an ethicalbuyer, an environmentally sound business? Thereare a lot of ways to describe Waitrose & Partners.Yes, they are passionate about food – and aboutthe people that they sell it to – but they are nevercomplacent. With 384 stores they can’t afford tobe. Grocery retailing is fiercely competitive; onethat challenges constantly to find new ways ofmaximising every opportunity.

Recent History

WIS International and Waitrose have workedclosely together since the start of 2015. Followinga rigorous testing and tender process, WIS wereawarded 50% of the Waitrose stock takingprogramme.

By the end of 2015 the other vendor involved hadbeen deselected and WIS awarded with 100% ofthe count portfolio for a three-year period. Duringthis time a close partnership developed and usingdedicated count teams, building on experiencetime after time, service, accuracy and timelinesskept on improving.

In 2018 another rigorous tender processcommenced, even more demanding than in 2015with a greater emphasis than ever on count andcounter assurance. WIS were again successful,retaining 100% of the count portfolio for anotherthree years.

In 2019 and beyond count standards have

continued to improve, with the addition of extracount teams to support the heightened countfrequency. More and more import is being placedon the counts to drive on shelf availability and ofcourse sales. Waitrose reported revenues of £6.4billion in 2019, and with between 2% and 6% salesincrease potentially driven by consistent worldclass count cycles, WIS have played an integralpart in developingWaitrose into market leaders ofInventory Control.

Benefits for Waitrose

Accuracy – Waitrose benefit from our attention todetail, audit trail and customised process. OurWISard™ data collection terminal has built-inalerts to assist WIS International auditors inproviding accurate results and helps to eliminatecommon count errors.

Trained Workforce – Trained, direct employeesprovide the inventory expertise facilitating asmooth and accurate count. The use of R.F.technology provides real time insight into aninventory’s progress.

Project Management Expertise – SuccessfulPhysical Inventory takes planning to succeed.With sixty years of project management expertisewe take care of all the details to ensure flawlessexecution of the inventory

Technology – Technology is an importantcomponent of an accurate stock count. WISInternational provide to Waitrose the latestbespoke developed equipment and software toensure the utmost data integrity.

Count Assurance – Utilising the latest tools andthe vast array of data available to interrogate, datadashboards have been developed that enableWaitrose to view in real time not just the progressof the count, but also after the event in depthanalysis of key performances buy store, countmanager, counter, sku and category. Absolutecount assurance is guaranteed, total transparency.

Retail Inventory ServicesA Case Study – Waitrose

Retail Inventory Services A Case Study - Waitrose WIS International

The Service

WIS International provide full-service inventorycounts in all 384 stores multiple times a year.

The frequency of counting is determined by thecount results of each store as they are generated,timings between counts lengthened or shortenedas required to ensure best on shelf availability andcomprehensive management information thatmeans any local issues are understood promptly.

A full-service inventory count really does meanfull service.

From the initial consultancy, understandingneeds, developing software, rigorous testing,thorough training, calm and efficient scheduling,continuous improvement, and detailed reportingand analysis.

At each count WIS International arrive incompany mini buses as a team in full uniform.

WIS International provide all necessaryequipment to complete the count, all that is askedfor is a table and a plug socket!

The store is included throughout, first in the teambrief and then continuously during the count.With the latest tablet technology, storemanagement can observe and understand how

the count is progressing whenever they wish.The warehouse is counted before store closing andhanded back promptly to the store forreplenishment. The sales floor starts beforeclosing, once the warehouse is complete and iscompleted within a pre-defined run time.

Throughout the count, store staff can audit thecounters using wifi and tablet technology, thedays of paper audits are long gone, very green….

Using the latest on hand stock files, variancereporting on the night is carried out, another layerof checking to ensure the most accurate countpossible.

Finally, the count is complete, the result agreed, asurvey completed, and the files transmittedpromptly to Waitrose for processing.

The morning after WIS field management revieweach count for its performance against keyperformance indicators.

The data dashboard is updated automatically andshared both within WIS and Waitrose.

Working together to improve, through data,understanding, knowledge, customer service,performance and results.

One click at a time.

Retail Inventory Services A Case Study - Waitrose WIS International

What people are saying

“Very efficient, informative and very positive. Great morale and great team spirit”

“Went very well. xxxx and his teamwere very professional a pleasure to workwith. The audit wasone of the smoothest I have done”

“The stock take was very professional, very efficient andwell timed and very well managed. Goodteam to have in.”

“Great manager and team very flexible to our requests and excellent communication. Thank you,we would very much welcome xxxx and his team back here again.”

“I am proud of the work we dowithWaitrose, it has been fantastic journey, I believe we have bothlearned much about how to deliver a world class count programme. The latest developments wehave put in place to deliver count and counter assurance takes us both to another level ofunderstanding.Geoff Chaplin, Managing Director, WIS International

Retail Inventory Services A Case Study - Waitrose WIS International

“As you would expect Waitrose is a very demanding customer, always seeking world class servicedelivery. Everything we do is focused on delivering the best experience for our customers, makingsure that their expectations of stock availability are exceeded at every visit, and when we are instore counting stock the customer does not notice…. Our relationship with WIS International isvery much a partnership, already four years in and a commitment in place for another three years.”Keith Rosser, Partner & Manager, Contract and Service Development, John Lewis Partnership

WIS InternationalWIS International has been delivering accurate results to many of the biggest names in retailingand manufacturing for more than sixty years. With more than 200,000 physical inventory countstaken every year, WIS International has become one of the industry’s largest and most trustedsuppliers of Inventory Counting Services worldwide.

In addition, WIS International also provides merchandising services such as new productplacement, point-of-sale display services, fixture installations and product recall return services.

01904 795550ssimmonds@wisintl.comwww.countonwis.com

Data Integrity –The Physical Inventory

Issue of Today...and Tomorrow

by

Stanley B. Vogelsang

February 8 2001

Appendix 2

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he physical inventory of merchandise in the store is each retailer’s primary asset. How that

asset is managed will likely determine the success of the retailer. This has always been the case. However, the explosion of technology in retailing has amplified both the benefits of physical inventory asset management and the down-side of inaccurate inventory information.

Historically, inventory information was developed at each store for financial reporting purposes, and was not kept at the unit or line item level of detail. Now many retailers are controlling their physical inventory by SKU or UPC item number. The SKU masterfile maintains a quantity on-hand for every item. This quantity on-hand controls and initiates the programs for automatic replenishment and much of the store’s merchandising activity.

Inventory integrity is the accuracy of each item’s quantity on-hand in the store masterfile. This quantity on-hand is initially determined by a physical count of the entire store at the SKU or UPC level. It is maintained between inventories by adding goods as they are received, subtracting items as they are sold and properly identifying and recording returns, markdowns and damaged goods. Periodically, another physical inventory count is performed to update the on-hand file for each item.

The masterfile quantity on-hand for each item drives the automatic replenishment process at the store. The benefits of programs such as Automatic Replenishment, Just-In-Time Replenishment and Quick Response are well known and include:

1. Reduced inventory in the store.

2. Improved cash flow - not spent on excess inventory.

3. Reduced store labor - not handling excess inventory.

4. Reduced store labor - price ticket removal.

5. Correct item pricing - price look-up.

6. Reduced/eliminated out-of-stock of items.

7. Improved in-stock of merchandise.

8. More competitive pricing.

9. Improved customer satisfaction - items are available.

10. Increase sales to the customer

Tomorrow’s successful retailers will demand these benefits.

If the retailer’s masterfile quantity on-hand data is accurately maintained, the benefits are assured. If the quantity on-hand is not accurate, the system will automatically order more of items already instock and not order enough of items in short supply. The result is fewer benefits, and in fact worse merchandise and sales conditions than originally existed.

Because of this heightened importance of creating and maintaining this on-hand masterfile, many retailers are forming partnerships with manufacturers and third-party inventory services to increase the accuracy of the physical count, and to improve the maintenance of the on-hand file between inventories.

These partnerships are also including representatives from many functional departments within the retailer’s organization such as store operations, internal audit, loss prevention, and inventory accounting. These partnering teams investigate the factors that impact on- hand data integrity and develop

procedures, programs and actions to assure the benefits noted above are achieved.

These partnering teams are looking at ways to impact the main causes of inventory data mistakes which include:

1. Selling errors - two different but similar looking items are being sold by twice scanning the barcode of only one item. This selling error causes the on-hands to be understated for the item scanned and overstated for the item not scanned.

2. Receiving errors - items that appear similar when they arrive at the store are grouped to a single SKU or UPC and cause an under-statement and overstatement in the on-hand file.

3. Merchandise stocking and shelf alignment errors - each item has a “home” location on the shelf, peg or display. A shelf label identifies the location and provides a descrip-tion to help stock and align the items on the shelf. When items are misaligned or mixed together, there exists an increased chance of inventory counting error for the item.

4. Masterfile data base errors - the masterfile may not contain all of the SKU or UPC numbers for merchandise located in the store. When selling, receiving or counting items not found in the masterfile, the use of a generic SKU number to speed the flow will result in an on-hand error.

5. Physical inventory counting errors - the inventory counter groups two similar looking items and combines them to a single SKU or UPC. This usually happens because of misalignment and/or mixed product on the shelf peg or display.

These partnering teams are also looking at ways to eliminate these inventory related errors. The selling and receiving mistakes are eliminated by educating store associates on how their actions impact the accuracy of the on-hand file. This education and awareness

T

./01/2345#67/78191/2#Data Integrity - The Physical Inventory Issue of Today…and Tomorrow If the retailer’s masterfile quantity on-hand data is accurately maintained, the benefits are assured.

will enhance the discipline of store personnel to maintain an accurate on-hand system, every day of the year.

The merchandise stocking and shelf alignment errors are being addressed by creating shelf labels that include a better description of the item so it is easier to identify where the item should be stocked. These shelf labels may include the item’s style number or other identifier.

An even greater opportunity to impact the alignment problem exists by partnering with the manufacturers to package their product with bright color differences for different items. When items are differentiated by bright colors, it is easy for stocking associates to see the item that is misaligned and stock it to its home location.

Store personnel who are doing pre-inventory straightening can easily see the items which are out-of-place and can properly align the same goods on each shelf peg or display. Retailers are working with manufacturers to color differentiate their products to aid in proper stock alignment and in identifying similar but different items at the check out. This partnership between the retailer and manufacturers will enhance the on-hand data integrity and assist the third-party service doing the physical inventory count in the correct separation of multiple items.

The remaining causes of inventory data errors of the on-hand file are related to the periodic physical inventory or count of merchandise in the store. The primary way to correct the on-hand masterfile is to perform a wall to wall physical inventory and count each item by its SKU or UPC number. Many retailers have developed partnerships with outside inventory counting services to perform their physical counts. These services provide a third-party independence that is especially beneficial for chains that cover a wide geographic area. It is possible for store employees to manipulate inventory results; the outside service is motivated to count only the merchandise that is actually in the store.

Recent surveys of retailers have found that 70+% of chain retailers in the United States utilize an outside counting service for all or part of their physical inventory program. Our experience is that more retailers are converting to using an outside service, especially as the demand for SKU or UPC level inventories has increased. The independent inventory counting services have developed special purpose handheld data terminals and in-store PC’s that run unique software. These inventory-specific counting and exception reporting systems are designed to help the inventory counter do a more accurate job, and to identify missing and incorrect data in the store masterfile.

The service can afford to make the capital investment in these systems as their associates utilize it for many different retailers throughout the year. This full utilization of the equipment also translates into a more accurate physical count since the third-party service associates are highly trained and experienced. Counting inventory is their retail job.

In summary, the benefits of an accurate automatic replenishment system are significant now and will likely become even more important to all successful retailers in the future. The key to achieving the benefits of reduced inventory, better in-stock position, reduced costs, and increased sales is a store masterfile that maintains an accurate quantity on-hand for every item. The accuracy and integrity of this on-hand quantity is impacted by the training, awareness and discipline of store associates; by the packaging, color coding and marking of product by the manufacturers; and by the counting accuracy of the associates and third-party professional inventory service that performs a periodic physical SKU/UPC inventory. The accomplishment of this task lends itself to a partnering team effort between the functional departments within the retailer, the manufacturers who package and bar code the product, and the independent inventory counting service that maintains the people, equipment and software to enhance the counting process. This TEAM, working together, will assure data integrity.

Stanley B. Vogelsang is Vice President for Strategic Global Accounts at WIS International. He has over 35 years experience in providing inventory counting service to retailers. His email address is svogelsang@wisintl.com