Retail shelf management forms the part of the supply chain that interfaces between the ultimate customer need and the rest of the supply chain. As such, it is regarded as the part of the supply chain where the consumer demand shows up.
Retail shelf management forms the part of the supply chain that interfaces between the ultimate customer need and the rest of the supply chain. As such, it is regarded as the part of the supply chain where the consumer demand shows up. Matching consumer demand with supply is the core task of retailers and a key lever for increasing efficiency. Consumers demand high product availability at low prices, while retailers are ever expanding their product variety. That is why it is not surprising that retail category management topics are gaining increasing attention – from practice and research – especially as the introduction of consumer goods launches increases year by year. The product proliferation is constrained by the limited store space and requires therefore an efficient decision making by the retailers about which products to offer and how to allocate the scare resource of shelf space. Assortment and shelf space optimization is one of the most important and difficult decisions that retailer managers face, as it needs to reflect consumer behaviour such as substitutions, product recognition, or price sensitivity, as well as inventory, replenishment, and operational costs. Research on category management therefore intersects with research in assortment planning, inventory management, and consumer pricing. Integrating shelf space management with assortment planning and coordinating price optimization with logistics management are the core contributions.
An efficient model needs to reflect merchandise variables that impact consumer demand and logistical components of shelf replenishment of fast-moving consumer goods. Fast-moving consumer goods are products that are sold quickly, replenished regularly and sold at relatively low cost with higher price sensitivity. The category manager’s shelf space decision problem can be characterized as a multi-perspective same-time decision problem, where several questions need to be solved jointly: what to list (assortment planning), how much of the products to put into the shelf (shelf space planning), how often to replenish (inventory planning), and how other marketing effects such as price can impact demand (price planning).
Despite retail managers striving to follow the mantra “retail is detail,” most retail managers have little time to consider the details of different category arrangements. Yet, research and experience has found that the introduction of category management often assists the retailers’ desire for suppliers to add value to their (i.e. the retailer’s) business rather than just the supplier’s own. For example, in a category containing brands A and B, the situation could arise such that every time brand A promoted its products, the sales of brand B would go down by the amount that brand A would increase, resulting in no net gain for the retailer. The introduction of category management imposes the condition that all actions undertaken—such as newpromotions, new products, re-vampedplanogram/ schematics, shopper and consumer insights, and the introduction ofpoint-of-saleadvertisingetc.—be beneficial to the retailer and the shopper in the store. Other reasons of adaptation of CM include the realization that only a finite amount of profit can be exploited from price negotiations and that there is more profit to be made in increasing the total level of sales. Furthermore, collaboration with the suppliers means that supplier’s expertise about the market can be drawn upon, and a considerable amount of workload in developing the category could be delegated to the supplier
You have been hired by Tesco to examine Category Management concepts in relation to current operations and provide coherent analysis and recommendations for retail operational demand and supply chain planning in the future.
You are asked to write a strategic report addressing all the issues / topics below:
- What initial data and research is required to get a comprehensive understanding of the operations involved, how will the team go about analysing the data and what tools could they use to categorise the spend. (20%)
- How should Tesco go about identifying the key stakeholders that need to be engaged with and what communication strategy should they employ to communicate with those stakeholders. (20%)
- What are the main challenges and risks that Tesco will face in endeavouring to implement a category management strategy across the supply chain and what measures could be taken in order to overcome the challenges and mitigate against the risks. (20%)
- Detail how key suppliers might react to implementation of a category management strategy and how should that reaction be addressed in the proposed strategy. (20%)
- Identify the main steps involved in the implementation including the measures necessary to measure its performance. (20%)