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“Logistics costs could be reduced within the entire supply chain”

After its foundation in 1997, online supermarket Migros Online quickly became the market leader in Swiss online grocery sales. Due to continued growth and high complexity in inventory and supply chain management, the in-house solution soon could no longer meet the increasing requirements. This prompted Migros Online in 2017 to replace the old solution with a new system: This was to adapt to the company’s growth and changing needs.

Daily changes in assortment and the high frequency of disposition (up to three times a day for fresh produce) require granular inventory management to consistently meet customer demand. Maintaining high availability while keeping spoilage low was also a top priority for the retailer to reduce shopper abandonment rates. This is high in online retail because if shoppers can’t find a product, they quickly discard the cart and order products from another supplier.

Phased rollout
The RELEX platform was rolled out in stages to give Migros Online planners time to familiarize themselves with the system and gradually build trust. The first phase began in April 2017 with Migros Online managing its entire dry goods assortment in the RELEX software. However, as 92 percent of customer orders contain fresh products, these were switched on in the second step.

After the categories were managed live with RELEX in October 2017, ultra-fresh products were added. These represent a special feature in the online retailer’s supply chain, as they are only scheduled after the customer has placed an order. With RELEX, forecasts are updated in the system every 30 minutes and shared with suppliers: This ensures that ultra-fresh demand is met in a timely manner.

Out-of-stocks and spoilage reduced
RELEX software now selects individual forecast models for each product to calculate order suggestions that most closely match actual demand at Migros Online. This improved the online retailer’s forecasting accuracy, especially for campaign products. Promotions also achieve significantly better results because disposition is precisely controlled by separate campaign forecasts.

Thanks to RELEX’s accurate and customized forecasts, Migros Online now optimally utilizes the shelf capacity of its dry goods assortment. This increased efficiency when picking customer orders – a prerequisite for the retailer to manage higher sales.

“As an e-food retailer, technology is at the heart of our business. In the past, we managed inventory management and replenishment with our in-house solution. However, as we grew steadily, we realized we needed an external solution that would give us more functionality to manage our huge product assortment, which ranges from shelf-stable to ultra-fresh items,” explains Beat Marending, Head of Merchandise Procurement at Migros Online.

Spoilage reduction
Prior to the RELEX implementation, Migros Online had noticed that spoilage was skyrocketing on weekends because no customer orders are picked on Sundays. By recalculating safety stock levels daily to more accurately match fresh inventory to changing demand, RELEX has reduced spoilage by an average of 20 percent. In addition, RELEX software empowers Migros Online to retroactively review forecasts for expiring promotions to adjust inventory levels to avoid overstocking.

Efficient crisis management during the pandemic
Migros Online experienced a massive increase in demand at the beginning of the Corona crisis due to hoarding purchases and the general shift to online retail. The company received 28 percent more order items and picked 40 percent more customer orders than in the second quarter of the previous year.

Despite these challenges, Migros Online used the forecasting capabilities of the RELEX system to increase its order growth rate by 35 percent in the second quarter of 2020 and reduce spoilage to 0.4 percent of total sales.

For more information:
https://shop.migros.ch/en/supermarket/home  
www.relexsolutions.de  

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