Webinar: Improve inventory performance to drive revenue in retail

all right i think we are ready to get going thank you everyone who has joined and um i hope you will you will enjoy today's webinar uh the topic is uh how to improve the inventory performance to drive uh revenue in retail you know amid the pandemic and emit the inflation 2021 has been a pretty good year for uh retail uh it at least the u.s has showed a staggering 14 growth uh which hasn't happened for the past 20 years and a lot of retailers were able to to see that growth that they were targeting 2022 however according to nrf is predicted to have a somewhat smaller uh growth rate at approximately six percent uh but with a higher level of inflation so given that the uh cost price for the

products is going to be higher the sales prices are going to increase as well and consumers will uh understand that so there's going to be that natural natural growth due to inflation but uh what we are going to address today is how to uh how to make the processes uh more efficient to increase the margin and to drive more revenue without the additional investment in the in the stock how to optimize with the existing uh resources so we are going to start with just a brief introduction of who we are and why we are speaking on the matter and if you may uh uh switch to the next slide uh we are leafio and we are passionately working to create the next generation digital supply chain

the reason why we do it is is simply because we are very passionate about doing our work well we are a software company originally but we are very passionate about retail supply chain and everything that we do is dedicated to optimizing and automating processes making retail and customer experience uh better uh next slide please the way we do that uh the way we're able to deliver that optimization is through a series of uh of categories of the or stages in the retail supply chain uh the first one is inventory optimization we are going to speak on this topic today and the we are going to show exactly how those changes can be delivered with the software we are going to go through our software demo um the next uh

the next uh stage of optimization is done in the store uh in particular through through efficient planograms through uh macro and microspace optimization and the next level in our perspective is the trade promotion management optimization given that the trade promotion level is continuously increasing and we see a steady growth in various verticals of retail uh and uh it's it's it's a steady growth that varies at least for several percent every year and at some verticals uh specifically health and beauty it may reach up to fifty percent of products in trade promotion so that's a vast uh pressure uh operational pressure for retailers to deal with and we help retailers manage that in an efficient way through our through our ai capabilities

um next slide please all right so um our experience uh comes predominantly uh from from none um non-apparel uh uh type of retail so we work virtually in any retail vertical uh that has continuous assortment uh our core expertise lies within the supermarket grocery and health and beauty space but however we do work with with electronics and gadgets retailers convenience stores oil and gas retailers diy retail and we have a lot of uh a lot of experience uh that we've gained over the past 11 years uh that we are ready to share uh in today's uh webinar and we can go on to the next slide

uh so over over that time uh we were able to implement over 160 projects in over 16 countries uh with a team of uh almost 200 people at the moment with uh presence in in the united states we have a vast presence in europe uh and those are those are two primary regions that we are present in but we're always interested to interested to work with companies throughout the world next slide please and uh uh your hosts today uh are myself i'm vlad uh lauda and i'm responsible for the international growth of lithia and uh my colleague anna who is going to be delivering the amazing uh live demonstration anna anna airman hello anna uh good to have you today

uh thank you thank you very much for joining and uh anna is responsible for the business development efforts in the emea region so she has a lot of great experience she's ready to share and i think we are ready to uh to get to the demo okay great thank you vladimir for the introduction uh so today we are going to talk about uh one of our solutions and actually uh one of the very and i would say key processes in the retail it's inventory optimization uh regarding the solution and regarding like general processes what's important in terms of their inventory optimization management uh first of all uh it's important to calculate the target stock balances for each square hsq location and based on this information to make a decision about the order to calculate the quantity for the order and to send this order to their uh to the supplier

uh secondly it's important to manage promo campaigns to uh monitor the supplies reliability uh to uh make some product range optimization and other other different features and of course uh the key to the success lies in analysis in analysis of the bottlenecks in the analysis of the kiki price for the retail chains and we pay a lot of attention to this analysis and that's why we have a very intense analytics block in our system uh but before we go to the system itself first of all it's very important to talk about what is the business value for from using this kind of the solution and what the business value should be because it's very important to when you are looking for a vendor for managing for automating these processes to choose the vendor who will be focusing on getting the real uh results and economic

effects from implementing the solution and not just providing the solution itself but building the right business processes of inventory management uh so what's your uh yeah can i clarify just one moment here so uh uh i apologize i completely forgot to let our attendees know that uh you can ask questions anytime uh during this webinar uh please write your uh your your your questions to the questions uh tab uh we will be answering those questions throughout the course of today's webinar and now ana is is starting to talk about the business value that that companies retail companies see uh by implementing uh tools of this kind but um anna can you share your experience what what what uh what pain points are actually um making retail companies think about uh about implementing tools like this about looking at inventory optimization where they're where where this

initiative is coming from yeah sure it's very good question uh regarding the pain points and uh what uh what is the driver actually for the retailers to uh to attract some vendor for automating this process uh so uh one of the most like frequent drivers is that retailers have a lot of people who are involved into the process of managing this ordering or replenishment process uh sometimes some companies they do it manually some companies have this process centralized some decentralized but still there are a lot of companies where a lot of people involved into this process and it's very hard to control all of these people to have the transparency on the process and uh company and uh in this case there is no way how to improve that and how to control that uh the second one is uh the second driver is when uh retail

companies they they are looking for scaling and they are like considering scaling and uh before scaling they understand that they should build the right business process of the inventory management and because without that they won't be able to scale effectively and uh they won't have enough budget for that because automation of the business processes uh it releases the capital for the future of future scaling and future development that's a great point that's a great point yeah yeah and that's actually one of the main drivers for our clients and the third one is uh i'm like talking just about the most popular drivers so the third driver is when the company is not satisfied with the current kpis in terms of the inventory management such as uh heaven they have always over stocks and a lot of money uh like invested in the over stocks they had out of stocks and in the result lost

sales so they cannot uh like uh guarantee the customers loyalty uh they have very bad inventory turnover uh and all of that it influences the uh their like business of the retail chain in general okay so overall basically basically uh uh if if i if i understood you correctly uh so so retail companies that are seeking to increase their supply chain maturity level uh are are basically in the search of uh such tool and anything um any company that is interested in in having more free capital uh for growth uh and better financial performance is is uh actually on the right way to implement a tool like this correct yes yes exactly exactly all right uh yeah so if we are continuing talking about what are the effects of

their like automating this process so first of all it's getting more sales because uh we improve the availability of the goods uh we eliminate lost sales and as a result of course we get more sales uh on average one our customer uh it this kpi rises up to eight percent uh the second but uh also very important point is uh decreasing the level of the overstock and that's what uh vlad was talking about and decreasing the uh amount of uh money that i is invested in the overstock in the stock balance actually but also in overstocks because uh we can eliminate that and we can decrease that uh it's a faster turnover a good turnover because the goods are sold fast and we don't have like big stock balances in our warehouse and because of the automation of course it's uh elimination of their uh labor and labor

costs um we think that it's important to uh automate as many routine routine processes as possible and all the routine jobs should be done by the system uh but the by people who are involved into their replenishment process into the ordering process they should focus on some smart tasks they should focus on solving uh their bo on like looking for the bottlenecks on finding how to solve these bottlenecks and uh how to solve some issues in in the process of inventory management uh okay uh let's uh go to the next uh and uh additionally uh the like one of the effects of implementing such kind of the solution and automating the inventory management process is of course a waste reduction and improving their uh availability level uh because of the system uh the automated system it

works uh without mistakes usually it eliminates the human factor and it allows to achieve this high service level for the retailers which is very important and it influences the customer loyalty and of course yeah yeah so uh you know you're talking about great numbers here uh and if we put this in perspective let's say um [Music] give it given that there are so many projects that have been implemented uh can you briefly describe um uh what what kind of retail company size wise i mean number of locations uh uh possibly annual revenue is is is is is good for this type of solution because there is you know uh what i'm trying to do is i'm trying to give a perspective to our attendees to understand who this solution is good for because there are there are saps of the world

that are you know great solutions they're they're really complex in implementation takes years to to deliver that implementation uh and then uh there are there are some simple simple tools uh so so this can can you describe who this tool is for and uh because these are great numbers that you're talking about here actually we work with different clients uh both in terms of the vertical and both in terms of their company size um we have some customers where the um wasn't like 500 stores 600 stores and those are supermarkets and those big companies they are seeking for also for improving the business process and of and on the other side we have also some mid-size retailers starting from like 50 stores that are like 40 50 stores that are also looking for this

kind of services so we uh we are working with different companies and we understand that uh their uh requirements uh like and the necessity for such kind of solution it's it can be in companies of different sizes in small companies and mid-size companies and in big companies as well okay thank you so one important thing yeah the project uh the projects itself they are different so we use the like the same tool but the project itself they are it's different for different size of the retailers uh but yeah we used to work with different customers uh wonderful so uh you know just to put this more in perspective if we take for example just uh a a a medium-sized retail company well this depends of course on the region for europe this would be like a small to mid size for uh for the us this would probably be a be a small retail chain um around 100 locations half a billion in

revenue uh and if we if we uh just put this you know into perspective so uh four to five percent growth that that's a huge huge number on these uh uh on this on this scale so how hard it is for a company of that size to implement a tool like this how much time does it take uh how much effort from from the from the retail uh uh side would would be required just a few words on this because this is this is this is a question that is often um of interest for our customers yeah that's a very good question and uh of course it's a project there is no like silver bullet for that and that it can be just like the company can buy the solution and everything will happen quickly and they will get the effect it's a hard work to be done both on the side of the retailer and our side of course and we do everything possible from our side to get this effect and to

get the uh best possible kpis but it's always hard work of the both parties and we are partners in that process not like not just the vendor we are partnering with our customers and we are working together on that uh they are one of the advantages of our solution because it's a lightweight solution is that it can be implemented in a rather short time uh for the implementation can be the under implementation i mean the implementation itself with the european system their uh pilot and the scale and this is the whole process of the implementation so this process usually takes from four months and up to six eight months depending on the company size depending on their uh like a complexity of business processes on the team on the customer side and so it depends on different parameters but on average it takes from four to

like eight months wonderful wonderful and before we get into the nits and grits of the tool uh can you can you talk uh just a few words about the setup is this a cloud tool how does this work and or is this a part of an erp just just give a give a brief description yeah i think that we actually will go to the uh to the window with the solution itself and uh yes it is a cloud-based solution uh so the everything that is needed for the solution is to be connected to the erp system uh sorry to the internet and the solution is connected to the europa system with the help of data exchange so we receive the data on the regular basis and based on this data from the european system the solution makes uh the orders and automates the replenishment process uh so now let's have a look at the solution itself i think that it's one of

the most interesting parts of our webinar because uh like we have a lot of interest in the demo itself and so let's start with the demo uh so there uh important thing to mention regarding the lifo inventory optimization is that this solution is very convenient and is very handy for people who are actually working in the solution and we consider that it's very important because if the solution will be a very complex one if it will be a hard one if it will require a very tough education uh people will just uh like uh switch back to their like either excel files or back to their old way of doing their management process and they want like uh they won't be using the solution so we think that it should be nice it should be convenient and it should be handy and we created it exactly in this way uh so

uh their dashboard consists of three main so the first part is the daily task for the manager so that people who are working in the replenishment process they can clearly see uh what scope of work they have for today and they just go step by step for the like task by task and uh they should complete the task till some exact time uh usually we have a timer here but uh you but it uh it works like till the sum time it is customized also regarding their retail requirements so and the second part of the interface is the stock structure and here we highlighted the most important from our point of view uh sku group so it's the uh top sku's that generate 80 of their uh revenue it's new products that were recently added to the

assortment and of course it's promo products uh that are under some promo campaign because we think that uh actually we know from our customers that promo now is a pain point for a lot of retail companies and it's very important to keep like keep attention on the promo campaigns and the third part of the interface is kpis for the manager so that they can track their own performance in terms of their managing the inventory process uh for the over stocks loss sales and in and goods turnover uh what we can do for example in terms of the stock structure and in terms of the top goods we can drill down directly from the interface to the top products that have over stocks uh we can see all the sku's here that have over stocks uh we can see the level of over stocks here and we actually the manager will have all information that is needed for him to be

able to work with those over stocks and to solve these issues with the over stocks uh usually during our projects we have over stocks in the beginning and after uh the pro after the solution is used the overstocks are decreasing uh but still overstock happens to every retail company and it's very important to pay attention to that to analyze that and to solve this issue and the other part uh it's their auto stock and we can also drill down to this uh out of stock to be able to see all the skus that have out of stock uh which of the skus are in transit uh and they will be delivered soon which is failures are not ordered and the manager can drill down to that and understand uh like a deep dive and understand why these skus were not ordered and solve these problems of out of stock uh okay now let's get uh

let's see the example of the order uh anna uh i i just wanted to to clarify something if we can go back uh to the dashboard so uh what you're showing is is a is a surprisingly simple user interface uh that you know is not a standard for enterpr enterprise level solutions and uh based on what you've said that it's it's a it's a really simple look that basically drives the attention of the manager to where it needs to be uh basically human intervention where it's needed the most uh the rest is taken care of by the algorithms correct yes exactly so uh there are as mentioned during the presentation but i will emphasize on that that the system works in a way to automate as many processes as possible and people just should be focusing on on some solving the issues so the system

on the background it creates the orders it calculates the target stock balance sends these orders to the suppliers and all this process runs on the background of the system so about the interface yes yes please go ahead yeah but the interface is very simple and so that people have people can be attracted to that and they they would enjoy using the solution and enjoy uh like uh deep dive into into this inventory management processes from the system interface uh looks like there has been a lot of work you know to simplify that complexity and put it in such a clear interface so uh this is this is always a you know very good for user adoption as you've mentioned uh the more people use the tool the better uh just uh one more question is the interface uh the same for any kind of user uh whether it's a it's a it's a

c level at the headquarters and uh if it's uh if it's a manager at the store is it any different or is the same for everyone the interface itself is the same but for example we can choose here different views and each user will see just his information he's responsible for so for example there if you are choosing some certain manager he will see just the product categories or the stores that uh he's responsible for and the top management for example they will see information for the whole retail chain okay okay clear uh okay now let's have a look on how the system uh creates their uh like and gives the visibility on each sku at hsq location uh let's just choose some uh some sku and sku location for example at

warehouse store the second store so we are finding this sku and we are drilled down to this sku and we can see such graph ah so what we can see in this graph that the system uh uh provides the full visibility on this is for you uh from like what was going on with data in like history time and what is going on with it right now uh what we can see here we can see here the target stock level we call it the buffer uh and we can see that the buffer changes a lot here so uh we have in the beginning in the like end of february we have a bigger bar and in the middle of march we have a smaller buffer what does it mean it means that the system really quickly adjusts to the demand changes and that's very important uh point to be made by such replenishment automation tools because the demand changes all the time it is

volatile and it's very important that the system shouldn't keep like the exact trend or for recasted trend but it should really adjust to the real demand and that's how it is realized in our system because uh once the system uh notices that the sales goes down it decreases the target stock level and once it notices that the sales goes up it increases the target stock balance and it does it really quickly so it's very sensitive to the change of the demand uh so anna you're talking about very interesting things here uh the market standard basically for inventory optimization is having a projection a long-term projection to what sales are going to happen and basically replenishing according to that long-term forecast as we know forecasts are uh well with with all of the technology that is available now they are pretty accurate but still not

not that accurate so like every there were the foreign as well yes exactly exactly so how how lithium is different in this regard because what you're showing is is is basically adaptability to the demand can you can you comment on this as well how this tool is different yeah sure uh so uh we also think that uh forecast is important part but it's important and some long-term planning so for understanding that uh what conditions should be discussed with the suppliers to make some plans for the next year but in terms of managing their regular replenishment process it's very important that the system is should be very sensitive to the demand changes and that's what we do because uh if the system will keep the trend according to the some forecast and like with the cavity it will not uh understand that okay there is something

happened and their orders won't be readjusted according to the real demand so it's very important to keep to be focused on their pool uh methodology but not on the push methodology okay okay uh thank you and then so uh what you're showing this is basically a response of the system to the demand changes of the customers and this is basically how the system maintains that optimal balance between the over stocks and out of stocks releasing that capital that is frozen and then making sure that every sale is happening at the same time so uh uh is there uh is there anything else to to how the system operates let's say in different environments because uh at the beginning i've mentioned that uh there is experience with different types of types of verticals can you can you talk a little bit about those different requirements how grocery is different from from uh diy and and and so forth

how the system is is is is suitable for those different types yes every retail is different and every retail vertical has its own specifics uh so there are for example for the grocery stores for the supermarket for actually uh all of the stores that have some food uh it's very important to have a separate like settings or that tool should take into consideration their fresh goods and uh it should take into consideration all their like specificity of the fresh goods such as their short expiration time like the expiration date their crossfit seasonality uh their desired service level because sometimes for fresh category it's important not to go to the over stocks maybe even to go to the right so to the uh out of stock sometimes but not to have overstocks and

to go into rides off and the system should be working with fresh this very sensitive fresh category in a different way than it works with just like regular cpg goods and in our system we have a separate algorithm so we realized that in uh we implemented that in the form of the algorithm and we have a separate fresh algorithm that is applied to such kind of goods uh and on the other hand for example it's a regarding the cpg goods it's very important to work differently in different ways with the goods with regular turnover and some slow movers so to consider different time for analyzing because they are not like stable in sales they have different different like quantity of sales and so on in time so it's very important to uh take all of this consideration and to manage their uh orders taken uh like uh according to all

of these parameters we do that with the help of different algorithms with the help of different settings and uh all of that is done during the implementation process okay okay very nice and then so uh those companies that are interested in rolling out these algorithms are there any requirements in terms of who can do this or basically any retail company can can uh can can start immediately and have these results what i mean by this is what's the requirement on the data that this system is being fed on daily basis is it historic data who can who can work with this yes uh yes actually we can work with uh of course with the historic data and the more data is available on the retail side is the better uh but at the same time it's uh um like we in any case we analyze their quality of

the data during the implementation process and also there is a way to work with new customers for example like the customers who are just opening their retail business uh it's also possible without the history data but of course it will be more efficient if the company has the data and the more data company has is better uh but in any case we solve this uh resolve this during the implementation process okay okay nice uh also what what we have seen over the course of this time the number of companies uh every every retail company is set up in a different way so there are there are those companies that uh even though they are large uh they can still operate with local suppliers and then there are other companies that have the majority of their supplies centralized with a network of local warehouses regional warehouses so

there um there can can be this challenge with having a multi-echelon setup how does the leafy address this uh in terms of you know managing managing the particular skew at a multi-level setup we are support the multi-echelon replenishment and we calculate the orders differently and we support both like the replenishment from their stores they're planning from and from the distribution centers and their hybrid model when the replenishment is done from the disease and from the suppliers so we support all their all their combinations that could be in terms of the supply chain and uh regarding their uh like way how to make this order and how to effectively uh manage this process it's important to aggregate uh if you were talking about

the orders from the distribution center it's important to aggregate the demand from the stores that are supplied from this distribution center and after to take into consideration the seasonality to take into consideration the upcoming promos and all different uh like parameters and based on that to make the orders and to send the orders to the suppliers thank you uh yeah uh so uh let's get uh switch to another important uh module in our system it's their promo module uh so it's their part where all prom campaigns can be managed uh in uh as we mentioned in the beginning of the presentation we have a separate product for the problem management uh that allows to manage promo campaign to make some forecasting so it's the tool that uses uh machine learning and ai uh but uh here in the system it's by default there is some

basic uh problem management but in addition it can be enhanced with their like machine learning and ai promo module uh so uh if we're talking about the promo it's important to uh to se to make some promo campaigns and to make the first correct order before the promissor so to make sure that we are entering the promo campaign with the right uh quantity and with the quantity that will be enough for the first days of the sale so we can increase the or the system will actually increase the order uh before the promo starts and uh when the promo starts there there will be all or there will be like more stock uh on the warehouse and the other important thing in terms of the problem management is how to finish the promise so not uh without having the over a huge overstock level and there are some different and actions that can be applied either to restore the old value to make the good and out

mover to make it make toward and so on uh now let's get to uh one of the most interesting parts of the solution it's the uh it's their analytics module as i mentioned in the beginning we pay a lot of attention to their analytics and so that people should be focusing on making uh their uh on analyzing their kpis in the inventory management so what we can see here we can see a different uh we can see different reports and in our system there are different reports available both for the top management of the company where they can know where they can see the general kpis for the retail chain and how they are changing and the dynamics of course the negative dynamic is highlighted in the analytics module by the red color that positive is highlighted by the green color

and the main kpi such as average stocks average surplus sales and loss sales of the company if you would like to go a little bit deeper into this uh processes we can go into weekly stock dynamics we can choose several weeks and we can analyze those kpis for this uh for example last six weeks additionally we can choose some product group like chocolate bars and can see information just for the chocolate bars or we can choose their brand the group the manager the supplier the warehouse name and other different parameters and view the report from their angle of those parameters and one more general report that is important to have a look at is the report that shows their stock structure and how much money is invested in each part of the stock structure so uh here we see three colors the gray color is

their safety stock or merchandising layout and we can see how much money is invested in that uh we can see the green part it's the actually the part that is needed for sales and we can see the blue part that is the part that uh like the overstock part and that is not means and we should try and attend get reading of this part uh and uh uh if we're talking about more or like uh specific reports for people who are actually working with the uh the replenishment process we can go to the analysis by sku and we can deep dive to their broader category we can see all the sku's that are in this product category and we can see the dynamic for the last five weeks uh for the last five weeks and uh make a decision about this overstocks level to analyze that why this happens and so on also there is interesting report that uh

may show us their uh at the same time their skus that have over stocks and out of stocks but at different locations so for example we can see that black olives they have over stocks at their fourth and fifth warehouse and they have a demand to order at the first warehouse and instead of ordering from the external supplier we can just re redistribute that to the first warehouse if it makes sense logistically of course and of course i will not show like all of their reports i will just show their most interesting ones but because we have like 13 blocks of reports and a couple of reports in each of them uh we have the like-like analysis where we can compare two different time periods for example month and uh we are taking like december and we are taking november for example and we can see uh what is the dynamic uh

what has changed from uh from november and we can see in terms of the average stocks in terms of the sales in terms of the over stocks lost sales turnover and other kpis that are important for us to be tracked in terms of the inventory performance and the last report that i will show it's the report about their supplies and about the supplies reliability let's go to another one choosing some certain supplier and or we can see all information regarding this supplier in terms of their uh skus that are managed by these suppliers their suppliers share the sales of this of the supply the balances and the accurate and timely fulfilled orders and then one important thing that we can see that in dynamics and we can track that in dynamics and with this kind of report we can go to their uh supplier

and negotiate probably on the better conditions uh okay i think that we are done with the demo overview uh let me have anything to add here uh yes i just just uh one clarification you know you've shown these great reports that of course are very important for the uh transparency in the organization alignment understanding where the business is going so a lot of great indicators can you point to maybe one or two that is the key and that any retail company shall pay attention to as a as a cornerstone of their uh inventory performance and financial performance accordingly so two important uh kpis are the over stocks and out of stocks these are the two kpis that should be tracked

by the each retailer because uh they're over stocks they have they there are a lot of money that can be invested in that and those money can be due to their like efficient efficient uh business process and deficient replenishment automation a lot of money can be released for some new business and the other is the lost sales or like actually the auto stocks that lead to a low sales because this influences the customer loyalty because if the customer will come to the store and they will not see their uh you know they will not see their like the product they were looking for uh it will like it will decrease the customer loyalty so i think that these two important kpis in terms of the inventory management processes okay okay well thank you very much for such a detailed overview uh i'm pretty sure that there is a lot more to talk

about but i you know the the main idea of today's uh webinar was to give an understanding to retail companies what type of results can be gained whether tool uh with inventory optimization tools specifically uh leafy or inventory optimization so just to wrap up i want to summarize this type of solution would be valuable to any retail company seeking to improve their in the financial performance both in terms of their sales level uh and uh and margin uh this this type of tool can be implemented uh within uh four to eight months depending on the uh on the size of the company and a great amount of work is done by leafio team to support uh this implementation and to ensure that the uh the results are delivered expected results and and improvements on the uh stock level and on the financial

performance so anyone uh interested in in exploring further these tools feel free to reach out to uh to us you can find our contacts on the website we're happy to talk more about the potential of optimization and we are ready ready to provide uh actually projections uh of what type of results can be achieved uh with a lefio platform thank you very much for your attention thank you for your interest and questions uh we look forward to having you in our further events our next webinar is going to take place next month so we are going to follow up with the uh announcements uh and it is going to be dedicated to the next step of supply chain optimization which is uh space optimization and assortment optimization that which that is done with our two planogram uh planogram optimization

planogram management so we're happy to share more with you uh have a good uh day ahead and thank you very much for your attention thank you have a good day