On-Shelf Availability in Retailing

Abstract

Ensuring high On-Shelf Availability (OSA) is essential for retailers today. It is a measure of retailer performance. Out-of Stock is a major problem in retailing, as it leads to lost sales and decreased consumer loyalty. The term "Out-of-Stock" is used to describe a situation where a consumer does not find the product on the shelf, at the time he/she wishes to purchase it. The root causes leading to OOS include inventory inaccuracy, unexpected high demand, restock frequency and poor shelf monitoring. Yet, the possibilities for detecting and measuring an out-of shelf situation are limited, mainly involving visual shelf audits. Hence, the existence of an automatic method for detecting the products that are not on the shelf, would be valuable, offering an accurate view of the shelf availability to the store manager. The proposed solution, is a real-time application connected to a camera device that monitors the on- shelf availability of products and sends alerts to the store manager when products go out of shelf or are misplaced. The proposed solution, compared to the existing solutions, is cost effective, easy to implement and easy to use.

Full text

International Journal of Computer Applications (0975 – 8887)
Volume 116 – No. 23, April 2015
47
On-Shelf Availability in Retailing
Rahul Moorthy
Student
Mukesh Patel School of
Technology Management and
Engineering, NMIMS University
Swikriti Behera
Student
Mukesh Patel School of
Technology Management and
Engineering, NMIMS University
SauravVerma
Assistant Professor – IT
DeptMukesh Patel School of
Technology Management and
Engineering, NMIMS University
ABSTRACT
Ensuring high On-Shelf Availability (OSA) is essential for
retailers today. It is a measure of retailer performance. Out-of
Stock is a major problem in retailing, as it leads to lost sales
and decreased consumer loyalty. The term „Out-of-Stock‟ is
used to describe a situation where a consumer does not find
the product on the shelf, at the time he/she wishes to purchase
it. The root causes leading to OOS include inventory
inaccuracy, unexpected high demand, restock frequency and
poor shelf monitoring.
Yet, the possibilities for detecting and measuring an out-of
shelf situation are limited, mainly involving visual shelf
audits. Hence, the existence of an automatic method for
detecting the products that are not on the shelf, would be
valuable, offering an accurate view of the shelf availability to
the store manager. The proposed solution, is a real-time
application connected to a camera device that monitors the on-
shelf availability of products and sends alerts to the store
manager when products go out of shelf or are misplaced. The
proposed solution, compared to the existing solutions, is cost
effective, easy to implement and easy to use.
Keywords
OSA (On shelf Availability), OOS (Out of Stock), Retail,
RFID (Radio Frequency Identification).
1. INTRODUCTION
On-Shelf Availability (OSA) is the measure of the amount of
products available in saleable condition to a customer, at the
place he expects and at the time he wants to buy the product.
On average, retailers spend 5% of sales on logistics. The
largest part of these costs are caused on the store level by
inventory handling (38%) and holding (7%) [1]. Thus,
improving in-store inventory management is essential to
retailer profitability. Maintaining OSA or reducing Out-of-
Stock (OOS) help in improving in-store inventory
management and are hence indicators of retailer performance.
Out-of-stocks (OOS), a counterpart to OSA, occur when a
consumer at a retail outlet arrives at the shelf and the specific
product they are seeking is not available [2].
There are several reasons for OOS. The number of retail items
continues to proliferate (25,000 in 2001 versus 35,000 in 2003
for an average grocery store, according to the Food Marketing
Institute website (www.fmi.org), which automatically reduces
the storage capacity per item on shelves or in storerooms. This
reduction has coincided with a decrease in storeroom areas by
many retailers that want to gain additional selling space, as
well as with the adoption of just-in-time procedures to reduce
retailer inventory costs [3]. Another major cause for shelf
OOS is phantom inventory. Phantom inventory occurs when
the inventory management system shows that a particular
product is available even when that product is not actually
present. This can be caused if a product is damaged or stolen
from the shelf, if the product is recalled or if the product is still
in the customer‟s cart. Figure 1 outlines the root causes of
OOS.
When a product is not found on the shelf, there are two
possibilities, either the product is still in the customer‟s cart
and not sold yet or the product is not in the customer‟s cart,
but sold out. When the product is in customer‟s cart, the
reasons for OOS include, delay in shelf replenishment,
misplaced product or product removed from shelf due to
damage, theft, recall etc. [4]. When the product is not in the
customer‟s cart i.e. the product is sold out, the reasons for
OOS include:
1. Product not ordered by the store due to inventory
inaccuracies. For example, stock is incorrectly
assumed to exist [4].
2. Inadequate stock ordered due to incorrect
estimations of volume or incorrect stock ordered.
3. Delay in delivery of the product ordered by supplier
due to insufficient stock.
25% of the OOS conditions are shelf-OOS [5]. Shelf-OOS is
the condition when the product is available in the inventory,
but not present in the shelf when the customer was looking for
it.
This situation is particularly frustrating since the order forecast
may have been correct, and the supply and delivery functions
executed appropriately. However, due to execution in the
store, for some reason the product didn‟t make it the final 50
meters so it could land in the shopper‟s cart [5].
When an OOS condition occurs, customer reactions are as
follows [6]:
1. 31% buy the product they need, but elsewhere
(different store or online)
2. 26% buy a different brand
3. 19% still buy the same brand but a different
variant/size/flavour
4. 15% buy the product at a later date
5. 9% buy nothing.

International Journal of Computer Applications (0975 – 8887)
Volume 116, April 2015
48
Billion [7]. If the OOS condition occurs repeatedly, the
customer would be forced to permanently switch to a different
store, considering the wide range of choice available to him
today. When a "loyal" family turns its back on a given store,
the weekly revenue loss comes to around EUR 150. Over a
20year period, that adds up to EUR 150,000 in lost revenues
[7]. Also, 20% of all OOS remain unresolved for 3 days
[6].This adversely impacts retailer performance and
profitability.
For manufacturers, a 3% increase in OSA equals a 1%
increase in sales and for a retailer a 2% increase in OSA
equals a 1% increase in sales [6]. Therefore, retail stores must
ensure high OSA to retain loyal customers. Piling up the
inventory with extra products is not a feasible solution as it
can lead to more losses due to wastages. Also, even if a
product is available in the inventory, there is a possibility it
might not reach the shelf due to inefficient shelf management.
Several methods are being adopted by retailers today to ensure
high OSA of products. One of them is store audits which
involve visual inspection of shelves. The auditor physically
assesses each shelf and replenishes empty ones. But such a
method is labour intensive and does not provide a reliable
assessment of OOS as firstly, the assessment depends upon the
auditor‟s time of visit, which is arbitrary. An item available at
2:00 p.m. may be missing at 5:00 p.m. Secondly, the
observations, because they are by nature instantaneous, cannot
assess the duration of an observed OOS. Whereas some items
missing at 2:00 p.m. may be back on the shelf at 5:00 p.m. the
same day, others will be back only two days later, which
implies a greater level of inconvenience to consumers and
increased sales losses [3]. Thirdly, in countries where labour is
expensive, this method may not be feasible. Lastly, this
method is susceptible to human errors and inaccuracies of
measurement as it involves manual human observations.
Fig 1: Reasons for OOS
9% of the customers who buy nothing, lead to a loss of EUR 4 2.CURRENT SCENARIO

International Journal of Computer Applications (0975 – 8887)
Volume 116, April 2015
49
2.1Mobile Apps
Thanks to the internet-equipped smartphones and the
availability of Wi-Fi connectivity in most retail stores,
customers are increasingly using their smartphones for
checking prices and reviews, while inside a retail outlet.
Research shows that 80% of smartphone owners always or
often have their phones with them while shopping [16].
One-third (33%) of those customers have used their device
to lookup a product on a competitor‟s site while 20% have
researched the store‟s own website.
Though this may seem like a small number, but as
smartphones become increasingly prevalent this number is
likely to increase [16]. Due to the proliferation of
smartphones, retailers can use it as a means to manage
OSA of products. One way is to develop an app for the
retail store, which the customers can use to directly
communicate with the store managers, regarding
unavailability of any product.
If the customer wants to purchase a particular product but
finds the shelf empty, he can use the retail store app to
photograph the current status of the shelf. This image
would then be updated in the database along with an alert
being sent to the store manager. The store manager can thus
make that particular product available at the billing counter
so that the customer need not go back to the shelf to collect
it and at the same time the store manager can replenish that
shelf.
2.1.1QR Codes
QR codes or Quick responsive codes are specialized
version of a 2D barcode which can be used to transfer data.
This QR code could link to a website, send a text message
or simply display a message to the store manager regarding
the current
This would internally alert the store manager via email
which he/she can access using his smartphone.
2.1.2Disadvantages
This method is too customer centric. It requires the customer
to take the efforts to scan the QR code of the shelf from which
the product he is looking for is missing, in order to alert the
store manager. A customer would rather prefer purchasing the
product from a different store or not purchasing the product at
all.
2.2RFID
RFID has been identified as one of the most important
technologies of the 21st century because it allows for real-time
tracking of objects or products within the supply chain [8].
RFID is a unique ID- identification system. This system
consists of three necessary elements. These are tags, readers
and the software necessary to link RFID components to a
larger information processing system [9]. The RFID tags
contain a small chip and antenna attached to them which are
implanted on individual products, thus giving them a unique
identity and making it possible to identify and control them
throughout the distribution chain. These tags store several
information relating to the product on which they are
implanted and are powered by the radio frequency signals
emitted from the RFID readers which are handheld or fixed
devices. The reader sends out electromagnetic waves, and a
magnetic field is formed when the signal from the reader
"couples" with the tag‟s antenna. The unpowered RFID tag
draws its power from this magnetic field, and it is this power
that enables the tag to send back an identifying response to the
query of the RFID reader. When the power to the silicon chip
on the tag meets the minimum voltage threshold required to
“turn it on,” the tag then can respond to the reader through the
same radio frequency (RF) wave. The reader then converts the
Technology too has played an important role in improving the
OSA of a product. Barcodes are being widely used by retailers
all over the world to obtain product and shelf information. The
world‟s largest retailer, Walmart, and dozens of other well
established retailers are making use of RFID (Radio-
Frequency Identification) technology to improve OSA. The
current technological solutions that help to improve OSA shall
be discussed in the further sections.
status of the shelf. A 2011 survey indicated that more that
more than 14 million mobile users had scanned a QR code,
and that nearly 40 percent of them had done so from a retail
store [17].
Use of QR codes requires building mobile application, which
would have an inbuilt QR code reader. The QR codes are
installed on each shelf. If a customer finds the shelf to be
empty he/she can use the mobile application to scan the QR
code and also obtain product details.
Fig 2[16]: Activities of smartphone owners while in store
0%
5%
10%
15%
20%
25%
30%
35%
Compared
competitor's
site
Looked up
product review
Scanned a QR
for info
Researched
store's site
Used
company's app
Sent text for
info
31% 27% 20% 17% 10%
33% 31%

International Journal of Computer Applications (0975 – 8887)
Volume 116, April 2015
50
tag‟s response into digital data, which the reader then sends on
to the information processing system to be used in
management applications [9]. Use of RFID tags help to
improve inventory accuracy, improve OSA and eliminate
OOS.A fixed RFID reader stationed between the back room
and the sales floor can track the movement of merchandise,
and employees can use handheld readers to take daily
inventory of items on store shelves and racks [10].Thus
products on the shelves can be counted and empty shelves can
be immediately replenished. It also prevents potentially faulty
or spoiled products from ending up in the hands of consumers
[11]. The appeal of RFID technology lies in its capability to
allow retailers to know the exact location and quantity of
inventory without conducting time consuming counts [12].
Thus helping retailers to fulfil customer demand by ensuring
that inventory is at the right place at the right time in the right
amount. RFID is a better technology as compared to QR
Codes as it has better durability and stores considerable
amount of information about a product. Also, QR codes need
to be in the line of sight to be read by scanner; but it is not
required in case of RFID [14].
2.2.1Disadvantages
Presently, RFID technology is expensive and the price of
RFID tags has traditionally been a significant obstacle to its
widespread deployment in SCM (Supply Chain
Management) [15]. Also, with an RFID tag, you cannot read
just one tag at a time as you can with a QR code. The reader
will scan all the tags it picks up in range at once. Tagging is
also not simply a matter of attaching RFID tags to items.
One of the major issues with RFID is privacy. There is a
possibility that after a product is purchased, it may continue
to be tracked, thus revealing the customer‟s location and
other information.
2.3 Weighted Sensor Shelves
The system consists of a weight-sensing mat integrated with
an RFIDreaderand a ZigBee transceiver (A device that both
transmits and receives radio waves).
The mats, which are placed on a store's shelves, are designed
to detect changes in the weight of products stacked on top of
them, though that sensitivity can be adjusted according to the
type of product.
The mat's sensors can not only measure the amount of weight
on top of it, thereby enabling the back-end software to
calculate the quantity of products, but also detect where the
products are located on the mat, based on the level of
pressure exerted on those sensors.
If the shelf needs to be restocked, the system could detect that
status and send a text message or e-mail to a staff member‟s
smartphone to take a corrective action.
2.3.1Disadvantages
The following are the disadvantages of using Weight sensor
shelves:
• High cost of installation of weight sensors on shelves.
• If the product is too light, weight sensor may not sense it
at all.
• Weight sensor shelves can only determine if a particular
shelf is empty or the count of products on a shelf. But
they cannot determine whether a product has been
misplaced.
3. PROPOSED SOLUTION
The solution proposed involves real time monitoring of the
shelves which includes a video streaming/ camera device and
an image processing tool. The front end product images e.g.
Kellogg‟s cereals are captured and stored as reference images.
The products are then arranged on a shelf. Images from the
video stream can be analysed using an image processing tool
and number of facings are detected and counted. Once a
product is removed, the application identifies the same and
states it as no longer available. If no product is detected on the
shelf, an alert is sent to the store manager to replenish the
shelf.
This technique also solves the problem about a product being
misplaced to another shelf. The stored product images and the
captured shelf image are then matched, to determine the
presence of a product on the shelf. If it‟s not detected, then an
alert is generated and is sent to the designated person or store
manager. The aim of the application lies on processing the
captured image using an image processing tool.
3.1.1 Advantages
As stated earlier, the commonly available solutions are use of
smartphones, use of QR codes and deploying weight sensor
shelves. There are significant drawbacks such as in case of
smartphones and scanning of QR codes, the customer has to
photograph the current status of the shelf or scan the QR code
using the retailer‟s mobile application. This would send an
alert to the store manager.
This kind of a solution is too way customer centric, i.e. most
of the work is done by the customer. If the customer is not too
brand obsessed, he/she could just pick up the same product of
a different brand without waiting for the shelf to be
replenished. In case of the weight sensor shelf, it cannot
determine misplaced products i.e. products deliberately kept
on other shelves, as it just sends alerts based on the current
weight of the shelf. Also the sensors use RFID tags which are
expensive to install and maintain. Hence the proposed solution
automates the monitoring of the shelves in a cost effective
manner. It aims at, both, detecting sold products as well as
detecting misplaced products.
4. CONCLUSION
This proposed solution aims at solving OOS condition in
retailing as it is a key performance indicator and a measure of
customer loyalty and satisfaction. It involves real-time shelf
monitoring. The existing solutions for shelf-monitoring are
either expensive or labour intensive. The basic idea of the
proposed solution is to overcome the need for labour in a cost
effective manner.
The basic idea of the proposed solution is to overcome the
need for labour in a cost- effective manner. The system can
be installed at minimal costs, allowing the store manager to
keep a check on every shelf in real-time. An email notifying
the store manager about misplaced or missing products makes
the task of maintaining on-shelf availability easier for him.

International Journal of Computer Applications (0975 – 8887)
Volume 116, April 2015
51
Future scope involves using an image processing tool that
could help to develop an algorithm which can detect as well as
count the total number of products on the shelf. It should be
able to identify misplaced and missing products, as well as
void spaces on the shelf
5. REFERENCES
[1] Joachim C.F. Ehrenthal, ”A Service-Dominant Logic
View of Retail On-Shelf Availability,” Ph.D. dissertation,
University of St.Gallen, St.Gallen, Switzerland, 2012.
[2] Kristie Jean Spielmaker, “On-Shelf Availability in
Retailing: A Literature Review and Conceptual Model,”
Honours thesis, University of Arkansas, Fayettevilee,
Arkansas, 2012.
[3] Anne-Sophie B., Gilles L. and Sandrine M., Assessing the
Frequency and Causes of Out-of-Stock Events Through
Store Scanner Data, Cahier de recherche du Groupe
HEC, 2006.
[4] Shelf Availability Standards, Terms and
DefinitionsHandbook , ECR Asia Pacific, 2013.
[5] Thomas G. and Daniel C. “A Comprehensive Guide To
Retail Out-of-Stock Reduction In the Fast-Moving
Consumer Goods Industry”, USA, 2008.
[6] Andrew Mitchell. “Improving On-Shelf Availability”,
[White paper] SymphonyIRIGroup, 2012.
[7] Gerhard H. “Approaches to measuring on-shelf
availability at the point of sale”, [White paper] Roland
Berger Strategy Consultants and ECR Europe, 2006.
[8] C. C. Chao, J. M. Yang and W. Y. Jen, Determining
Technology Trends and Forecasts of RFID by Historical
Review and Bibliometric Analysis from 1991 to 2005,
Technovation, Vol. 27, No. 5, 2007, pp. 268-279.
[9] David C. Wyld “24-KARAT PROTECTION: RFID and
RETAIL JEWELRY MARKETING”, International
Journal of UbiComp (IJU), Vol 1, Num 1, January 2010.
[10] Jennifer Zaino “A Guide to RFID Apparel Retail
Solutions”, RFID Journal, 2011.
[11] Richard H. and Patricia D., Understanding RFID
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[12] Michael A. Jones, David C. Wyld and Jeff W. Totten,
“THE ADOPTION OF RFID TECHNOLOGY IN THE
RETAIL SUPPLY CHAIN”, The Coastal Business
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[13] Susan A. Vowels “A STRATEGIC CASE FOR RFID:
AN EXAMINATION OF WAL-MART AND ITS
SUPPLY CHAIN”, Proceedings of the Southern
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[14] Trupti L., Rohan K., Anand P. and Akshay M.,
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[15] Michael, K, &McCathie, L, “The pros and cons of RFID
in supply chain management, Proceedings of the
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July 2005, 623629.Copyright IEEE 2005.
[16] Mobile Consumer Report: Understanding the
Showrooming Shopper, Vibes Mobile Consumer Survey
August 2012
[17] “Apparel Labeling: The Evolution of a Revolution”,
[White paper] Checkpoint
Fig 3: Flowchart of Proposed System
IJCATM : www.ijcaonline.org