KOLO, a convenience store chain operating since 2017, currently boasts over 236 locations. Despite its compact minimarket format, KOLO offers an extensive assortment of over 3,500 SKUs, including staple products such as bread, cheese, sausages, fruits, vegetables, beverages, and more. The chain is now planning an ambitious expansion to 3,500 stores nationwide.
Before implementing LEAFIO Inventory Optimization
At the beginning of the cooperation, the client was using a different system for automatic order generation. The inventory management department comprised three employees: the head and two managers.
The company's management sought a more efficient solution with similar operational logic. They expected the new software to improve KPIs, optimize order management processes, and account for weekday-related demand variation for fresh goods.
The chain aimed for a rapid transition to the new solution, setting clear deadlines for disconnecting from the previous system and implementing the new one.
Key project goals:
- reduce lost sales;
- improve the availability of goods;
- reduce excess inventory;
- improve inventory turnover.
Implementation process
The standard LEAFIO Inventory Optimization implementation process consists of three steps:
- Integration.
- Connecting the pilot assortment.
- Scaling.
For this project, the implementation process was adapted to address specific challenges. The implementation team successfully managed the data, trained staff, and processed test orders.
Despite the difficult circumstances training in system management continued uninterrupted. The LEAFIO AI and KOLO teams maintained daily communication via email and online meetings.
"The KOLO project team was actively involved in the implementation process. Employees participated in solving all tasks and promptly provided feedback on necessary issues. Thanks to this collaboration, we successfully adapted LEAFIO Inventory Optimization to the specifics of the network's business processes," says LEAFIO AI’s project manager.
Effects of the system integration
Thanks to the well-coordinated cooperation of the teams, KOLO seamlessly switched from one auto-order system to another, ensuring an uninterrupted supply of goods across the network.
The transition to LEAFIO Inventory Optimization occurred the day after the previous system was shut down. This switch was executed simultaneously across the entire network, utilizing all algorithms and connecting 100% of the assortment, generating nearly 5,000 auto-orders on peak days.
Changes in inventory management processes after implementing LEAFIO Inventory Optimization
1. Automatic calculation of projected demand for new products
Previously, the commercial department of the chain calculated the demand for new products and manually inputted it into the auto-order system. With LEAFIO Inventory Optimization, this process is now automated using clustering techniques. Consequently, the commercial department is relieved of this task, allowing them to focus more on strategic objectives. This automation also minimizes errors attributed to human influence.
2. Considering weekday-related demand spikes
The system now incorporates weekday-related demand fluctuations for products ordered more than once a week. It automatically calculates coefficients for each day of the week, adjusting the average daily consumption based on varying demand patterns. This feature is particularly beneficial for differentiating between weekday and weekend demands, ensuring accurate inventory management across all days of the week.
3. Flexible management of fresh category
The client required tools to significantly impact the availability of goods and minimize write-offs in the Fresh category, aligning with their business goals for specific periods. LEAFIO Inventory Optimization offers a solution through its service level parameter. This parameter enables the adjustment of goods availability and write-off levels in the Fresh category, providing flexibility to meet varying business objectives efficiently.
4. Report generation within the system
Before the implementation of LEAFIO Inventory Optimization, analytical inventory reports were generated within the ERP system. However, with the adoption of LEAFIO Inventory Optimization, the inventory management department now utilizes a dedicated specialized system equipped with a comprehensive suite of tools for analysis and process management. In addition to its primary auto-order function, the system provides a wealth of supplementary information regarding products, orders, insights, and an extensive analytical section comprising over 40 reports designed to oversee, monitor, and optimize inventory management processes.
The initial focus is on the "Phantom Inventories" report, which identifies products typically associated with regular sales but currently exhibiting unsold balances. Such discrepancies suggest potential issues, such as products being out-of-shelf or discrepancies in the accounting system's balance accuracy.
"Out-of-shelf goods directly contribute to lost sales, while inaccurately indicated stock leads to erroneous orders. However, with the Phantom Inventories report, the inventory management department can swiftly identify and resolve these issues," explains the project manager.
It's worth noting that the client's system is configured to automatically recalculate cross-dock orders upon goods’ arrival at the distribution centers. This strategy ensures a more precise and current distribution of goods to retail stores, recognizing that the availability of goods may differ between the initial calculation and delivery times.
Key performance indicator improvements post-implementation
Comparing key metrics from the 1st quarter of 2023, when the previous system was in use, to the 2nd quarter after implementing the LEAFIO AI’s solution, yielded impressive results:
- Overstock reduced by 43%.
- Sales increased by 20%.
- Inventory turnover accelerated by 17%.
- Lost sales decreased by 13%.
- Availability of goods improved by 14%.
The implementation of LEAFIO Inventory Optimization has boosted order management efficiency for the KOLO chain, providing a suite of new tools tailored for this purpose. The software seamlessly integrates seasonality considerations, enables the generation of comprehensive in-system reports, and enhances the management process for Fresh category goods.
The surge in sales and enhanced inventory management efficiency at KOLO will undoubtedly fuel the chain's ambitious expansion plans. The LEAFIO AI team is proud of standing alongside the client on this exhilarating journey, offering ongoing guidance and support to ensure maximum results for the client's users.
