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Case Big Lots
Improved Forecasting and Replenishment through Automation and Adaptability

Big Lots, Inc. is an American discount retailer known for its big deals on food, furniture, seasonal products, household essentials, and more. Their assortment of replenished products has grown to 6000+ SKUs from 500+ global vendors, each with different lead times, capabilities, and requirements. As such, Big Lots’ needs outgrew their time-consuming, manual processes, which were executed through a combination of spreadsheets and an outdated replenishment system.

The Challenge: Simplifying Complex Processes at Scale

To scale their processes and more effectively manage their complex assortment, Big Lots needed a solution that could:

  • Automate demand forecasting and replenishment planning
  • Integrate their disconnected outbound and inbound planning, including order projection rollup capabilities to improve DC and vendor visibility
  • Provide the flexibility to support changing business needs

Big Lots decided RELEX was the best solution to meet these needs for their stores and DCs, and selected them to integrate their forecasting (including promotional forecasting) and replenishment. Their decision to implement RELEX was driven by:

  • Strong customer references for RELEX’s system capabilities and ability to execute timely implementations
  • RELEX’s ability to articulate in detail how they could address Big Lots’ unique challenges
  • The transparency of the RELEX solution, which allowed Big Lots to understand and explain what the system was doing

The RELEX implementation was completed within 12 months, kicking off in June 2019, moving into the pilot phase in December, and concluding with a full roll-out in June 2020.

Results: Automated, End-to-End Forecasting and Replenishment

Results at a Glance

  • End-to-end forecasting and replenishment planning within a single system
  • Automated demand forecasting at the day-SKU-store level, including calculations for lost sales and promotional and seasonal uplifts
  • Automated calculation of order proposals for a range of situations, including DC-to-store distribution, vendor-to-store distribution, load building, varying lead times, etc.
  • Adaptability to quickly and effectively respond to unforeseeable COVID-19 demand and supply challenges
  • Improved transparency and efficiency

The RELEX solution allowed Big Lots to maintain the small size of their team while enacting a great deal of change by improving processes and structures. One of the most significant changes addressed the disconnect between their inbound and outbound planning processes, which raised too many opportunities for either excess or insufficient DC inventory to meet demand from stores. With RELEX, Big Lots has fully integrated their demand forecasting and replenishment processes so all planning takes place within a single system, ensuring planners have the visibility necessary to meet customer demand accurately and efficiently.

The centralized system automates Big Lots’ forecasting at the SKU-store-day level a year into the future. These automated forecasts consider more demand-influencing factors, such as promotional activity, seasonality, or lost sales from stock-outs. Big Lots is now able to leverage these improved demand forecasts to automatically calculate inventory requirements and orders for each part of their supply chain, taking into consideration lead times, order frequency, load building, and other requirements.

Configure, Don’t Code: Taking Ownership of Their System

Big Lots and RELEX have worked closely together to develop solutions to the retailer’s challenges. “One of the best aspects of working with RELEX has been their willingness to think creatively, take the time to understand what we’re trying to do, and work as a team, utilizing experience from across their organization to figure out solutions,” said Johan Hoover, VP of Allocation & Replenishment at Big Lots.

In addition to leveraging RELEX’s expertise, Big Lots was also quick to see the benefits of RELEX’s “configure, don’t code” approach and take full ownership of their new system for themselves. Rather than relying on a vendor to support changes to the system, Big Lots’ users embraced RELEX’s adaptability, implementing their own configurations to support their business decisions and improve outcomes.

In the above video, Hoover discusses the challenge of chocolate products, which Big Lots tackled together with RELEX.

Chocolate products, for example, present a challenge specific to Big Lots because chocolate would melt if distributed through their DCs, which are not temperature-controlled, during warm weather. Their process of switching from DCs to direct-to-store chocolate distribution in warm weather—then back when the weather cooled—was an extremely time-consuming, manual task.

Big Lots configured RELEX to automate these changeovers—calculating order needs by store, ensuring they’ve met order requirements and inventory turn objectives, and automatically generating purchase orders. The efficiency gains have been deeply appreciated by the replenishment planners: “I’m sure I saw some tears of joy from the planner responsible for chocolates the first time he used this new process,” said Hoover.

Another complex challenge is the frequency of the company’s planned promotions. While uplifts can be large, they vary significantly based on product and promotion type. RELEX’s promotional forecasting functionality now automatically identifies the lift associated with different types of promotions, then calculates SKU-store forecasts for future promotions. These forecasts take into consideration important demand drivers including promotion type, timing, and price change.

Effective COVID-19 Management

While they were better able to forecast their promotions, safety regulations from the COVID-19 pandemic forced Big Lots to adapt their entire promotion strategy. The retailer moved from large weekend events and one-day promotions, which have traditionally drawn large crowds into stores, toward promotions spread over longer periods of time. RELEX enabled them to make these adjustments and update their forecasts accordingly quickly and accurately.

RELEX proved valuable in Big Lots’ response to the scarcity and capacity restrictions brought on by COVID-19 as well. While the onset of the pandemic drove initial demand spikes for essential items like toilet paper and hand sanitizer, this soon evolved into broader demand as customers who were now working and studying from home did more home cooking and wanted to redecorate their living spaces, for example.

The Big Lots team used RELEX to automatically trigger scarcity allocations, helping them sustain positive sales trends and keep up with demand despite limited inventory. “RELEX was able to quickly recognize COVID-impacted changes in demand, which gave us visibility into our inventory needs and allowed us to adjust our orders and vendor projections accurately,” said Hoover.

Big Lots also used the new RELEX system to proactively tag events related to the extraordinary demand and supply chain disruption they experienced in 2020 as a result of the COVID-19 pandemic. This ensures that in 2021, planners will be able to accurately clean their demand data of COVID impact with the click of a button, preserving their forecasting accuracy going forward.

Transparency and Automation: The Key to Big Lots’ Future

Big Lots saw RELEX’s transparency as a valuable advantage throughout the uncertainty of the pandemic. “The system’s transparency was something that had appealed to us from the beginning, but it ended up being even more important than we’d thought, as we were actually in the process of completing the RELEX implementation just as the pandemic started,” said Hoover. “Our replenishment planners were using a brand-new system under conditions that were anything but ordinary, which made it even more important that they could understand how the system was working in order to gain confidence in it.

“System transparency and automation help companies like us look ahead to future opportunities,” Hoover continued. “There’s no going back to 2019. The bar was raised in 2020 on inventory productivity, which drove us to continue looking for opportunities to be more efficient and challenge old business paradigms. Even without a pandemic, the pace of retail change only continues to accelerate. Our implementation of RELEX forecasting and replenishment allowed our team to better serve our customers throughout the pandemic and will continue to be an essential part of driving our business in the future.”

The results

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End-to-end forecasting and replenishment planning within a single system

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Automated demand forecasting at the day-SKU-store level

The forecasts include calculations for lost sales and promotional and seasonal uplifts.

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Automated calculation of order proposals

Order proposals calculated for a range of situations, including DC-to-store distribution, vendor-to-store distribution, load building, varying lead times, etc.

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Adaptability to quickly and effectively respond to unforeseeable COVID-19 demand and supply challenges