Suomen Lähikauppa, one of Finland’s biggest food retailers, expects to cut fresh-goods spoilage by more than 15% through its groundbreaking use of automatic replenishment in one of retail’s most challenging areas.
Suomen Lähikauppa, which has 670 stores and more than 5000 staff, used RELEX systems to automate its fresh produce and short shelf-life items. The savings mean that the company expects to cover the cost of implementing RELEX’s retail planning very quickly through increased profits.
The results were all the more impressive because Suomen Lähikauppa is an old hand when it comes to automating replenishment having pioneered the technique more than a decade ago.
However the complexity and risks involved in automating most perishable lines such as fresh bread, fresh meat, fish, and fruit and vegetables meant that it wasn’t until the company worked with the RELEX team and implemented its systems that it felt confident it could meet the challenge.
The implementation was carried out in cooperation with the wholesaler Tuko Logistics, which is owned collectively by Suomen Lähikauppa and other leading food retailers in Finland and which already uses RELEX systems. The system is used for the entire assortment in all its stores. As part of the initiative Suomen Lähikauppa has centralised its replenishment ordering so that managers have more time to focus on customers and their in-store experience. The project has extended integration and visibility across Lähikauppa and Tuko’s joint supply chain, and supports their common Sales and Operations Planning -process.
“Automating the most perishable lines is often regarded so complex that people ask themselves whether they can be automated successfully – well, yes they can!” says Suomen Lähikauppa’s Vice President Esko Sutelainen. “The key issue was the constant real-time visibility across the supply chain data and fast reactions to exceptions, and nowhere was that more critical than with short shelf-life products. The fast pace of the business also enables reaching measurable business results quickly, which was a big motivating factor in this initiative.”
“It is not very often that a complex development project actually seems set to pay for itself before it ends but that reflects the degree of impact it’s had on our operations,” adds Sutelainen. “So at this phase of the project we remain on course to attain this goal. Working together with RELEX and Tuko Logistics we expect to save millions of Euros annually. The project took less than eight months from the start of the feasibility study to the completion of the roll out phase, was significantly under budget and right on schedule. To say that we are satisfied is something of an understatement!”
The CEO of Tuko Logistics, Petteri Pelkonen, hails the project as a showcase for supply chain collaboration. “Increased visibility means a more efficient supply chain, so at Tuko Logistics we’ve prioritised forecasting in co-operation with our customers and suppliers as one of our key areas for strategic development.”
“Retail is about detail, nowhere more so than when you’re optimising your fresh food supply chain,” says RELEX co-founder and MD Mikko Kärkkäinen. “Products need to be analysed individually at an individual store and daily level. By grouping those with similar characteristics together it allows for a greater degree of automation and that in turn allows managers to focus on the exceptional, not the everyday.”
“Of course this requires very close management of product-, store- and day-level calculations in order to define system parameters and calculations for different products and you need those results in real-time. Moreover our proprietary database makes possible the billions of calculations that it requires, yet at a cost that makes the fast ROI that Suomen Lähikauppa are set to achieve eminently possible.”