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Cutting costs and improving customer service – in fresh food a clear win-win

Mar 25, 2015 1 min

Traditionally inventory management has been framed in terms of finding the right trade-off between customer service (shelf availability) and cost (inventory value). The basic idea has been to search efficiently for the right availability and stock level for each product to ensure a good overall service level at a low cost.

However, with fresh products, the tradeoff is skewed. Interestingly the main issue in products with a limited shelf life is that customers generally prefer not to buy products that are nearing the end of their shelf life; in other words, they want fresher goods. So when moving to a more accurate inventory management and cutting average stock, the customers routinely get fresher goods and thus become happier. This is part of the reason why our customers have actually experienced sales and margin increases while driving down their stocks of fresh products. Combined with a reduced spoilage cost happy customers have really led to happy commercial directors.

So, the normal high stock, good customer service mantra does not apply for fresh goods. Actually, customers tend to prefer buying from slightly smaller displays of fresher goods. The best thing of course is that by combining accurate day-level forecasting with day-level stock control, that freshness can be increased while maintaining or increasing availability.

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Written by

Mikko Kärkkäinen

Mikko Kärkkäinen

Co-founder & Group Chief Executive Officer