Supply Chain Solutions [for clients]
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OOS Upside Calculator for FS.OSA
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OSA (a product to monitor OOS rate and improve business processes by helping workers do the right data-driven decisions and spend their time more effectively)NowFutureEffectChange cells colored in yellow
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OOS rate8.3%7.0%-1.3%
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Number of stores 100--
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Number of SKUs per store50,000--
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Profit margin2.0%--
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Average transaction size per store visit$30$32-
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Wage for a store worker with amortization for office, benefits, etc.$18--
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Weekly revenue per store (sales volume)$516,727$520,490$3,763
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Firm's OOS-related annual loss (lost sales + labor cost)-$9,211,849-$7,769,030$1,442,820
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Annual lost revenue due to OOS-$111,509,687-$94,044,314$17,465,373
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Annual labor cost due to OOS (store workers handling unplanned OOS questions)-$6,712,958-$5,661,531$1,051,427
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Annual lost revenue due to OOS customer churn to other chains-$13,434,902-$11,330,640$2,104,262
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OSA total cost (evaluation + training + license) based on a 12 months subscription
$0-$171,300-$171,300
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OSA evaluation cost (given that a firm already monitores OSA and has historical data)
$0-$11,700-$11,700
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OSA training cost (2h per person using the product)$0-$60,000.00-$60,000.00
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OSA license fee (SaaS monthly subscription)$0-$99,600.00-$99,600.00
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BOTTOM LINE (total profit for OSA project per chain)$1,271,520
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OOS Upside Details
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TOTAL ANNUAL OOS UPSIDE, $$1,442,820
Source of valuable data:
http://www.fmi.org/research-resources/supermarket-facts
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http://couponsinthenews.com/2014/01/23/guess-how-many-items-the-average-grocery-shopper-buys-in-a-year/
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TOTAL ANNUAL OOS UPSIDE FROM OSA, $$360,705
http://www.nacds.org/pdfs/membership/out_of_stock.pdf
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TOTAL ANNUAL OOS UPSIDE FROM REPL, $$678,125
http://yourbusiness.azcentral.com/profit-margin-supermarket-17711.html
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TOTAL ANNUAL OOS UPSIDE FROM One Supply Chain (1SC), $$403,990
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TOTAL ANNUAL OOS LOSS, $$9,211,849
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Annual sales volume per chain, $$2,686,980,400Business marginality2.0%
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Weekly sales volume per store, $$516,727
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Weeks per year52
SKU volume power law
count, out of all SKUs
revenue, out of all SKUs
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Number of stores in a chain100
SKU, high demand (head)
100.00%100.00%
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Number of SKUs50,000
SKU, low demand (tail)
0.00%0.00%
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Average transaction size per shopper, $$30
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Current OOS, probability8.3%decrease TO7.0%
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Sales / OOS correlation (impact ratio, substitution rate)0.5
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Shelf-based problems, probability0.25
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Store-based problems (replenishment and logistics), probability0.47
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Upstream supply chain problems, probability0.28
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Annual lost direct sales/revenue (not taking into account churn etc.), $$111,509,687
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Annual lost revenue per store, $$1,115,097
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Weekly lost revenue for a chain, $$2,144,417
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Weekly lost revenue for a store, $$21,444
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Daily lost revenue for a store, $$3,063
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Hourly lost revenue for a store, $$170
~Essentially, they could hire a senior McKinsey's consultant for each store to work 24/7 during the entire year.
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Annual cost per chain for OOS QA to shoppers, $$6,712,958
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Annual cost per store for OOS QA to shoppers, $$67,130
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Weekly cost per chain for OOS QA to shoppers, $$129,095
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Weekly cost per store for OOS QA to shoppers, $$1,291
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Number of shopping visits per week per store17,282
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Number of items per visit10
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Shoppers with OOS, probability0.83
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Ask for help given OOS, probability0.1
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Time to handle a shopper question, hour0.05
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Wage for customer service employee (regular store worker), $ per hour$18.00
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Annually OOS affected shoppers74,588,419
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Annually OOS affected shoppers per store745,884
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Weekly OOS affected shoppers per chain1,434,393
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Weekly OOS affected shoppers per store14,344
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Annual lost sales/revenue due to shoppers churn caused by OOS$13,434,902
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Annual sales per client$2,332
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Annual churn0.01
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Number of clients to churn per year per store115
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Shopping trips per year78
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Switch to a different store if experienced OOS, count3
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Number of unique items a shopper buys per year260
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Number of shopper trips per week1.5
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Probability to have a specific product OOS per shopping trip0.003192307692
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Probability to face OOS 3 TIMES for a specific product in less than a year0.002305
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Probability to face OOS 3 TIMES for ANY product in less than a yearNegMultDistr needed
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OSA Adoption Cost
80
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Employee group$/hour
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Wage for analyst/PM to prepare a pilot $120.00
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Wage for evaluation personel (merchandising, restocking, warehouse, etc.) $18.00
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Wage for execs$300.00
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Wage for store manager$60.00
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Pilot Cost (from 1st contact to the contract signed)
Timeline, business days
Unit, hoursCount, people
SUBTOTAL, h
SUBTOTAL, $
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Call10.510.5$60
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Meeting OSA.overview (key contact ~ champion)2112$240
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Meeting OSA project management (key contact ~ champion)6116$720
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Pilot preparation 44232$3,840
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Pilot results data analysis1818$960
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Contract and legal paperwork1224$480
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Pilot results evaluation (OPTIONAL)7122168$3,024
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Pilot exec meetings --- internal 2124$1,200
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Pilot exec meetings --- external 2124$1,200
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Pilot payment$3,000
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SUBTOTAL15$11,700
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SUBTOTAL (WITH OPTIONAL)26$14,724
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