Optimization of Dairy Inventory: A Real Case of Reducing Surpluses and Increasing Sales
Dairy products are one of the most challenging categories to manage in grocery retail. Due to their short shelf life and constantly fluctuating demand, retailers often face the problem of excess stock, write-offs, or lost sales.
ABM Inventory helped a grocery supermarket chain optimize inventory management processes in the Fresh category. As a result, dairy product sales increased by 16%, surplus stock was reduced by 7%, and product availability improved by 7%.
Challenges in Dairy Product Management
Before implementing ABM Inventory, the company faced typical category issues:
- Incorrect Stock Data – The client’s ERP system did not have accurate data on actual stock levels since inventory was not always conducted daily. This led to uncertainty about how much product was still fit for consumption.
- Excess Stock – Managers tended to overorder, ordering more than necessary, which led to increased write-offs.
- Lost Sales – Due to uneven demand and untimely orders, some products would simply run out of stock on the shelves.
- Difficulty Forecasting Future Write-offs – There was no unified mechanism for accounting for future product spoilage and its impact on orders.
ABM Inventory Solution
ABM Inventory is an automated inventory management system that independently forecasts demand, generates orders, and optimizes stock levels. However, to achieve maximum results, it is crucial to properly configure the system according to the specific characteristics of the product category.
Proactive Support from CST
After implementing ABM Inventory, the Customer Success Team (CST) continued to monitor the automation results and search for opportunities to further improve processes. While the system was already working efficiently, deeper analysis revealed that the dairy category required additional fine-tuning for even more accurate write-off forecasting.
Based on the collected data, CST optimized the algorithm parameters, which allowed the forecasting to better adapt to the specifics of products with short shelf lives. This did not require changes to the core logic of ABM Inventory but became part of the flexible approach to settings that helps clients achieve maximum results.
Forecasting Algorithms and Managing Fresh Products
To effectively work with perishable goods, ABM Inventory takes into account all the key factors influencing their sales:
- Demand Forecasting – The system analyzes historical data, trends, and seasonality to accurately calculate delivery volumes.
- Order Lead Time – ABM Inventory adapts orders to actual delivery times to avoid gaps in product availability.
- Supplier Packaging and Constraints – The algorithm accounts for minimum purchase batches and delivery specifics.
- Required Availability Level – The retailer can set an acceptable stock level for each product to avoid write-offs.
- Demand Fluctuations Throughout the Week – The system tracks and adapts orders to fluctuating customer behavior.
- Remaining Shelf Life Consideration – ABM Inventory analyzes the product shelf life and forecasts future stock that will be available for sale. This allows for precise determination of when to order products, avoiding both shortages and excess stock.
Forecasting Future Write-offs
The system learned to better account for product shelf life, predicting when items would be written off. This allowed for more accurate orders and helped avoid excess stock.
Automated Inventory Management
ABM Inventory determines the optimal stock level, analyzes historical sales, assesses future demand, and automatically creates orders without human intervention.
Optimization of Accounting and Implementation Results
After analyzing the Fresh category, the CST team suggested optimizing batch accounting settings, allowing ABM Inventory to forecast future write-offs before the product is officially written off in the system. This helped the system account for products that would soon be written off and timely create orders for their replacement, minimizing lost sales and ensuring steady product availability on shelves.
As a result, after optimizing dairy product management, the client saw significant improvements:
- +16% Sales Growth – Improved inventory management ensured a constant availability of popular products.
- -7% Reduction in Surplus Stock – Accurate forecasting and the elimination of over-ordering reduced surplus stock.
- +7% Increase in Product Availability – Products became more accessible to customers, reducing lost sales.
Thanks to the combination of automated algorithms and CST’s flexible settings, ABM Inventory ensured consistent results without the need for manual order adjustments, giving the client a competitive edge in the Fresh category.
What does this mean for retailers?
The Fresh category requires a special approach to inventory management, as forecasting errors lead to write-offs or lost sales.
ABM Inventory allows retailers to:
✔️ Automatically forecast write-offs.
✔️ Reduce excess stock.
✔️ Increase product availability without shortages.
✔️ Receive proactive support from CST, helping to achieve maximum results.
