Founded in 1997, Migros Online (formerly known as LeShop.ch) is the e-grocery subsidiary of Switzerland’s largest retail company, Migros. Through its web and mobile platforms, the online-only supermarket offers 12,500 products delivered either through home delivery or over 100 pick-up stations. Every day, the company ships approximately 200,000 items, or 160 tons of groceries.
Challenges and Goals: Update Inventory Management, Maximize Availability
Migros Online quickly became the market leader in Swiss e-grocery, but this rapid growth increased the complexity of their supply chain and inventory management needs. By 2017, having outgrown their in-house inventory management software, they sought a new solution to help them scale and meet changing requirements.
Migros Online’s daily assortment changes and replenishment frequency (up to three times a day for fresh items) called for extremely granular inventory management that could consistently meet customer demand. Maintaining high availability and minimum spoilage at the same time was a critical target to reduce bounce rates, as it’s notoriously easy for online shoppers to abandon carts and seek products elsewhere.
Migros Online established four requirements for the new solution:
- Improve availability to increase sales and customer satisfaction
- Minimize spoilage through more precise forecasting
- Automate previously manual tasks to improve efficiency and free employee capacity
- Optimize logistics costs throughout the supply chain
The company evaluated seven vendors, ultimately choosing RELEX’s forecast and replenishment software.
“We were won over by RELEX’s best-in-class intelligent technology,” says Nicolas Soussan, Chief Logistics Officer at Migros Online. “We work with RELEX because it automates our goods procurement and reduces spoilage through their innovative application of AI and machine learning.”
A Phased Rollout to Establish Trust
The RELEX platform was rolled out in phases to give Migros Online’s planners time to train on the new system and develop trust in it. Phase 1 began in April 2017 with management of Migros Online’s full assortment of nonperishable goods within the RELEX system. Phase 2 added fresh products, which are ordered by 92% of customers.
By early October 2017, RELEX was live across Migros Online and had added management of the retailer’s ultra-fresh assortment. Ultra-fresh products present a unique challenge within Migros Online’s supply chain as they are only replenished after a customer places an order. The company was able to update and share RELEX’s forecasts with suppliers every 30 minutes, ensuring they could keep pace with ultra-fresh demand.
Results: Fewer Out-of-Stocks, Less Waste
Migros Online met all initial targets, seeing strong results across all metrics shortly after the full RELEX rollout was completed.
Initial project results:
- 99+% availability
- 50% reduced out-of-stock rate for promotional products
- 20% reduction in average spoilage rate
- Increased automation
For each product, the RELEX system now automatically selects the forecast model that will best calculate order proposals that align with Migros Online’s actual demand. This improved the retailer’s forecast accuracy, particularly for promotional products. The retailer was also able to significantly improve its promotional campaign outcomes by driving accurate replenishment with separate promotional forecasts.
Migros Online used RELEX’s accurate, individualized forecasts to make better use of shelf capacity for nonperishable items. By doing so, they increased their efficiency when picking customer orders, which led to the ability to manage increased sales.
“Because we are an e-grocer, technology is the core of our business. In the past, we handled inventory and replenishment with in-house software. However, as we grew, we recognized that we needed an outside solution with more functionality to manage our large assortment of products, which range from nonperishables to ultra-fresh,” says Beat Marending, Head of Goods Procurement at Migros Online.
Waste Reduction
Migros Online had previously identified that spoilage rates peaked during weekends because they do not pick customer orders on Sundays. By leveraging RELEX’s ability to calculate safety stocks daily and more accurately match fresh stock to fluctuating demand, the company reduced the average spoilage rate by 20%. Migros Online also used the RELEX solution to retroactively review promotional forecasts at the end of campaigns and adjust inventory levels going forward.
Coronavirus Crisis Management
Migros Online experienced a massive spike in demand as the coronavirus crisis began due to stockpiling and the general shift to e-commerce. The company received 28% more delivery rows and picked 40% more customer order lines in Q2, year-over-year.
Despite the challenges, Migros Online used RELEX’s forecasting capabilities in Q2 of 2020 to increase the order growth rate by 35% and reduce spoilage to just 0.4% of total sales. The company will be looking to RELEX to continue managing its fresh, ultra-fresh, and nonperishable inventory into the future.
“The flexibility of the RELEX system allows us to easily adapt it to our business’s unique needs,” adds Marending. “With RELEX, we were able to quickly reach a high level of automation. Additionally, because we are able to make essential adjustments to the system, it can continuously meet our ever-changing requirements.”