Nicolas

Case Study Nicolas

On-shelf availability improved by 30% and overall profit margins boosted by 1.2%

  • Case
    Study

    Company Profile

    Nicolas is the largest chain of retail wine outlets in France with 430 stores. Growing at an average of 10 stores per year they also have a strong presence in the United Kingdom with 80 stores as well as a selection of stores in Belgium and Morocco, accumulating to an annual turnover of over €250 million.Since the first store opened in Paris in 1822, Nicolas has become a renowned destination for expert advice and fine wines with a selection of over 1200 wines from France and around the world. Nicolas is highly focused on driving sales through their retail stores with 98% of sales coming via this channel compared to their online and reseller channels. Nicolas stores are run by owner operators passionate about wine; they have a reputation for being "wine experts" and giving friendly advice as often consumers are not looking for a specific product but want help in selecting a wine from a certain region or from a specific grape.


    Supply Chain Context

    Nicolas's headquarters (HQ) based in northern France controls the procurement of products and distributes them around Europe to the individual franchised stores. Traditionally HQ had a lack of visibility of consumer demand and no input into the lines being stocked. Owners were empowered to stock their choice of products based on what they believed would sell through their individual experience, rather than using any specific forecasting techniques or taking into account trends, seasonality and promotions. The absence of a central forecasting system and inadequate control over the product range and assortment led to an excessive number of SKUs being carried in stores. This impacted the distribution centre (DC) by causing storage capacity issues and subsequently slowed down the procurement process creating inefficiencies.Product proliferation resulted in the wrong products being on the shelf or in a shortage of stock of the required products. Out-of-stock items were not being substituted with products of similar attributes, which resulted in lost sales in the store.


    The Challenge of Nicolas

    • Refine their range and reduce the number of SKUs to optimize store inventory and replenishment
      Processes
    • Provide the best possible response to consumer demand whilst achieving target margins
    • Modernize forecasting capabilities to enable Nicolas to be more demand driven - At the DC manage demand better through analysis of trends and seasonality patterns for optimized procurement
    • Enable a smooth organizational culture change - demonstrate to the store managers the value of gradually moving to a centralized management of store replenishment.


    Why TXT?

    Working closely with a consultancy firm to re-design and modernize their key business and supply chain processes, Nicolas selected TXT as their technology partner.
    TXT’s supply chain management expertise within the retail sector and in implementing demand forecasting and replenishment solutions meant Nicolas could rely on TXT to deliver a solution that was flexible and right for their requirements.
    TXT’s powerful demand forecasting and replenishment capabilities were easily integrated with both their ERP and in store systems.


    The Solution

    The TXT system generates demand forecasts at a DC level for each of the pre-defined product groups (products with similar attributes). These are the basis for the automated replenishment proposals given to the stores and are also fed into the procurement process. The solution was implemented in two stages: Stage one was deploying the replenishment proposals from HQ to a few trial stores before group wide roll out. Stage two was to put into operation demand forecasting for optimized procurement at the DC.


    STAGE 1

    Stage one of the solution allowed Nicolas to refine their product range and have better on-shelf availability, optimized inventory levels and a dynamic replenishment process with improved margins and overall profitability. Replenishment occurs 1-3 times per week. The TXT system calculates store replenishment at a SKU level based on the product group forecasts, existing number of days stock and safety stock considerations; this enables Nicolas to control store assortment by prioritizing the SKUs within each product group. The replenishment proposals are made centrally by HQ and can either be accepted, modified or declined by the 700 store managers and users of the system. The TXT solution provides them with decision support and explanations that relate to the proposed plans. This enables the system to also positively impact their daily work without loss of responsibility.


    STAGE 2

    After the successful implementation of stage one, stage two of the solution allows the Nicolas demand planners at the DC to create accurate forecasts that take into account actual point of sale data, seasonality and other trends. These enhanced forecasting capabilities will support Nicolas in planning promotions and other marketing activities. By relying on accurate demand forecasts the procurement process will also be improved and will enable automated order management with suppliers. The system creates orders for the procurement planners enabling them to work by exception and make decisions based on tangible facts.Provides alerts showing the sell-through of any SKUs and highlighting deviations. This makes it possible for planners to re-negotiate contracts in season and take advantage of unexpected top selling SKUs.


    RESULTS

    Since going live in February 2007 Nicolas has seen many benefits that are driving value into the organization. The level of acceptance of the replenishment proposals generated by the TXT software by the store managers is nearly 80%, as a result Nicolas was able to push NOS or "best" products, increasing their on-shelf availability from 65% to 95%. This was a key driver in improving customer foot traffic and boosting individual store revenue. Improved forecasting capabilities and visibility of demand has resulted in a double digit % reduction in store inventory levels. Overall margins for the group have increased by 1.2% as a result of the entire project after only 12 months.


Objectives

  • Optimize in store replenishmentand product range
  • Modernize forecasting capabilities and improve procurement
  • Store acceptance of the ongoing organizational change to automate and centralize supply chain processess

The TXT Solution

  • Demand forcasting and replenishment planning

Results

  • On-shelf availability of never out of stock(NOS) products increased from 65% to 95% in every store
  • 1.2% increase in overall group margins after 12 months
  • Double digit % decrease in inventory levels
  • End-to-end visibility across the fashion value chain
  • Store acceptance of head office replenishment proposals is now nearly 80% - up from 60% one year ago objectives

Customers Speak

Nicolas is delighted with the partnership we have formed with TXT.The TXT solution has supported our senior management commitment to re-define our processes by enabling us to have the right products on shelf with optimal margins. The solution has proven the value of centralized forecasting and replenishment processes in the eye of our store managers. The 30% jump in the on-shelf availability of our "best" products in store along with an overall 1.2% improvement of the groups bottom line after only 12 months has been a fantastic output of the work done so far

Mr Christian Fouasse, CIO - Nicolas