Elkjøp Nordic: 20 Percent Increase in Availability Through Better Replenishment Planning

Five years ago, Elkjøp Nordic started renewing its IT systems. After initial implementations in wholesale, logistics, and finance, the company is now also using SAP products in its core retail processes, such as the SAP Forecasting and Replenishment application for automated replenishment and reordering.

The variety of products at Elkjøp is hard to beat: The Norwegian electronics retailer offers its customers in more than 400 stores and online shops across Scandinavia 16,000 different products ranging from washing machines and printers to USB sticks at prices ranging from €1 to €10,000.

With €3.4 billion in revenue and 10,000 employees, one particular challenge for the company is making sure it has those products available that the consumers are demanding.

'The more automated this process, the better,' says Björn Dalen, director of IT Systems and Operations at Elkjøp, who began rigorously modernizing the company's IT landscape five years ago. Three years ago, the wholesale part of the enterprise went live with SAP ECC for purchasing, logistics, and finance, followed one year later by SAP for Finance solutions for retail for the retail chains.

The reason: 'Our existing systems were no longer able to accommodate our growing requirements. We urgently needed to do something,' said Dalen. Having doubled its revenues in the past 10 years, the decision to move forward was inevitable.

Automated Product Replenishment in Elkjøp Stores

More revenue and a broader product range requires retailers to accurately plan enough product availability or at least to know when the product will be available again in case it is sold out. The Elkjøp stores today therefore deploy SAP Forecasting and Replenishment along with an HTML launchpad based on Neptune software. Store employees can easily look up order proposals and include further products into their store assortment.

Forecasting and replenishment is part of the SAP portfolio functionality. It optimizes internal logistics processes of retailers by improving replenishment quality, reduces inventory in distribution centers and stores, automates processes, and enhances transparency. All regular products are planned in this manner at Elkjøp today.

If a store decides based on current trends to include further products in their core assortment, they simply check the 'F&R' box and the system automatically includes this product for reordering if minimum quantities are not reached. In case a product is currently not available due to supply shortages, staff call up the next scheduled delivery date directly on the tile- structured launchpad .

Forecasting and Replenishment at Elkjøp

The implementation of automated forecasting and replenishment processes at Scandinavia's biggest electronics retailer required intense preparation. At the end of 2015, Elkjøp began by planning its project 'ApolloX.' To make sure that the solution met all of its requirements, Elkjøp launched a three-step proof of concept by implementing the main parts of the ApolloX solution in seven stores.

'This was the period in which we really needed to prove that the solution worked,' said Dalen recently at the International User Forum for SAP Forecasting and Replenishment. Following this period, Elkjøp kicked off a pilot phase with 64 stores in three different countries.

'In this pilot phase, we saw that the solution was serving our requirements quite well and that implementation was easier than expected,' said Dalen. After another three months of piloting, through the peak Christmas period, Elkjøp decided to roll out SAP Forecasting and Replenishment across the entire enterprise.

Thanks to the solid advance preparation, this was possible in just three months - way ahead of its initial forecast of one year. Today, the Elkjøp stores in Norway, the Elgiganten stores in Denmark and Sweden, and the Finnish stores Gigantti are all equipped with this functionality - in all of the currently 383 stores.

One of the biggest automations was actually activation of articles based on references, according to Ronny Steng, Supply Chain manager at Elkjøp

Though the main focus of the Apollo X project was on automated forecasting and replenishment planning for Elkjøp's stores and distribution center, the assortment and price planning was implemented in an integrated manner as well.

One of the crucial points to be solved was the immense product variety and frequency of assortment changes.

'We created manual processes and then we translated all these manual processes into rules and setups,' explained Ronny Steng, supply chain manager at Elkjøp. As a next step, the company assigned references - based on strategic targets from sales, sales history, or similar product groups.

Acccording to Steng, 'The biggest automation this enabled was actually activation of articles based on references.' Today, all the products in all the stores are planned using SAP Forecasting and Replenishment, and roughly 60 percent of the orders in the distribution center are triggered by SAP Forecasting and Replenishment.

'This approach enabled us to increase availability considerably - up to 20 percent for products with historically low availability,' notes Steng - good news for a company that has to handle 40,000 orders per day.

Next Steps

Elkjøp plans to extend its digital expansion with SAP to further business areas going forward. As part of its Next-Generation Retail Program, for example, the electronics giant plans to implement store merchandising and e-commerce processes with SAP Retail, SAP Hybris Commerce, GK POS, and SAP Customer Activity Repository in order to enable it to continuously grow in an agile and efficient way.