How the supply chain ecosystem for grocery is changing — and how software can help grocers navigate those changes
“The only thing constant in life is change,” noted the Greek philosopher Heraclitus some 2,500 years ago. To this very day, his thesis proves to be true ― all the more so when you look at current developments in grocery retailing. Even before the pandemic hit, serious changes were already in motion. Some of them were related to an increasing (albeit, slowly increasing) volume of e-commerce, while others were due to evolving shopping habits of consumers. Recently combined and accelerated, the supply chain ecosystem has undoubtedly become increasingly stressed as retailers scramble to meet consumer expectations.
Fear not! There is hope. But before we get to that, let’s have a look at how this grocery supply chain stress got started.
The long way into the city
A few years ago, the typical shopping trip of an average American family looked like this: Once a week, they went by car to a large supermarket in the suburbs where they stocked up on supplies for the next week. The supermarket (or rather hypermarket) in turn was also supplied weekly (or maybe biweekly) by an enormous distribution centre with full pallets of individual goods.
But not so long ago, a new trend emerged: Fewer people wanted to make time-consuming trip to these hypermarkets anymore. More stores with smaller footprints popped up in cities and neighbourhoods as grocers moved closer to consumers. This was a first step in a development to provide shoppers with greater convenience. And while Heraclitus has his theories, I have my very own: The more convenient it gets for consumers, the trickier it gets for grocers.
The more convenient it gets for consumers, the trickier it gets for grocers.
Smaller footprints, bigger efforts
Consumers (especially younger consumers) love it when there's a grocery store right around the corner — they can go shopping whenever they want, even without a car. As a result, they no longer have to plan so much in advance. Purchases become smaller, but more frequent. By the way, this has long been the case in other parts of the world, especially Europe with its higher population densities.
For grocers, weekly replenishment is no longer enough, so the frequency of deliveries from the distribution centre increases. And since there is less space in an urban store than a vast suburban hypermarket, full pallets of single products are no longer viable — instead, grocers have turned to half pallets and mixed-case pallets that combine many different SKUs to meet new demands.
High pressure, even higher expectations
On top of all these changes, customer expectations have evolved a lot, too. Healthy living and an increased awareness of sustainability are shifting buying habits more towards organic as well as local or regional suppliers. Customers want to know more — they want to see where their purchases came from, to know who touched them, to track and trace them at any given time. Clearly, visibility into all parts of the supply chain will be increasingly important to both consumers and grocers.
This is where it becomes evident that the connection between comfort for the customer and supply chain complexity is not only a correlation, it’s a causality. It's just as precise and unyielding as the principle of conservation of energy in physics or Newton's axioms: If customers plan less, grocers must plan more. If customers have shorter routes, grocers have longer ones. And if customers now have access to everything at all times due to the boom in e-commerce, the supply chain ecosystem can become a nightmare for grocers.
The good news: software shows a way out of the chaos
One of the truths that the COVID-19 pandemic revealed is that doubling down and working harder with existing systems may get you through a short-term crisis, but it’s not a viable long-term plan (and certainly not a profitable one). Adding more labour and machinery will help to scale up throughput but does not necessarily help with speed and efficiency.
A long-term solution to all these challenges should be one that incorporates the perpetual change mentioned at the outset — an open system that can easily adapt to change. And that's exactly the kind of solution that software provides. Software can make coping with radical shifts in customer demands possible. Think of it as working smarter, not harder.
Software can make coping with radical shifts in customer demands possible. Think of it as working smarter, not harder.
A few examples of how complex things can become easy
In a world where customer expectations and distribution channels have changed so radically, even small deviations from the “ideal process” can cause major challenges. For example, what if a customer makes a substitution on an order? Here, software offers a simple and (more importantly) instant solution because updates and adjustments on substitutions can be made immediately and communicated in real-time with the customer.
What if a large number of customers place orders at the same time? Software can handle real-time planning of the workload, which in turn balances efficient picking against meeting customer delivery/collect times. Moreover, volumetric planning of orders allows parallel picking of similar orders to meet shortened timeframes. And here, finally, we see what “working smarter” really means — and how investing in software is becoming a vital strategy for grocers.
The list of “what ifs” that grocers are currently facing and will face in the future is long, and I am convinced that software will offer a solution to every single one of them. Still, it is important to keep in mind that while software can provide the solution, it’s not magic. In fact, grocers will get much better results if they think of software less as an added extra and more as the solution itself. The tools to meet all the challenges are already there, and now is the best time to start using them. Because if change is the only constant in this complex world, software might be the best way to embrace it.