GROCERY
SUPPLY CHAIN MANAGEMENT—COVID UPDATE
On May 19, 2019, I wrote a paper, shown
below, on grocery supply chains. This
revisits it given what is happening with coronavirus.
Their supply chains have been dealing
with two changes. The surge of
e-commerce as shoppers limit and even avoid going to stores. Stock outs of many products as customers stock
up on items and as those who are home in lockdown or employment problems with
the pandemic.
The online increase includes more
shopping by third-party services, in addition to store employees doing it. So there are now two buyer sets—outside services
and end-customers. Ideas such as micro-fulfillment
are getting attention. But these miss an
underlying issue with grocer supply chains—product availability/stock outs. If products are not on shelves, they cannot
be purchased.
The empty slots of items has been
exacerbated by CoViD. But it existed pre-pandemic. Grocery stores have a different supply chain
than other retailers. Actually, there are two product supply chains. This need to be recognized.
Assuming the coronavirus-related
stockouts are reduced, there is still the likelihood that, even post-pandemic,
some part of the online sales increase will remain. Against that, the dual inbound supply chains
should be assessed.
The duality is grocers and
third-party suppliers. The accelerated
demand requires accelerated restocking.
This, in turn, requires new approaches to have inventory for stocking. That approach must recognize speed of inventory
replenishment.
Think of this as a lesson learned
from the pandemic. Speed of inventory. This is important for creating supply chain
resilience and its sibling, risk reduction.
New processes, procurement approaches, inventory management, and
technology are part of the needed change.
Conclusion. Stock outs are an issue that is important
here. And it is pre-CoViD. Dual inbound supply chains. Ones where products are
handled directly by grocer. And one where supply is done by third parties. Dual
inbound supply chains. Dual inventory
sources. Change is needed. Not optional. Micro-fulfillment and Instacart and
other third parties cannot perform well when out of stocks occur. Update must
be end-to-end design built on supply chain management. A new approach is needed. Not optional.
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GROCERY SUPPLY CHAINS
--Comments to Challenge the Status Quo--
Grocers have two supply chains that are challenged by
omnichannel--store and e-commerce--that demands high customer service. It
requires Supply Chain transformation.
Grocery chains across the world have common
issues with what is happening to their industry. Against that, there seems to
be a common fear of change--better the devil you know--especially against
investors. Then there is the question of how to change--since there are no
quick fix, easy answers that many seek.
The challenge being faced has its roots with
Amazon. Amazon did not create e-commerce. What they did was build a
Blue Ocean strategy that used it to redefine retailing and to redefine supply
chain management (SCM). They created and met customer expectations
with order delivery velocity. They weaponized SCM and elevated it to
strategic.
Here are three comments--and they revolve
around grocery supply chain management. First, grocers have two supply
chains that hopefully come together at the store level. One supply chain is
under the control of the grocer and runs through their end-to-end SCM
operation. The other is managed by suppliers-—a type of third party in
the supply chain--who stock/restock shelves with their products.
Adding complexity to this supply chain
structure is the need to successfully drive performance across
channels. It is no longer just about stores and
inventory. It is about customers and how to serve them both in-store
and online. And that requires supply chains with end-to-end velocity
to be responsive.
Second, e-commerce has highlighted a flaw in
that design and operation. Namely, the two supply chains are not coordinated
and managed together as one supply chain with two origins. This compounds
problems with omnichannel customer service. It shows with stock
outs--a customer service failure. These failures reflect on Perfect
Order performance, both with customer orders and with store
restock. Online now brings grocery supply chains into the
omnichannel reality using what is now an outdated supply chain
management.
Three involves how well the C-suite understands
supply chain management and its operations. That brings us to the new
reality of doing business where customers have the power. They need to
start to transform. Omnichannel success is driven by supply chain
management. It is now strategic. And it is now about speed, the new
competition.
Grocers, if there are supply chain issues, then
have to define the problem before a solution can be defined. This
requires starting with an assessment of their present dual supply
chains and they perform.
The new selling reality is about
velocity--end-to-end supply chain velocity that drives inventory velocity
required for order delivery/restock velocity. This is a mandatory part of
customer expectations. Speed is the competition when it comes to
customer focus and customer satisfaction in all channels. Slow and
steady does not win the race.
Executives must understand that the times they
are a changin. It is about transformation and creating robust omnichannel
approaches that recognize each channel's success is driven by supply chain
management. The alternative may be to watch their futures in rear-view
mirrors. Delay, playing it too safe, is not an option.
