GROCERY SUPPLY CHAIN MANAGEMENT--COVID UPDATE

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.