Impact of grocery e-commerce in today’s supply chain
It’s no surprise that today’s shoppers are expanding their digital experiences into the grocery sector. What was unexpected though was its rapid acceptance, growth and explosion of service companies. That’s why retailers and manufacturers are now facing major re-alignment strategy projects for their supply chains.
In fact, Nielsen, New York, projects that by 2025, 20% of the grocery shopping will be exclusively online, which equates to more than $100 billion in annual consumer sales. This means that approximately 3,900 grocery stores will be dedicated to supplying online grocery demands just in the United States. But, how does this impact the supply chains of retailers and manufacturers?
As e-commerce fulfillment has matured and more options are available in the marketplace, customers have experienced increased convenience for faster, same-day shipments, reliable and damage-free deliveries, as well as competitive pricing. These impacts have forced companies to re-evaluate their existing supply chains and determine what investments are needed in technology infrastructure, systems, people, operational processes, material handling equipment (automation and robotics), transportation and inventory. Re-purposing certain nodes of distribution, originally intended for other channels, must be strongly considered to access the population.
When evaluating areas of investment for grocery companies, one must consider the right IT infrastructure and systems that optimally handle the customer’s web experience, order management, multi-channel node selection, efficient order fulfillment, multi-mode transportation selection, expedited order processing and real-time customer updates/notifications.
Speed and flexibility are the largest drivers that create pressure on traditional technology. Customers expect convenience and expedited delivery. However, batch processing systems, antiquated host/DC interfaces and long lead time processing expectations do not fit this model. That’s why companies must have the ability to offer multiple customer shipment options for the front-end web experience, as well as support the back-end ability to determine the optimal distribution node. In addition, companies must evaluate the levers of speed, reliability, quality and cost when enabling e-commerce capabilities to understand the best technology investments that drive efficiency in the supply chain and meet or exceed customer expectations.
Equipment and operational processing
Most product handling in the grocery industry is at the pallet and case level for inventory until it reaches the store. But, grocery facilities are generally temperature-controlled, so finding a workforce to pick peaches in a frozen environment, for example, becomes a difficult task.
Cubic building efficiency is critical in cold storage due to the high costs of construction; areas for design consideration include material handling automation such as high-bay storage and robotic layer/case handling should all be considered vs. the manual order picking in wide aisle environments on low level pallet jacks. Concerns around the outer packaging equipment to handle frozen and perishable goods must be reviewed to minimize damage and ensure good presentation.
Outside a dedicated distribution facility, an area of evaluation includes the ability for store labor to handle e-commerce orders, in addition to the normal retail volume and customer flow. Stores must put a method in place to handle both customer pickup and shipments.
There is no one-size-fits-all model
E-commerce fulfillment may rely on many channels, such as distribution center to consumer, store to consumer, dedicated e-commerce fulfillment center to consumer, or pickup in-store/click and collect. All of these methods allow companies to leverage their existing supply chain assets to best service speed, convenience, quality and customer expectations. The challenge that many grocery retailers face however is that they are not properly designed, equipped or technologically advanced to support an omni-channel operation; it will take a significant capital investment that most of them don’t have or are not willing to spend.
The grocery industry cannot wait to evaluate the impact of the e-commerce marketplace. Ensure your supply chain can address both speed and flexibility while balancing cost, quality, reliability and overall customer experience.