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A Page from Other Playbooks


Great sports teams aren’t afraid to steal a few plays from their competitors — as long as they aren’t literally stealing their opponent’s play sheet, as the New England Patriots have been accused of doing. In the same vein, grocers can learn a lot about supply chain management by not only studying their main competitors — think Walmart — but also surveying how other industries make their supply chains strong.

Each year, Gartner Inc., a Stamford, Conn.-based technology research and advisory firm, names its Supply Chain Top 25 to identify global supply chain leaders and highlight their best practices. This year, Progressive Grocer caught up with one of the firm’s analysts — a former grocery supply chain exec — to discuss what today’s food retailers can learn from the recently released 2015 Top 25.

Mike Griswold, a research VP in Gartner’s consumer value chain team, is firmly convinced that a strong supply chain can not only help a company succeed, but also serve as a competitive weapon.

Bentonville Behemoth

One of the most obvious examples of supply chain success in the retail world is Bentonville, Ark.-based WalMart Stores Inc., which is No. 13 in this year’s Top 25 list (see the opposite page for the full list).

“Walmart [has] clearly identified the role of the supply chain within their organization,” notes Griswold. “As we look at our research, we tend to see companies classify their supply chain in one of three ways. At the lowest maturity level, they see their supply chain basically as a cost. It’s something they have to have. The second classification is that it’s one source of differentiation for them in the market, but it’s not their primary source of differentiation. And then, where we would say the most mature companies are, is that they see their supply chains as a competitive weapon. It’s their primary source of differentiation.

“The challenge I see for a lot of food retailers is that they still see their supply chain as a cost center, and they don’t invest in it from a people, process and technology perspective,” adds Griswold. “Walmart [sees] their supply chain as a competitive weapon, and they invest in it accordingly.”

Leading companies like Walmart continually reflect on their current supply chain configuration and ask themselves whether it’s as efficient as possible, according to Griswold. They conduct a lot of network design reviews, asking themselves, do I have the right DCs in the right locations? Do I have the right alignment between stores and DCs? Do I have the right delivery frequency to support that balance between supply chain costs and inventory, and the shopper experience through on-shelf availability?

“Too many retailers evaluate their supply chain maybe once a year,” notes Griswold. “The folks who … want to keep their edge around the efficiency of their supply chain look at it four, five or six times a year to make sure that all those relationships and interrelationships are as effective as they can be. Especially now, in the multichannel environment, you really need to look at your network more than once a year.”

Indeed, the multichannel conundrum — how to provide customers with products when and where they want them — has forced most retailers to step up their supply chain game in a big way.

Food retailers, however, have been relatively slow to roll out tests and even slower to adopt any clear strategies on online ordering and pickup or delivery.

“Almost every major food retailer is at least piloting some type of order-online, pickup-in-store functionality,” he notes. “The reason that folks like Walmart and Kroger are starting to do these things is because we’ve got Amazon, and Amazon is forcing everyone to up their game relative to same-day and next-day delivery. That’s why we’re seeing so many retailers across all segments of retail revisit how they can use the store. Because if you just fulfill e-commerce orders out of a distribution center, it becomes incredibly expensive.”

Packaged Goods, Packaged Well

One area from which grocers can learn from major CPG players, which are well represented on Gartner’s list, is customer analytics, in which they’ve invested heavily, notes Griswold. “A lot of CPG companies have technology that we call DSR [demand signal repository], which basically takes sales data you have from Kroger, Walmart, Publix, Target, etc., and allows you to look at that data in aggregate, but it also lets you start to look at data by each of your individual customers,” he explains.

“On the retail side, I’d say supermarkets are probably the one channel that knows the most about their shoppers but does the least about it in general,” observes Griswold. “We can certainly point to examples like Kroger, or Sainsbury and Tesco in the U.K., which have incredibly strong customer analytics skill sets. But in general, there’s a wealth of data that most supermarkets probably haven’t mined to its fullest, especially in the areas of trying to understand things from a customer segmentation perspective.”

If retailers want to delve deeper into customer analytics, he says, they should be asking questions such as: “How many different types of customers do I have? What do those customers value out of the shopping experience? How do I align my supply chain to meet the needs of those key customer segments?”

“There’s a definite connection between how well you know your customers and then how you want your supply chain to work in order to meet the needs of those key shoppers,” he advises.

Another area where grocers can learn from large CPG companies is that of shelf-level visibility. A few consumer goods companies are using hourly SKU shelf-level visibility to manage supply during critical promotional and seasonal events, notes the Gartner report.

“They’re using it to monitor sales patterns and trends, and then from that figure out from an on-shelf availability perspective if they need to find ways to be more proactive in how they stock the shelves,” explains Griswold. “From the retail side, we still have a long way to go in terms of automating the replenishment process. We still have way too many grocers in the U.S. that have a very manual ordering process, where someone walks through the aisles and looks to see what we need to order.”

Griswold estimates that about half of the top 20 North American supermarket operators have automated ordering and replenishment. By comparison, he figures that about 90 percent of the top 20 U.K. and European food retailers use this technology.

That may be changing, however. “I’ve seen a lot more interest among U.S. food retailers in embarking on better forecasting and better automated replenishment,” he contends. “So I’d like to think that in the next 12 to 18 months, we could get a little closer to maybe 60 percent or 70 percent of folks utilizing that technology.”

Last but not least, grocers should look to CPG firms to learn how to develop a “very overt talent strategy,” recommends Griswold. “The retail supply chain is one of the most complex, exciting and demanding supply chains across any industry,” he says. “So I think retailers should look at the CPG companies and adapt some of [their] practices around getting in front of college students to explain what the supply chain in retail is, how it works and why it’s a good career choice.

“Attracting talent in retail in general is hard,” he adds. “Getting good retail supply chain talent is even harder.”

“Especially now, in the multichannel environment, you really need to look at your supply chain network more than once a year.”
—MikeGriswold, Gartner Inc.

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