The initial outbreak of COVID-19 in the United States rocked the supermarket world unlike anything else in modern times. Behind the frantic scenes of shoppers fighting over toilet paper, the grocery supply chain was being stretched and bent like never before.
“All of a sudden, we found ourselves in a situation where it was like 10 snow days, Thanksgiving and Christmas rolled up into one every day of the week, and then restaurants shut down,” recalls Mark Baum, chief collaboration officer and SVP of industry relations at Arlington, Va.-based FMI - The Food Industry Association. “Demand just soared. It was up double digits, even triple digits in certain categories.”
- The coronavirus pandemic has revealed vulnerabilities in the supply chain that the food retail industry must figure out how best to address.
- Demand planning and inventory management solutions, enhanced by machine learning, can bring greater visibility to the supply chain.
- Companies should also focus on stronger collaboration with suppliers and other partners, both within and outside the industry, and on developing a cross-functional workforce.
“COVID-19 really raised the importance of the supply chain,” observes Tom Madrecki, VP of supply chain for the Consumer Brands Association (CBA), also based in Arlington. “It went from being an issue that was maybe not front and center within the c-suite or within government to being the issue of the moment.”
Ultimately, the chain didn’t break, but some vulnerabilities were revealed — and exposed to consumers — as excess agricultural products ended up being destroyed, certain products became obsolete seemingly overnight and e-commerce programs were suddenly being used more than ever before, revealing a gap in different retailers’ levels of preparedness.
Now that the pandemic’s initial outbreak has passed, the industry has a brief window of time to reflect on what worked, what went wrong, and ultimately how to plan ahead for what’s next.
“I’m hoping retailers have either built or updated their ‘disruption playbooks’ to understand what they need to do going forward,” says Mike Griswold, a research VP with the consumer value chain team at Gartner, a global research and advisory firm based in Stamford, Conn. “A lot of them probably had some type of disruption playbook, but nothing of the magnitude to where they’d need to be limiting products and customer counts, and forcing the majority of people to do an online transaction. This is certainly the biggest disruption most of us have experienced in retail — and it’s not going to be the last.”
At presstime, the term "second wave" is being floated as several states are seeing worrisome spikes in cases and hospitalization rates. Some experts caution that autumn could be particularly bad, as seasonal flu begins cropping up alongside the novel coronavirus. While no one can predict the future precisely, one thing’s for certain: Retailers need to be prepared as much as possible and focused on building a more resilient supply chain to adapt to whatever comes their way.
Here are key areas that they can focus on to make their supply chains as COVID-proof as possible, according to Griswold and other industry watchers:
- Build in more agility and flexibility;
- Increase the frequency of supply chain modeling;
- Work to more quickly adopt new technologies that can aid in visibility, planning and beyond;
- Better collaborate with suppliers and other industry partners, and rethink supplier diversification;
- Focus on a well-protected, more cross-functional and flexible labor force; and
- Reconsider the balance of in-store versus online sales, with a specific focus on last-mile delivery.
Walmart’s Focus on Agility
During a recent webinar entitled “COVID-19 Supply Chain Risk Management,” conducted by Eyefortransport Ltd. and Reuters Events, several leaders representing various areas of the grocery supply chain shared their thoughts on better preparing for unforeseen conflicts in the age of the coronavirus.
Josh Buchanan, director of supply chain design and innovation for Bentonville, Ark.-based Walmart, noted, “In our processes of refreshing supply chain strategies annually for our international partners, we’re going to see that leaders reviewing those strategies are going to have [COVID-19] as a lens for the near future. There will be a value on agility in contingency planning.”
Buchanan noted that Walmart’s ability to work as one company has greatly aided the organization over the past six months. “A great deal of the learnings out of China essentially informed all our international markets and our U.S. markets,” he said. “There are a lot of technology and processes that can be implemented faster than anyone would have said was possible last year.” He cited examples such as the ability to onboard an associate in under 24 hours, as well as starting up a warehouse management system in a matter of days, as opposed to weeks or months, to get a new distribution center operational.
Buchanan also lauded Walmart’s suppliers for their collaboration, which he said has been “more fluid and dynamic than it’s ever been before,” including getting products through to put on shelves, changing order quantities and the channels that products move through, and adjusting both locally in different markets and globally.
Representing a different part of the business — primarily transportation, but also managing inventory — Gary Allen, VP of supply chain excellence for Miami-based Ryder, urged companies to get a better handle on data across the supply chain and work to transform that data into information and insights, via predictive analytics.
New Day for Demand Planning
Gartner’s Griswold says that he’s hearing more chatter regarding visibility from his grocery retail clients, as they look to strengthen their supply chains in the months ahead. “They realize they need more visibility around customer orders, demand, inventory and capacity — what space they have in their distribution centers and in transportation,” he notes.
“Certainly, people need to be thinking long and hard about their demand-planning and inventory management platform, not that any tool was ever going to predict the demand for toilet paper and Lysol that we saw,” continues Griswold. “What you’re looking for now in a tool is one that will help you learn from the effect of this event, so that when you have another disruption similar to it, you can model that. But the second piece of this is that people need to figure out how to take the effects of COVID-19 out of their history, so they can plan better moving forward. In other words, your demand-planning tools need to be able to sift through what would have been normal based on historical trends, not from what happened during the COVID outbreak.”
Griswold also points to more advanced planning capabilities that are made possible by machine learning. “This should be an investment area,” he advises.
Another area that companies need to focus on, according to Griswold and others, is stronger collaboration with their suppliers and other industry partners.
In terms of supplier relationships, Griswold advises retailers to think of their suppliers in two ways. In normal times, suppliers may generally be segmented into two groups — the top 10 to 15 companies with which retailers have the closest relationships, and then another segment of suppliers that are more tactical. In times of disruption, however, the relationships may need to change so that retailers become more collaborative with the midtier, more tactical suppliers, especially if they make a product that’s in high demand (think toilet paper).
Collaboration was also key to helping companies combat food waste, he adds. “In just one example, Land O’Lakes partnered with a retailer in Wisconsin, so that rather than dumping milk, they turned it into 10-pound bags of mozzarella,” he notes.
Cincinnati-based Kroger, already known for its sustainability commitment, made a similar move by redirecting some dairy farmers’ excess milk to food banks as part of its ongoing Zero Hunger | Zero Waste initiative. In late May, the company said it would expand its Dairy Rescue Program to support children and families during the COVID-19 pandemic through the summer.
In some cases, even competitors worked together to share resources, according to Jason McCourt, senior solutions consultant for Aptean’s U.K.-based Paragon Software Systems.
“This crisis highlighted the value of collaboration between competitors, and that’s something we believe may well be the future of transportation and retailer distribution,” he notes.
“Increasing urban restrictions, sustainability concerns and a host of other issues means it makes increasingly little sense to have one truck delivering half a load of Charmin and another one delivering Cottonelle to the same store," McCourt adds. "Maybe following this crisis, we will see more companies willing to collaborate for mutual benefit.”
Collaborating With Other Industries
Partnerships were built outside the traditional supermarket industry as well. According to FMI’s Baum, his association stepped in when the foodservice business suddenly halted. “You had a bunch of these broadline distributors with tremendous capacity, whether it was in transportation services or warehousing capacity, and then from a retail standpoint, we had this unprecedented demand. So we worked really, really hard and put up a series of partnerships.”
The first was an ad hoc partnership with the Washington, D.C.-based International Foodservice Distributors Association (IFDA) to bring their products, as well as labor and equipment resources, to retail. The endeavor, which started off as a manual exchange, grew into what FMI now calls the Food Industry Exchange, a more advanced digital trading exchange powered by The Seam, in Memphis, Tennessee.
Companies can take advantage of the exchange year-round, says Baum. Suppliers can use it to expand their distribution networks, make buy-now offers available and introduce items to certain customers they might not get to otherwise. In the same vein, retail buyers can use the exchange as a source of discovery, he notes.
FMI also found a creative way to tap into the new labor pool created as foodservice and other businesses shut down. The trade group worked with Eightfold.ai, an artificial intelligence-based talent exchange, to find workers to fill in labor gaps in the supermarket industry. According to Baum, “We’ve got everyone from Instacart to C&S to Ingles on the hiring side, and then companies including restaurants, United Airlines, Macy’s and other nonfood retailers populating the supply side.”
Retailers will no doubt be able to use this exchange going forward as labor needs shift amid changing COVID patterns and general economic trends.