Chain of Command

Did you hear about the shopper who complained on Facebook about her local grocer being out of free-range turkeys the week of Thanksgiving? She?s just one example of why retail supply chain management is more important than ever before.

As today?s consumers raise their expectations about getting what they want ? when and where they want it ? retailers must be keenly focused on each link in their supply chain, from the initial product source, to transportation and delivery, to the store shelf ? as well as the virtual shelf, for that matter.

?The customer of today often demands and expects the physical side of the supply chain to move as fast as the technology at their fingertips,? observes Scott Reily, SVP of logistics at Brookshire Grocery Co., a regional chain of more than 150 stores, based in Tyler, Texas.

The growing list of consumer (and retailer) concerns impacting the supply chain includes food safety and security, the desire for locally sourced products, an interest in sustainability and product ingredients, and a growing appetite for high-quality fresh food. It?s a wonder that any grocers can keep up.

Yet Reily and others acknowledge that the supermarket industry is doing a sufficient job of managing the supply chain, especially considering the consumer demands and constantly changing regulations retailers have encountered.

?I think the state of the supply chain in the typical supermarket today is better than ever,? says Reily. ?Despite all the things food retailers are doing right, they are constantly looking for better ways to satisfy their consumers.?

Pat Walsh, VP of supply chain and chief business development officer at the Arlington, Va.-based Food Marketing Institute (FMI), concurs, but he notes, ?The industry still has substantial room for improvement. Retailers are investing in supply chain technologies to ensure they provide better customer service and improve supply chain capabilities. The key issue is how retailers and suppliers manage data effectively.?

Smaller is More Complex

Ken Morris, principal at Boston-based consultancy Boston Retail Partners, lauds chains such as Publix Super Markets, Wegmans Food Markets, Whole Foods Market and Trader Joe?s for their success in working with smaller, locally owned vendors. ?Dealing with many small, local vendors often creates more complexity and manual processes, with more SKUs, less economies of scale, and the difficulties in managing relationships and processes with small businesses,? he says.

When it comes to working with larger suppliers, direct store delivery has provided better efficiencies for many retailers, he notes.

Meanwhile, a growing number of grocers are turning to innovative technology applications to get a better handle on their supply chains. ?Many grocers are leveraging advanced analytics technology to optimize inventory levels, reduce cycle times, improve forecast accuracy and maximize on-shelf availability,? observes Morris.

Boston Retail Partners is working with Dedham, Mass.-based software provider Reflexis and a large grocery chain to develop a software package that provides ?real-time visibility? to the supply chain, he adds. This will enable the company to react immediately to exceptions and bottlenecks throughout the supply chain.

In another example of smart technology, Eden Prairie, Minn.-based distributor Supervalu Inc. relies on SVHarbor, a web-based business tool it introduced more than a decade ago, to support its business partners. Since its launch, SVHarbor has grown to support retailers with scheduling, ordering, advertising and planning functions. The tool also provides services for suppliers to support retailers? category management and accounting needs, providing greater transparency.

FMI?s Walsh points out that one of the main challenges faced by retailers boils down to ?supply chain complexity and simplicity ? in other words, balancing capital investments in technology and [getting an] immediate return on those investments to impact supply chain performance.?

?Unified Commerce?

For all of the industry?s accomplishments, there?s at least one area where supermarkets have some room to catch up, according to Morris at Boston Retail Partners ? and that?s in the area of merging their bricks and clicks (assuming they offer some sort of online ordering or delivery model).

?The current retail industry supply chain focus is on innovation and technology for omni-channel environments, and it?s non-grocery retailers that are leading the way,? he says.

Although many specialty and mass retailers are integrating their internet and store operations successfully, these functions are often still being managed in separate silos, notes Morris.

So now, the omni-channel approach needs to be upgraded to a new ?unified commerce model,? in which individual channel silos are eliminated, with technology being offered on a single platform. Boston Retail Partners goes into more detail about this model in its 2014 Annual Supply Chain Benchmark Survey, which the firm released last July.

The survey revealed that 93 percent of companies are adopting a unified commerce model, with 54 percent in the planning stages and 39 percent currently implementing solutions. Yet even the organizations that are making unified commerce a priority still have silos, as only 22 percent of companies indicated that they?ve merged their channels into a single organization. Of the more than 500 companies included in the survey, 7 percent were grocery or food and beverage retailers.

Morris acknowledges that omni-channel dynamics have created operational complexities in the grocery sector, with shoppers expecting to order online and pick up groceries at local stores or have items delivered to their homes. ?Successfully delivering on this promise requires grocers to invest in new systems and processes that enable cross-channel inventory visibility and nimble execution,? he says.

Ultimately, the grocers that can figure out the most efficient ways to deliver on their customers? expectations ? whether in the store or online ? will win in supply chain efficiency.

But grocers should have smart employees as well as smart tech. ?I would take good people over technology at any opportunity,? stresses Brookshire?s Reily. ?It?s important, though, to provide your people with the right tools, which includes investigating the right technology to meet the customer demands and the government requirements.?

?Retailers are investing in supply chain technologies to ensure they provide better customer service and improve supply chain capabilities. The key issue is how retailers and suppliers manage data effectively.?
?Pat Walsh, Food Marketing Institue

?The state of the supply chain in the typical supermarket today is better than ever. Despite all the things food retailers are doing right, they are constantly looking for better ways to satisfy their consumers.?
?Scott Reily, Brookshire Grocery Co.