By Ben Ames | May 3, 2017
Grocers are finding new supply chain efficiencies with the latest technology, but the solutions aren’t always perfect out of the box.
Faced with fast-changing demographics, challenges from private-label brands, and a volatile food supply, grocers and consumer packaged-goods (CPG) companies are looking to technology to find new efficiencies in their supply chains, according to retailers attending a food industry conference this week in San Diego.
Approaches like shipment tracking, targeted ads, click-and-collect fulfillment, and home delivery can deliver a smoother supply chain, but these solutions aren’t always perfect right out of the box, users said at the TPA Supply Chain show, a conference hosted by the Trading Partner Alliance (TPA) joint committee of the trade associations Food Marketing Institute (FMI) and Grocery Manufacturers Association (GMA).
The retail food industry has some unique challenges—such as the short shelf life of fresh meats and produce—but most of the industry’s logistics headaches would be familiar to any other retailer trying to manage a complex supply chain, said Rich Kauffeld, principal at the consulting firm PricewaterhouseCoopers Advisory LLC.
There are six disruptive forces in CPG retail supply chains, Kauffeld told attendees at a panel session Monday. He said they include:
- fragmenting demand between consumers willing to pay premium prices and those who can’t or won’t;
- agile new competitors;
- the steep growth curve of Amazon.com Inc.;
- disruptive technologies such as smartphones that identify specific customers as they shop;
- food supply volatility in the wake of extreme weather and natural disasters; and
- uncertain prospects for changing regulations under the Trump administration.
Retailers can adjust to these trends by applying technology innovations, but many users find that they also need to invest significant time to fine-tune these tools to fit the demands of each business sector.
“The biggest challenge is the speed of change,” Rick Keyes, president and CEO of Meijer Inc., a regional grocery chain based in Walker, Mich., said in a panel discussion. “There has always been change, but now we have multiple disruptions happening at once. Just when you solve the problem right in front of you, you realize you should have solved the problem two or three steps away.”
For example, Meijer recently launched a click-and-collect program with curbside pickup, hoping to appeal to millennial shoppers put off by the prospect of searching for parking spaces and wandering store aisles. The system is working, but Meijer has been forced to adjust to several wrinkles, such as order sizes that grew well beyond the staple items like bread and milk, and the unexpectedly high cost of picking those orders in the store, Keyes said.
Another instance of a technology solution that presented unexpected challenges was an initiative by San Diego-based canned seafood proprietor Bumble Bee Foods LLC, which rolled out a series of sustainability, traceability, and social responsibility programs, Bumble Bee president and CEO Chris Lischewski told the panel. Bumble Bee’s new program allows shoppers to go online, enter the serial number from the can of sardines, tuna, or salmon they just purchased, and learn details like the name of the boat that caught that fish, the time and place it was caught, and the location of the facility that processed it. However, Bumble Bee found consumers still make their buying decisions based primarily on purchase price alone, and largely ignore the company’s effort to making its supply chain so transparent to the public, Lischewski said.
Still, the company plans to continue the program, and will justify its investment through long-term improvements in sustainability and reputation, he said.
Meijer and Bumble Bee plan to continue seeking technology solutions to supply chain challenges, their executives said. Future programs could include “planogram optimization,” or the development of models that indicate the shelf placement of products to maximize sales, they said. Meijer will also work on “smart label” food tracing programs, while Bumblebee will develop personalized deals in digital advertisements and begin preparing its products to be purchased in stores without cash registers, such as the Amazon Go convenience store model, according to executives of the two companies.
Ben Ames is Editor at Large and a Senior Editor at Supply Chain Quarterly’s sister publication, DC Velocity.
ben at supplychainquarterly.com
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