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The convenience store supply chain is constantly teetering between delivering convenience and increasing profitability.
In general, at c-store chains, there are between 300 and 500 SKUs per store. Most c-stores don’t have a backroom, and their replenishment cycles are more complex and faster to reduce out-of-stocks. For c-stores, the elimination of slow-moving items is essential.
The focus is on bestselling items that have higher margins, making the difference between a profitable and non-profitable c-store chain. There is very limited margin for error. Category management is essential. In addition, the success of a c-store chain is largely based on balancing leader brands and owned-brands, but always with the focus of higher margins.
Before the Internet, c-store owners were relegated to pen and paper to manage inventory, painstakingly documenting replenishment needs shelf by shelf. And there was no visibility over the entire network. Therefore, the strategy of replenishment was foundationally based on assumption, leading to an overflow of some products and an underflow of others, which ultimately led to a decrease in profit margins.
ON-PREMISE SUPPLY CHAIN
Allowing c-stores to move from pen and paper, the introduction of on-premise solutions offered a more efficient supply chain process. However, there were challenges.
On-premise solutions require a greater upfront investment and regular maintenance for additional costs, making them cost prohibitive for some of the smaller convenience store brands. On-premise solutions take significant time to implement and maintain. Additionally, on-premise solutions can occupy major real estate, which is a huge issue for convenience stores that are working with smaller floor plans.
The infiltration of true cloud solutions transformed the supply chain, and the c-store industry is no exception. With the introduction of the cloud, convenience stores are able to gain the advantage of larger brands.
With no upfront costs, faster implementation times and the speed and ease of use of the Internet, cloud-based solutions change convenience store fulfillment in a big way:
- Visibility: Cloud solutions have greatly widened visibility over the c-store’s supply chain. Supply chain directors can now build an accurate warehouse replenishment strategy that is separate from a store replenishment plan, as well as a strategy that unifies the two. From warehouse to store, owners can see precise product levels. Furthermore, there is visibility from store to store, allowing for a more dynamic replenishment network.
- Replenishment based on actual consumption: Replenishing based on assumption is a losing game. Constant communication between warehouse and store is critical as store owners are better equipped to plan for the consumption habits of their neighborhood. Owners can now consistently send consumption signals to the warehouse, allowing the warehouse to prepare replenishment stock accordingly.
- Boundless business growth: With cloud solutions, c-stores are able to automate supply chain processes, opening up new avenues for cost cutting and increased revenue. Additionally, because true cloud solutions are rooted in the efficiency and speed of the Internet, adding new stores to the network is easier.
The introduction of the cloud to c-store supply chains provides a fertile foundation for c-stores to grow their footprint.
To fully benefit from this cloud supply chain era, convenience stores need to consider making some strategic changes:
- Minimize one-off sales: These are short-lived product bursts that disrupt the flow of the convenience store supply chain. The return on investment of one-off sales generally does not counterbalance the disruption enough to make them worth it.
- Utilize store brands strategically: Because c-stores have a difficult time competing on price due to larger wholesale costs, it will become increasingly imperative to focus on moving their own brands as much as they move leader brands. Placing store products next to leader brands can help create awareness and demand for the store brand.
- Omni-channel supply chain: The smaller real estate of c-stores allows them to be nestled in the heart of neighborhoods. Because of this, convenience stores are in a prime position to offer delivery. Additionally, cloud supply chain solutions offer network visibility, making a customer delivery offering possible. With the ubiquity of same-day delivery and the entrance of grocery delivery services, it will be increasingly imperative for convenience stores to offer delivery services to compete.
Cloud supply chain solutions have opened up a plethora of opportunities for convenience stores. If implemented strategically, the sky’s the limit (pun intended).
Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.