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    Retailers’ Supply Chains Follow Suit with Industry Transformation

    How will digitally enhanced supply chains look for traditional grocers?

    By Jenny McTaggart

    As long as supermarkets sell bread and butter, they’ll have a physical supply chain to contend with. But as the “digital age” comes into further maturity — complete with online ordering, mobile communications, cloud computing, and even drones that can be used to deliver products — food retailers can’t afford not to be thinking about their digital supply chains, too.

    With the lines between the digital and physical worlds blurring, retailers’ supply chains will need to look a lot different from how they look in 2016. Stamford, Conn.-based technology research and advisory firm Gartner Inc. predicts that by 2018, 50 percent of chief supply chain officers in $1 billion-plus global companies will design and manage supply chains that support digital business. While the average grocer isn’t that big, there’s no doubt that their supply chains will need to be rewired as well.

    At least one major retailer is already rethinking its supply chain, with digital technology weighing heavily in its decision-making. At the beginning of the year, Bentonville, Ark.-based Wal-Mart Stores Inc. unveiled plans to close 269 stores while also merging its two tech groups: the group that operates from its headquarters and focuses on systems for its stores, and San Bruno, Calif-based Walmart Labs, which facilitates e-commerce development.

    The merged unit, called Walmart Technology, should help Walmart further grow its annual $13 billion e-commerce business, including a recently launched click-and-collect service.

    “Our customers don’t think of these as different experiences,” noted Neil Ashe, head of Walmart’s e-commerce division, in an internal memo cited by published reports.

    This realization — that consumers expect a seamless experience regardless of whether they’re in a physical or virtual store — will no doubt continue to drive changes in other retailers’ supply chains.

    Faster and Smarter

    So how might the new, digitally enhanced supply chains look for traditional grocers? One major difference is that they’ll need to be exponentially faster, according to Mike Griswold, research VP in Gartner’s consumer value chain team.

    “Retailers need to focus their efforts on speed,” he advises. “They need to consider the physical assets they have and look at how to move things faster, how to respond to customers’ needs faster and how to deliver a better experience faster.”

    To help them do that, retailers will need to have real-time visibility of not only their point-of-sale information, but also their perpetual inventory, explains Griswold. Today, fewer than 10 percent of the top 20 North American food retailers are fully connected in this way, he estimates.

    “A lot of retailers already have the real-time point-of-sale data, and they’re able to look at it every 15 minutes, which is nice. But if you can’t respond to that, it’s a waste of time,” he continues. “If they can couple getting the POS data every 15 minutes while also refreshing balance-on-hand information every 15 minutes, then they’ll have a much clearer picture of which products are in which stores.”

    That breadth of data will help retailers manage their supply chains in the physical stores while also responding to online orders, which may well need to be picked in their stores.

    By Jenny McTaggart
    • About Jenny McTaggart Jenny McTaggart is a Progressive Grocer contributing editor.

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