The topic of retail optimization for food businesses is important because retailers have an incredibly high standard for peak supply chain performance. Suppliers that don’t provide on-time, accurate deliveries can face costly penalties and other repercussions. Of course, when you’re dealing with food, which is often perishable and may need to be shipped at a certain temperature, there are added layers of complexity since you risk the product going bad.
A Timely Issue
The food business is getting a new wave of attention as it takes on new forms, including online grocery shopping and delivery of food orders to consumers’ doorsteps. With increasing interest in services like this, ensuring the quality of the food has become more complex than ever.
To help address the evolving challenges in the industry, compliance programs are now the norm within today’s retail supply chain. They’re designed to give the retailers a competitive edge, outline appointment times, and set delivery standards along with penalties for not meeting the terms. The theme with retailer compliance programs is the same: non-compliance results in hefty costs and the risk of lost business.
To gain that competitive edge, shippers are focused on retail consolidation programs that optimize food shipments, while at the same time improving customer service to help shippers get ahead. These programs not only enhance the level of control, but also provide a deeper level of visibility, create efficiencies, capture critical business intelligence, decrease costs, reduce mileage, improve speed to market, and decrease over, short, and damage claims.
Important benefits include better visibility and collaboration across the supply chain, enhanced inventory management, and shorter transit times.
Better visibility and collaboration. Supply chain performance plays a critical role in controlling costs and improving service. According to a survey by ECR Europe and McKinsey, successful supply chain collaboration on average resulted in a 4.4 percent decrease in out-of-stock instances and a cost reduction of 5.4 percent.
Collaboration can—and should—begin early in the supply chain. Shippers’ supply chain providers can provide an analysis of the entire supply chain and break down the invisible barriers that exist between different divisions within a supplier. Often, suppliers find themselves unaware of what others within the business may be doing. They can also become so focused on meeting their immediate goals, they lose sight of the big picture. This type of siloed approach doesn’t work to anyone’s benefit.
Early planning also helps providers offer a custom solution. For food service companies with multiple distribution facilities, retail consolidation becomes an important piece in the supply chain strategy and a critical method for improving profitability.
Enhanced inventory management. Inventory control is critical in the retail sector, especially when it comes to food, given the need to closely monitor and adhere to expiration dates and shelf life limitations. Perishables that have gone bad lead to a great deal of waste, and the supply chain complexity behind these items can be tricky to manage. In addition to being costly in terms of lost sales and discarded product, food recalls can be severely damaging to brand reputation and customer loyalty.
Retailers try to keep their inventories low and prefer just-in-time deliveries from vendors. At the same time, they want to make sure the product they need is going to be available. This becomes a real balancing act when seasonal demand for certain food items increases or decreases, such as during the summer months when certain products like bottled water are more popular, for example, or during the winter holidays, when a different group of seasonal items are more in demand.
As part of a retail optimization program, supply chain service providers can help retailers and suppliers manage inventory by analyzing data and making proactive inventory and transportation decisions.
Shorter transit times. The growth of the omni-channel sector—including in the grocery business—means customers expect things at the click of a button. Case in point: A recent report from Internet Retailer details the online grocery boom, noting that the sector is expected to grow by 157 percent to $42.1 billion this year alone, according to Morgan Stanley.
Continual analysis of transit time data along with proactive communication can help suppliers plan and execute an effective transportation strategy as the omni-channel food retail market continues to grow. For example, by combining partial loads into fully utilized truckloads, suppliers can achieve shorter, more predictable transit times. With proper pre-planning, loads can be consolidated, which typically allows more direct transportation routes. This, in turn, reduces the risk of damage and errors.
A comprehensive network optimization effort can drive major reductions in landed costs while maintaining—and in some cases, even improving—transit times. Considerations include production, warehousing, and inventory needs, in addition to transportation. Warehouse location, growth projections, and potential new markets should all be closely considered and included in forward planning to ensure that today’s working solution does not become tomorrow’s roadblock to scalability.
The decision to work with a single national warehouse provider or multiple regional warehouse providers is driven largely by two things: 1) cost and 2) the consideration of utilizing a single or multiple warehouse management system(s). This analysis complements a mode optimization effort, allowing shippers to control costs and enhance service through the optimum blend of intermodal, truckload, and less-than-load services.
A good retail consolidation program allows the entire supply network to comply with retailers’ requirements while also increasing visibility, reliability, and quality of product. Overall, this creates value for the shipper and end-customers through improved service. Everyone wins.
Given the benefits, there’s a clear case for implementing a retail optimization strategy when it comes to ensuring quality and safety of food, given the logistic complexities involved with managing perishables.
Bass, director of sales at AFN Logistics, has held several positions at AFN, giving him broad experience across operations, carrier relations, and developing supply chain solutions. Reach him at email@example.com.