My main prediction for 2015 is that the supply chain will take an increasingly strategic role within grocery retailers, driven by the growing focus on multichannel retailing.
As growth in supermarkets and hypermarkets becomes far more challenging to achieve, retailers will be looking harder at the potential growth opportunities in alternative channels such as smaller formats, online and discount stores.
The good news is those retailers that have developed multichannel operations have done a pretty good job to date, with 82% telling us that they are on top of it, or have a good idea of what needs to be done. This is unsurprising given that they view multichannel as a long term growth opportunity, and are building it into their strategic plans.
However, as operating through a number of channels becomes the new normal, supply chain flexibility and robustness will be key to delivering success. For many, this will not be easy, with effective product distribution being one of the biggest challenges which they will face.
The combination of delivering to small stores in urban areas and shoppers’ homes often means small and frequent orders. This is tough as the major grocery retailers have designed their infrastructure and processes to do the opposite, i.e. deliver larger orders to out–of-town-stores.
Adding in the complexity caused by differing demand patterns, the need for channel specific product formats and varying promotional effectiveness across the channels, often means that common processes can’t always be used. This can create a knock-on effect in terms of forecast accuracy and executing promotions effectively. Consequently retailers don’t always excel in these new channels as they have done historically across their core operations.
But these channels are where the future growth will come from. Getting it right will require investment in the supply chain, and a lot of hard work. As retailer strategy pivots towards a multichannel approach, those that can fully integrate the supply chain within this, are more likely to deliver operational excellence and better efficiencies.
For many companies, this will require a major change of mind-set. No longer will the supply chain just play a supporting role, responding to business changes, but will become fully involved in driving the changes that are required across the organisation.