It’s been three years since the start of the pandemic and to this day you can still walk into a grocery store and see gaping holes where issues with the supply chain have caused out-of-stock conditions.
Whether it be manufacturing or sourcing issues, transportation costs, labor shortages, inflation, or calamities like the global bird flu, consumers continue to be burdened with higher prices and low inventory of items needed to feed their families.
Why The Shortages?
Since 2020, container costs to transport goods through the supply chain have increased four to five times pre-pandemic levels. Vendors and grocery store retailers will now wait for full container loads before shipping product to their customers and selling locations.
Not helping the situation, the labor pool to pick, pack, and ship product is at 50% of pre-2020 levels due to an aging truck driver pool and lack of available labor to move the product through the supply chain.
Heading into 2023, it’s more important than ever to understand a product’s lifecycle through the supply chain. Integrated forecast tools help predict consumer demand, but these tools initially use historical sales data to predict order cycle and selling patterns.
Using historical data from the last two to three years can’t be relied upon to develop a demand forecast, considering the issues that plagued the supply chain due to the pandemic.
How Tracking and Predicting Are Keys to Success
With the help of logistics and forecasting tools to better track and predict consumer demand, issues with lost sales can be overcome. An automated supply chain that tracks the lifecycle of the product from the point of manufacture or purchase through the sale of those products is essential.
Prior to placing a purchase order, the process must start with vendor collaboration. Leading grocery retailers provide forward-looking SKU level forecasts of anticipated demand so the vendors can schedule labor accordingly to manufacture product ahead of the planned order cycle. With labor in such short supply, understanding demand patterns is critical for the manufacturer.
The Order Lifecycle
Once an order is placed, moving the product through the supply chain as quickly as possible to track where and when that product becomes available for sale is crucial.
Advance Shipping Notifications
It starts with an ASN (Advanced Shipping Notification), alerting the grocer of the details of the order to be shipped.
Grocery retailers with advanced allocation methods and procedures will provide DSD (Direct Store Delivery) instructions on the original order or will provide pre-allocation instructions for their distribution centers. They do this in order to cross dock product from the Distribution Center (DC) to store without repacking or using put away methods for later distribution to their selling locations.
The speed of the delivery is essential and having accurate shipment information to allocate those orders begins with the ASN.
Master Data and Inventory
When the product is received at a selling location or available for customer pick-up or home delivery, accurate master data is key to moving product from the shelf to the end consumer.
Whether that data is managed solely by the vendor via VMI (Vendor Managed Inventory) or handled centrally by the grocer, accurate inventory availability is a must for shoppers ordering online.
According to McKinsey, 20-30% of all grocery purchases occurred online during the height of the pandemic in 2020. Today many services offer same day delivery ( Peapod, Instacart, Fresh Direct, Amazon Fresh, GoPuff, Uber Eats, Door Dash, etc) and each rely on real-time inventory availability to fulfill customer orders.
While the percentage of online grocery purchases is no longer at pandemic levels, many customers now prefer home delivery due to the convenience that comes with all options available by ordering online.
Promotion Planning
Leading grocery retailers use targeted promotional offers for these customers no matter what channel they order from, based on their purchasing history usually through loyalty programs.
Planning profitable promotions are paramount to driving sales across all channels through vendor deals and in-store promotional offers. These promotions are planned and forecasted throughout the year based on offer type and margin targets.
Automated Replenishments
Finally, once a product is sold, automated replenishment processes kick in to generate reorders to the vendor and/or distribution center to keep the shelves full based on anticipated need.
A combination of recent sales data and sophisticated demand forecasting techniques drive future suggested orders to the selling locations using these algorithms.
Inventory analysts rely on automated replenishment systems to drive the ordering process as many of them are responsible for thousands of SKU/store/channel combinations and can only review exceptions based on business rules defined for the product mix.
When working properly, automated replenishment can:
- Reduce costs
- Provide higher service levels
- Increase inventory turn
- Allow the grocer to run with lower stock levels based on the replenishment cycle
A Modern Retail ERP Solution
Leading retailers are turning to SAP S/4HANA® Retail and Merchandise Management solution to enable capabilities that will support a dynamic supply chain strategy.
SAP Customer Activity Repository (SAP CAR) provides grocery retailers with the ability to plan promotions that support sales targets and analyze their effectiveness.
Picking the Right SAP Partner Is Key
Rizing has partnered with SAP to deliver outstanding experiences to our customers with end-to-end SAP S/4HANA Retail capabilities in vertical markets including grocery.
Since 2003, we have completed more grocery SAP implementations in North America than any other SAP service provider. If your company is preparing for a new SAP implementation or plans on migrating from ECC to S/4HANA, Rizing has the capability to help you accomplish your goal.
Rizing’s objective is to enable every business that uses SAP solutions to achieve a truly intelligent enterprise. We help our customers with a combination of our own deep industry experience and leading SAP technologies.
Get started with SAP S/4HANA for Fashion and Retail by taking our specialized assessment session.
Barry Adam
Rizing Senior Director, Business Development