How Omnichannel Strategies Minimize Supply Chain Waste

This is a FMI authored article by Doug Baker, Vice President, Industry Relations, FMI.

According to FMI’s latest The Food Retailing Industry Speaks report, the COVID-19 pandemic drove 51 percent of retailers to encourage customers to order online, and 24 percent offered more SKUs online. Not surprisingly, 92 percent of food retailers with an ecommerce channel predicted that their online sales would increase in 2020, and strategic ecommerce experimentation was planned to increase significantly, from 67 percent in 2019 to 83 percent in 2020. report.

It’s no surprise that grocery retailers of all sizes are looking to improve their ecommerce strategy and make thoughtful investments in new technology. Speaks finds approximately 75 percent of retailers with fewer than 10 stores and 85-90 percent of retailers with more than 100 stores are actively experimenting with accommodating for new technologies to improve both efficiency and the customer experience.

Today’s retailers need a strong omnichannel strategy in place to meet rapidly changing consumer needs resulting from the pandemic.

Today’s retailers need a strong omnichannel strategy in place to meet rapidly changing consumer needs resulting from the pandemic. As more people choose to take advantage of ecommerce for delivery of their essential food items, retailers must ensure that they have forecasting and replenishment capabilities that give them end-to-end supply chain visibility.

Make Strategic Ecommerce Decisions

To be successful with ecommerce, grocery retailers need to make strategic decisions about:

  • Whether to use a centralized or decentralized fulfilment model.
  • Whether to use dark stores, distribution centers, and/or open stores for picking and packing online orders.
  • How to ensure that inventory will be appropriately allocated to each channel, both online and offline.

Take Advantage of Automation

Retailers also need to take advantage of technology that can deliver automated, data-driven, channel-specific forecast and replenishment capabilities that take into consideration all external factors that can impact demand. Such forecast and replenishment capabilities can ensure that fresh and ultra-fresh foods will be available in appropriate quantities to fulfill online orders (which are likely to differ from purchases made by in-store shoppers) while minimizing waste.

Rethink Availability vs. Waste in Your Grocery Supply Chain

It’s important to remember that automation should not mean creating a black box. Rather, it should mean lightening the load on planners so they can focus on areas where their expertise really makes a difference — most notably, managing exceptions. A good retail planning system allows you to audit it. If there’s a problem, say the spike in spoilage that some grocers experience on a particular day of the week, you should be able to locate the root cause, such as systematically inconsistent demand.

Other issues worth being aware of include over-large batch or inventory sizes and display space-driven spoilage, where too large an area has been allocated to a fresh item and minimum display requirements lead to stock exceeding demand.

For more information on technology in food retail, see these resources developed in partnership with FMI member, RELEX Solution: