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New challenges: "Hot shopping" and "hot shipping" trends in the fresh produce and food supply chains

Consumer habits have changed radically and they have changed quickly. Classic supermarkets are now not only competing with each other but also with the new faces of Aldi or Lidl . The bottle-necks in logistics and in liner shipping add a number of risks

 

by Paula Stefan , Journalist

Shoppers' habits are changing

The world is changing. We are changing. The way people shop now is very different from ten years ago. Long gone are the days when shoppers made a trip once a week to a large supermarket to complete the weekly shop. Now consumers :

1.             Don't think in terms of channels but do see different strengths in different forms of retailing

2.             Use multiple channels in combination with one another

3.             Are motivated to get the best overall range, value and convenience

Changing shopper habits has led to three trends in the global grocery markets

1.             Increased penetration of online grocery shopping

2.             Shoppers shopping ‘little and often' means their local stores remain relevant

3.             The rise of the discounters in many countries

Supermarkets have to effectively compete in at least one of these ‘hot' channels to drive growth. The majority of the grocery retailers have operated in all of these channels for some time, but with little or no growth in the more traditional channels, focus has turned sharply to convenience, discount and online operations.

What does this mean for supply chain?

The supply chain characteristics of the convenience, discount and online channels are very different to supplying a more standard supermarket/hypermarket operation.

Online

  • Multichannel retailers service online orders through a mix of picking in-store and dedicated fulfilment centres
  • Stores need to maximise availability earlier in the day to ensure optimum picking
  • Demand patterns for online orders can be very different to store sales, making forecasting and planning harder for manufacturers

Convenience

  • Smaller stores have less shelf space, little room to store and organise incoming deliveries and limited vehicle access
  • Sales volatility is high both within the day and through the year
  • Case sizes, order frequency, order quantity, vehicle size, product ranges, replenishment sizes, RRP solutions and in-store processes all need to be re-evaluated

Discount

  • Offer a limited range, run basic stores and tightly control costs
  • Operate with basic IT systems - for example orders can be placed via email
  • Little data sharing across supply chain, making collaborative working difficult
  • Use own product descriptions vs barcodes/supplier descriptions leading to confusion

Complexity is rising

With some retailers operating in all of these sales channels, it's inevitable that supply chain complexity is rising. This can lead to inefficiencies and rising costs - which is not an option in today's trading environment.

To help combat complexity and provide solutions to these challenges, retailers are asking for more from their suppliers:

Discount
Traditionally difficult to engage with, discounters operate with strict parameters and like full pallets and full truck loads to keep costs down. IT systems are unsophisticated and failure to comply with these rules means suppliers will be de-listed

Convenience
Pack size is a particular issue. If suppliers used smaller pack sizes, more suitable for the smaller operational areas of stores, it would improve operational efficiency for retailers

Online
The online pick for customer orders tends to happen between 5 - 7am in-store. This means stores need to be fully stocked much earlier in the day than previously. Shortening lead times and earlier deliveries back through the chain would help retailers improve on-shelf availability

Producers and food manufacturers

As complexity rises, manufacturers are looking to their own businesses to simplify operations.Enhancing partnerships with trading partners is vitally important. Further collaboration, be it with retail trading partners, logistics companies or suppliers further down the chain is required to tackle the multichannel supply chain challenge.

Many collaborative partnerships are already underway in all of the channels and are starting to make a difference to performance.

This is encouraging - these challenges are too great and too complex to tackle alone and those that collaborate, and collaborate well, will thrive.

Reefer Logisticians are playing and shall play a key role in this "hot channel" trends, too.

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