For many of us, the most appealing factor about online shopping is the convenience. We’ve been able to purchase goods online and have them delivered to our homes for quite some time. As a result, there’s a certain level of experience we’ve come to expect. Now that we’re seeing many grocery retailers offer online ordering and delivery options as well, it makes sense that we would expect the same level of experience from this vertical.
However, I’ve been hearing more frequent accounts of flawed grocery deliveries. Each one further reveals a fundamental disconnect between systems in the supply chain, causing what should be a seamless process to be a chaotic and disappointing experience.
For example, one of my team members recently ordered groceries online from a top grocer hoping to take advantage of its convenient delivery service. What went wrong? Nearly everything, it turns out. Six out of the nine items in the order were out of stock, but she had no idea until the order arrived, missing nearly half the items. Some of the out-of-stock items were replaced with substitutions, likely determined by a combination of algorithms and human intervention. However, the substitution process wrongly predicted that my coworker would prefer substituting her chicken with the same brand but a different cut as opposed to a different brand.
The process to cover that last mile of an online grocery order involves many more moving parts than the average consumer would assume and gives way to a much larger and more complex supply chain. So, who is to blame for this delivery mishap? Is it the human who physically packaged the items, the third-party delivery service or the grocery store? The answer is that you cannot pinpoint one area. Instead, the problem stems from the lack of overarching technology connecting each step of the supply chain to ensure each handoff in the process goes as planned.
Traditional grocery stores and supply chain logistics are designed for regional sales where shoppers walk in from the street with a handwritten grocery list of items intended for themselves. Traditional grocers base their pricing, promotion, replenishment and supply chain off that assumption. The current forecasting systems used by grocery stores today are manually intensive, infrastructure-heavy and maybe provide category-level forecasting down to the store level. Grocers that didn’t have store-level forecasting at the SKU level before certainly need it now, but that will only take them part of the distance they need to go. Now, grocers need to handle 200,000-plus SKUs and integrate with third-party delivery services to cover the last mile and fill the consumers’ demand for time-saving shopping tactics.
How do we improve the grocery supply chain?
It’s imperative that grocers get better in order to ensure they remain competitive and keep up with consumer expectations. Knowing that the supply chain can be the source of so many challenges that impact margins and customer experience, I would encourage grocers to consider:
- Recognizing the opportunity and ensure that all levels of top management are aligned with the need for this level of business transformation because it’s complex. That said, it’s worth it. A well-developed and mature supply chain can bring real financial impact, including better margins and improved profitability.
- Developing a feedback loop between all the omnichannel delivery systems — including third-party delivery services — that captures all of the online and offline data. Trying to predict things like demand, replenishment, promotions, pricing and safety stock with only online historical data is like predicting the weather with data from inside a house.
- Implementing an artificial intelligence solution that will link the supply chain gaps through predictive measurements. AI can predict shopping preferences, prices and also forecast changing foot traffic and the increasing quantities of people turning to online orders. This means last-mile delivery services can better source and retrieve ordered items and predict better substitutions. But it’s critical to start slow. Test the solution in one specific category, see how it performs and then roll it out more broadly once the results have been proven.
- Letting go of legacy systems and allocating additional investment in cloud-based technologies that further bridge the gap between disparate systems, allowing for real-time inventory tracking and management. This investment alone will significantly improve inventory allocations, minimize stockouts and reduce food waste.
- Optimizing change readiness and management processes so new technology can be implemented and adopted quickly and effectively.
At the end of the day, people will always need to purchase food, and physical grocery stores are not going anywhere. The major change is how grocers interact with consumers. As grocers race to simplify the way customers shop, we’re realizing this comes with extreme difficulty and requires key technology upgrades across multiple departments. Technology has the ability to fix many of the core issues affecting the grocery sector while minimizing risk, improving profitability and preventing food from being wasted. The end result, hopefully, is that customers (like my team member) receive their full orders.
This article originally appeared in Forbes.
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