Before you say, “I am not into material handling so this is not my conference,” stop. Yes, there were some material handling discussions, but this really was about managing the supply chain. So I would encourage anyone who is in retail, food, manufacturing, or logistics, who thinks about the flow of goods, to consider this conference next year. Banner brands and companies attended (and for our audience of potential sponsors, you might consider sponsoring, since the top flight retailers, distributors, and manufacturers attending were the who’s who in their respective industries).
There were too many sessions to cover, including Omni-channel, home delivery, modernizing and creating high-performance distribution, whether in retail, grocery, or globalization, so I will just cover a few highlights.
Grocery Gurus
One of the best panel discussions I have attended in years featured Mario Adamy, Vice President, Corporate Distribution, Safeway; Rick Keyes, Executive Vice President, Supply Chain & Manufacturing, Meijer; and Jerry Pimental, Vice President, Supply Chain, Stop & Shop/Ahold. These execs know the grocery business and supply chain and are at the forefront of the dramatic changes occurring in the industry — from next gen millennial mobile shoppers, going green and organic, new types of logistics, displays and shelving, to the overall SKU explosion.
Much of the discussion centered on the changing customer base and the need for supply chain to respond to it. There is a new generation of households (the millennials). Mark Zandi, Chief Economist, Moody’s Analytics (another speaker we had at the conference) stated that about 4.5 million millennials are living at home who might be creating their own households soon. That, plus the increasing population and social mobility, means not only increasing grocery business, but a changing customer base.
Millennials are also moving to mega urban or mid-size urban centers, creating increased demand that has to be pushed through smaller store formats. That means a higher velocity. Yet adding more trucks at the loading docks is not desirable in the urban environments. As a result, we are seeing smarter assortments and new fresh/ready displays coming into their own that allow much faster unloading and quicker deployments into the front of the store.
Customers are also more informed about price and ingredients, are looking for different products and assortments, and are expecting different delivery methods. Examples are click and collect, mobile, drop to point of consumption, and regular weekly (or daily) home delivery. (More on Jerry Pimental’s Peapod story of home delivery in the next section.)
Another interesting facet of the trend to mobile is the move away from print advertising, which has an impact on the supply chain. Rick Keyes described how promotional launches have changed. In the old days, ad executives would decide to launch a promotion and it took two weeks for that advertisement to appear in the papers, plenty of time to respond with inventory to support the promotion. Nowadays, they can decide that mid-week and expect to have the promotion launched that week. Hence, the supply chain has a much shorter time in which to respond.
There has also been a SKU explosion: Organic, gluten free, fresher produce, freshly prepared meals, locally grown, international cuisine, specialty and gourmet departments, as well as package size are all factors. Behind the scenes these issues may mean rethinking the distribution strategies — number and location of warehouses, logistics — size of equipment and frequency of delivery, and much finer grained demand planning to ensure that the right kind of product is going to the right store (or consumer’s location).
One note of interest was a discussion about the Food Safety Modernization Act. The panelists all agreed that the impact on the food/grocery industry would be huge. And 2015 needs to be a year of implementation. So firms have to be preparing now.
Peapod’s Home Delivery
This session was one of those overwhelming project presentations about Peapod’s growth and their building of and bringing online a new distribution facility to support NYC and Northern NJ for home grocery delivery. From the customers’ perspective, they just want what they asked for on time. But behind the scenes, what it actually takes to create the facility, understand the demand and manage the inventory, train the workers, create and schedule the delivery routes to ensure that on-time delivery is not trivial.
We have been writing a lot about home delivery from the outbound side, but this was a pick and pack operation built from the ground up. Gone are the days of picking from the store and having your ‘delivery boy’ bring it to the house.
Hundreds of thousands of square foot distribution centers designed specifically for home delivery are being built. In the past, DCs may have been blended with traditional fulfillment models. But the fact is that for grocers who do home delivery, the interior design of these DCs is quite different than a typical food DC, and they continue to learn about what works, how workers can be successful with the intense atmosphere and high degree of accuracy required at each handoff — from inbound, put away, picking, packing and ultimately, to the home.
Of course, stores will be around in the future. But so will alternative approaches, and the logistics strategies are more important than ever. If the trend to virtual stores and other short-window delivery preferences continues to grow, expect to see many more branded delivery vans in your neighborhood.
Conclusion
The world of material handling and logistics is rapidly changing, reflecting the needs of the greater world. Other presentations, as well, demonstrated what we have always felt — that ‘markets determine supply chain design.’ The days of thinking of warehouses as being somehow distinct from customers — if that was really ever so — are gone. Though rooted in the assets and equipment, new methods and new data requirements are catalyzing change within the industry. With Omni-channel strategies emerging in every industry, and the decisions you make about how you design your processes make or break decisions, these types of conferences are a critical step to learn from each other.
To view other articles from this issue of the brief, click here.