The BearingPoint Supply Chain Vulnerability Framework[1] enables organisations to identify risks and opportunities within their supply chains on the premise that being forewarned is being forearmed, and therefore actions can be taken. We have taken our framework and flipped it on its head – the risks are now issues. This insight outlines the opportunity to pragmatically and constructively respond to the key issues in a considered manner, while mitigating further risk which could be created by focusing only on the immediate challenges.

Re-orientating and re-applying the framework through an issue-tackling lens can feed into you and your teams’ efforts in maintaining control of the supply chain and high service levels for your customers in an environment where the challenge evolves by the hour. In this initial insight we will focus on the sector experiencing the largest increase in supply chain pressure, Grocery.

Supply chain risks and issues are anything that threatens or delivers interruption to the workings of the supply chain, which can be grouped into ‘drivers’. Some of these are external and not under your organisation’s direct control, i.e. government decisions, whereas others are internal and are under your control, i.e. how you change process to respond – this is illustrated below. Which of these areas drive the biggest challenge in a specific organisation in a specific situation will depend on the relationships between the drivers, e.g. Morrisons’ ownership and control of its’ abattoirs, bakeries and food processing facilities may buffer the supply impact of availability of ingredients or products whereas other grocers’ challenges may take a different form.

The risk and issue drivers are directly and indirectly disrupting the Grocery industry today – from Home Delivery, through Stores and Distribution Centres, back to suppliers and throughout all central Support Centre teams. The following section identifies some of the key challenges and suggests actions which can be taken to manage, control and maintain service. All of these issues need to be assessed through an Effort / Benefit trade-off where Effort can include time, skills, complexity and Benefit can include capacity, customer service or sales, and cost minimisation.

The demand for Home Delivery of groceries has maxed out current capacity – it’s estimated that 2019 saw ~7%[2] of grocery sales delivered direct to customers. Let’s assume the market can cope with a 20% uplift in demand, which gives a capacity of ~8.4%. Given the potential demand for grocery home delivery over the next few months there is a significant capacity gap.

Which solutions could create opportunity for increased capacity?

  • Currently customers choose their slots; adjusting this to be postcode-led would enable home delivery to reach more customers more efficiently and is more feasible given the numbers of people who are now working remotely; alternatively, giving flexibility for neighbours to receive could further help
  • Assuming vehicle flexibility, temporarily utilise non-temperature-controlled vehicles to deliver ambient goods while utilising the chill and frozen capability of ‘normal’ fleet
  • Vehicles could be sent to different postcodes pre-stocked with essentials enabling maximum utilisation of space and time while giving maximum customer coverage potential with payments made via apps or other digital methods
  • Mitigate risk of viral spread through drivers by implementing door-step deliveries rather than in-home as a blanket approach
  • Prioritise where appropriate, whether it be demographic driven or those with delivery subscriptions – supporting those most vulnerable and rewarding loyalty is the right thing to do
  • With other areas of retail and hospitality industries struggling, explore opportunities with partners to create additional delivery or collection points using now closed property
  • Encourage and incentivise customers to co-ordinate with neighbours to consolidate orders and maximise vehicle fill and time utilisation
  • Collaborate with providers such as Uber Eats or Deliveroo to create additional capacity or even Royal Mail for mailable-appropriate products
  • Collaborate with commercial food suppliers who normally support bars, restaurants and hotels to utilise their now quiet fleets

Stores are also seeing unprecedented levels of footfall and demand, higher than those seen at the traditional annual peak of Christmas which in turn is driving demand through to distribution centres:

  • Focus energy on priority products through segmentation techniques (for example top 20% of products that generate 80% of volume) and ensure flow and availability of staple products – this will maximise the probability of maintaining availability for customers with those products also being most likely to have stronger more robust supply chain flows, facilitate that prioritisation throughout the supply chain
  • Centralise decision-making to minimise localised over-riding of stock allocation decisions to ensure holistic availability and service across the store network
  • With security of supply at one end, managing and controlling the quantities customers can buy across selected product categories can create greater access and smoothen purchasing patterns at the other end
  • Aim to keep colleagues safe and well across shifts by adapting shift changeovers and physical routines; for example, introduce a 15-minute gap between shifts to minimise risk of viral spread
  • Protect drivers by introducing ‘stay-in-cab’ routines when on supplier, logistics or store sites
  • Remove higher-risk, higher-effort activities, such as delicatessens and foreign currency counters and prioritise colleagues onto core grocery replenishment activity
  • Maximise customer opportunity to self-serve; this could be through incentivising customers towards ‘scan as you shop’ using hand-held (maybe personal) devices, flowing cash-only customers to dedicated check-outs with extra precautionary measures in place or adding additional self-checkout technology to manned check-outs – all of these reduce risk and free up colleague capacity
  • If not required immediately because all colleagues are still available, cease the less critical activities to channel resource and focus into primary activities such as inbound receiving, stock replenishment and check-outs
  • Colleagues need the right level of information to feed their actions and to relay to customers as required; ensure these channels are open and are being fed to drive clarity

Stepping back through the customer-end of the supply chain to support centre-based teams creates different challenges which need to be tackled:

  • Liaise with key suppliers to create visibility of inbound product and review the most appropriate way of communicating this through to colleagues and customers
  • Review demand and replenishment parameters to ensure spikes are assessed and smoothened where appropriate to mitigate risk of feeding the bullwhip effect
  • Maximise visibility and effectiveness of internal replenishment needs which may require additional gap scan or process requirements for key staple products
  • Keep communication and escalation lines open as any local, regional or national issues will need to be dealt with quickly and assertively to maintain consistency and order
  • Look for opportunities to maximise the fact that people are staying at home, such as new dining-in deals or entertainment bundles
  • Grant planning teams the space to re-forecast and re-phase inbound flows, especially to avoid a significant bullwhip effect based on spikes in demand which lead to industry-wide stock-outs – as customers are advised to only buy what they need to enable the system to cope, grocers alike should be open to working differently to tackle the issues for overall societal benefit

Grocers are facing a set of short-term end-to-end supply chain challenges, some of which they can control, some of which they can influence, and some of which are out of their control. While grocers can, and are, adapting to remove supply bottlenecks, customer behaviour also needs to adapt to enable safety and efficiency opportunities to be realised. Whether this means accepting there won’t be as broad a product range available, only buying what you actually need or actively changing your own customer journey by engaging with new ways of transacting. Grocers will adapt to serve the nation, the nation needs to adapt to let them.


 


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