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By Leslie Hand, Research Director, IDC Retail Insights
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Through the course of our research for our recently published report Vendor Landscape for Grocery PLM and Traceability Solutions, we identified a distinct interest by grocery retailers in transforming their supply chains to something akin to what many in the industry are referring to as a “smart” supply chain. Clearly the time of the smart supply chain is upon us, and grocers are in a unique position to leverage the transformation of their supply chains to respond to customer needs for greater visibility, and industry demands for compliance and traceability efforts.
Smart Supply Chains And Customer Visibility are Driving Changes in Grocery Retail
There is no doubt that the nature of the grocer’s relationship to their brand, their value chain, and their customer is shifting quickly. Grocers are feeling the pressures from a number of different directions, and are being challenged to transform their value chain in a way that balances regulatory, customer, and internal demands. As I recently discussed in our 2013 IDC Top 10 Predictions for Retailers, retailers will optimize their omnichannel customer service and cost by enabling trustworthy, efficient and effective supply chains (TEE). We define the TEE supply chain as the use of smart supply chain technologies (e.g. software, analytics, mobile devices, sensors, social networks, cloud) to improve the economic and consumer brand strength of a retailer.
This optimization of the supply chain goes hand in hand with another important prediction IDC Global Retail Insights sees for the coming year. We believe retailers will invest in technologies that enable visibility, visualization and virtualization. Central to this growing effort to build visibility into the food supply chain from farm to fork is the desire for grocers to strengthen their brand, which today includes an increasing amount of store-brand and private-label product that thrust grocers into the role of manufacturer or at least product developer and steward.
The Evolving Role Of The Grocer
By assuming greater responsibility for brands, particularly from the consumer’s perspective, the grocer accepts ownership of added process complexity, with new requirements around ingredients tracking, packaging and labeling, and track and trace from order through manufacture to the store shelf. Add to this the global nature of the food supply chain and efforts to manage all of the moving parts become overwhelming.
Critical to success, traceability is both a business process and a set of application tools, so there is a need to be certain the right processes are in place before looking for the right set of tools to help facilitate traceability and supply chain visibility. As brand owner and brand representative, as in the case of “the face of the recall” for any product in their store because of their proximity to the end consumer, the retailer must manage customer expectations and provide the appropriate levels of transparency. In addition, with private brands central to business strategy, retailers now need an efficient way of bringing new private label products to market, and they need to manage more of the details from formulation through ingredient management, production, and delivery to the store shelf and ultimately home cupboard/refrigerator. This is where PLM tailored for grocery improves process efficiency and effectiveness, as well as innovation potential.
Business Drivers For Traceability
At IDC Global Retail Insights, we’ve been speaking with retailers about traceability for some time, in the greater context of supply chain visibility and collaboration with partners. We are seeing an increased effort by retailers to balance the value of customer intimacy with the value of supply chain mastery to deliver the optimal omnichannel customer experience. Customers are demanding that they have access to the right product at the right time, in the place they determine. At the same time, the bar for service is ever being raised, and retailers are acutely aware that any lapse in customer service will send customers to their competitor. To succeed in omnichannel, retailers need to instrument their supply chain so that it is trustworthy, efficient and effective.
Achieving this level of visibility requires collaboration with suppliers up and down the food value chain. As our recent Supply Chain Survey revealed, food manufacturers and grocery retailers both believe that collaboration and traceability are key drivers for improving product quality and safety. 50% of respondents selected improving collaboration with suppliers as the key activity driver for improving product quality, while enabling better supply chain visibility and/or traceability tied for second.
The goal for many grocery retailers, then, is to create systems and processes that engage suppliers in a collaborative way to achieve visibility throughout the product lifecycle. However, supplier collaboration can be one of the biggest challenges for retailers as they move down the path of product lifecycle management and traceability.
Conclusion
In conclusion, as grocery retailers find themselves in their expanded role of brand owner, they will instrument their smarter supply chains by tackling challenges including managing product development & sourcing, supplier onboarding, customer visibility and recall preparedness and brand protection. The solution requires a combination of process redesign and traceability and PLM re-tooling.
As Research Director for IDC Retail Insights, Leslie Hand provides fact-based research and analysis for IDC Retail Insights Supply Chain, Merchandising and Demand Management service. She also provides thought leadership on Sustainability, IT for Green and RFID. Hand regularly contributes to the Retail PLM and Sourcing blog in the IDC Retail Insights Community (http://idc-insights-community.com/retail). Her Twitter handle is lesliehand.
