What Do Supply Chains Need to Win? It All Starts With the Shopper.

Shoppers rule. Here’s how retailers and brands can rethink supply chains to serve fulfillment’s many new avenues.  

The digital shelf is here. Getting goods to it? That’s another story.

As the digital channel grows in importance for retailers and CPG brands, moving goods for in-store and online customers means mastering not only the market shift but also striking the right partnerships to serve it.

It’s a complex transition that finds the supply chain morphing from its traditional function as a cost center that moves physical goods to a far more nuanced, pivotal role in shopper fulfillment and customer experience.

Why now? Credit the accelerating rise of the online channel and the contraction of the middle store. A joint report from the Food Marketing Institute and Nielsen predicts 40% of center store volume will migrate to online shopping. The impending shift is already upending routes to market for the four mainstay categories in consumer goods: personal care, household, health and beauty, and food and beverage.

The result of the shift is a marketplace that’s shopper driven and increasingly complex. First moments of truth happen at the digital shelf as well as the in-store physical shelf. And fulfillment ranges from home delivery, to click and collect, to the Instant Pick up that Amazon is rolling out this month on college campuses.

How do retailers and brands rethink supply chains to deliver goods among the many new avenues or purchase and fulfillment? For one thing, they must become adept at moving small orders quickly. Slice Intelligence found 60% of CPG e-commerce is small baskets of one to three items.

For another, they need to understand the mix of trips. Slice found stock-up orders are accelerating, as are fill-in trips, those necessary purchases that occur outside of major shopping excursions, like weekly grocery store visits and quick trips to buy something we have unexpectedly run out of. Slice predicts 38% increase in fill-in trips. 


Key Statistics

So far, even the largest retailers have trouble delivering. My recent experience with an online fill-in order at WalMart shows the complexity of this new reality. My order included 10 common items such as soda and dish soap. Some items were out of stock, some backordered. I received multiple partial orders. 

The fits-and-starts approach to shopper fulfillment isn’t a convenient or viable solution.


Two Principles for Shopper-Ready Supply Chains

How can CPG companies ensure availability of products for digital and physical shelves, and deliver orders that are complete, on-time and down to a granular SKU level?

Ocado provides an example of one answer. The UK online grocer is an Amazon-like example of a company that has put robotics and automation to smart use to create profitable home delivery. Ocado’s scalable home-delivery platform grew so successful it began leasing its use to traditional grocers looking to beef up their online businesses.

For companies that face the greater challenge of serving both the physical and digital shelves, recasting supply chains to move merchandise for fulfillment purposes embodies two main principles:

  1. Measure and monitor the marketplace shift. What’s going on at the store level for your product category? How many orders are sold through digital? How the shift plays out in each store will be different. On the digital shelf, brands know little about whether they missed a sale due to product being out of stock or backordered. Given the shift of sales moving to the digital shelf, brands need to understand how this shift is occurring in their product category, how fast and what impact to overall in-store and digital shelf fulfillment is needed to win with the shopper.  Their first order of business to build a shopper-centric supply chain is getting the store-level data across both digital and in-store shelves – a real-time descriptive model of the shopper shift. 

  2. Build the new channel with your retail partners. Brands have an opportunity to move away from the existing supply chain models of pushing products and seize this moment to begin building out the next generation of supply chain practices – focused on shopper fulfilment.  When a shopper buys your product on-line, the first moment of truth is not completed until he/she receives it.  The time requirement for completing this moment of truth continues to decrease and of course we are fulfilling at an individual sku level across several different methods – home delivery, click and carry and in-store.  Who owns digital and in-store shopper experiences? How do retailers and brands ensure positive experiences that keep consumers coming back? That means understanding the nuances of the first moment of truth at digital and physical shelves. It also means knowing orders have been completed and that there was a positive customer experience.

Emphasis in the center store going forward will be on quality not quantity. Have you provided the right assortment for the shopper who shops your category in-store at this store correct?  The old motto stack-them-high-let-‘em-fly is history. To optimize physical shelf space, brands will need to convince retailers of the economics and then fine-tune their shelves for the store traffic. And not use it as a fulfillment center.

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