us grocery supply chain - progressive grocer
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2
Background & Research Methodology
Notes for the Analysis
Survey Results:
I. The Importance of Fresh
II. Demand Forecasting
III. Auto Replenishment
IV. Distribution Center Forecasting
V. Willingness to Invest in New Systems
VI. Competitive Environment
VII. Survey Participant Classification
VIII. Appendix: Comparison of Current State of Retail And Supply Chain Planning Systems
Table of Contents
3
Background
RELEX Solutions needed to quantify grocers’ supply chain challenges, opportunities, and current approaches. For example: How important is AI/machine learning to current planning. Is it on grocers’ horizon if they’re not currently using it?
Results will inform RELEX strategies for marketing and communications with current and potential customers. Additionally, content will be used in direct communications with retailers through the leading grocery industry publication, Progressive Grocer.
Research Methodology
EnsembleIQ conducted an online survey with grocers who met the following criteria:
• $250M+ in revenue
• Individuals in supply chain and inventory management roles
• Manager, Director, VP/Sr. VP, C-Level/President
• Work at or report into corporate office (not store level)
A total of 54 grocers participated, representing large grocers including, but not limited to:
Price Chopper Supermarkets
Publix
Ralphs
Stater Bros
The Save Mart Companies
Woodman’s Markets
Alberton’s
Giant Food
Houchens Industries
King Soopers
Market Basket
Meijer
4
• Grocers operating online only skipped questions that are not applicable to their business model. Additionally, language varied on some questions for online-only grocers. Question language is noted on applicable pages in this report. For further detail, please refer to the full questionnaire document.
• The first wave of this survey was conducted one year ago (2018). Though results for 2018 are not included in this report, it’s notable that in some instances, survey results in 2019 vary quite a bit from 2018, likely due to a number of factors:
1. 2019 only included grocers, while 2018 included some convenience store chains as well
2. Varying representation of grocer and participant characteristics:
• 2019 included more C-Levels/Presidents and Managers, while 2018 included more Directors and VPs/Sr. VPs
• 2019 included more participating companies with revenue between $250 million - $1 billion, while 2018 included a much higher number of companies with revenue over $10 billion.
Notes for the Analysis
6
It goes without saying that fresh products are important to the grocery business.
Q2. How important are fresh products to your business? (n=54)
fresh products are very important
60% 40%
fresh products are just as important as other product categories
7
But 2/3 of grocers are losing over 1.5% of their annual revenue to expired and spoiled fresh products.
Q3. In relation to your total revenue, what is the cost of expired and spoiled fresh products? (n=54)
9%
<1.0%
22%
1.0% - 1.4%
46%
1.5% - 1.9%
22%
2.0% - 2.4%
9
Grocers with both online and brick and mortar presence most often pick orders from distribution centers, dedicated fulfilment centers, or dark stores, but half pick in store as well.
Q4. Which of the following describes your business? (n=54)Q5. Where are items picked for order fulfillment? (n=32)
60%
37%
4%
Combined
Brick and Mortar
Online Only
Participating Grocers
88%
orders are picked from distribution centers, dedicated fulfillment
centers, or dark stores
50%
orders are picked in stores
10
Store-Product-Day is a slightly more popular approach to forecasting sales.
Q6. On what level do you forecast store sales? (among grocers that are not online only, n=52)
52%
store-product-day store-product-week
46%
11 Q6. On what level do you forecast store sales? (among grocers that are not online only, n=52)
52%
store-product-day store-product-week
46%
among combined brick and mortar + online who pick online orders in storen=16*
separate forecasts for in-store sales and online orders picked in the store
combined forecasts for in-store sales and online orders picked in the store
separate forecasts for in-store sales and online orders picked in the store
combined forecasts for in-store sales and online orders picked in the store
19%
19%
13%
50%
Totaln=52
*small base size, interpret with caution
And in particular, combined store-product-day is most commonly used among brick and mortar + online grocers who pick orders in store.
12
However, store-product-week is most commonly used among combined brick and mortar + online grocers who do not pick orders in store.
Q6. On what level do you forecast store sales? (among grocers that are not online only, n=52)
52%
store-product-day store-product-week
46%
among combined brick and mortar + online who do notpick online orders in storen=16*
63%
40%
38%
55%
Totaln=52
*small base size, interpret with caution
among brick and mortar only grocersn=20*
13
59% 56% 56% 54% 52%44%
Fresh products Holidays Seasonalproducts
New products Local events* Promotions
About 6 in 10 grocers are confident in forecasting sales of fresh products, but perceptions of efficiency and accuracy are low overall, particularly for promotions.
Efficiency/Accuracy in Forecasting (Top 3 Box)
Mean 7.617.70 7.39 7.46 7.35 7.02
Q7. Please rate how efficient and accurate your forecasting is for each of the following. (*’local events’ among grocers that are not online only, n=52; n=54 for all other forecasting scenarios)
14
While ERP systems/add-on modules are the most popular system for demand forecasting, a variety of systems are being used...
9%
33%41%
17%
<1 year 1-3 years 4-7 years >7 years
Q17. What is the current state of your retail and supply chain planning systems?: Demand Forecasting – Type/Vendor & When Implemented (n=54)
Spreadsheets/ No system
17%
Best-of-breed system24%
Developed in-house
26%
Part or add-on module to the ERP system
33%
…And a majority of grocers have been using their system for several years.
When System Implemented – Demand ForecastingType of System/Vendor – Demand Forecasting
15
Only about 6 in 10 grocers are satisfied with their system and about 8 in 10 have plans to develop or improve their system.
Q17. What is the current state of your retail and supply chain planning systems?: Demand Forecasting – Overall satisfaction (1 to 10) Top 3 Box & Plans for 2019-2020 (n=54)
Mean= 7.63
59%
Overall Satisfaction with Demand Forecasting System (Top 3 Box)
Plans for Improvement –Demand Forecasting System
19%
11%
33%
37%Upgrade current system
Minor development
Investigate replacement system
No plans
16
Specifically, grocers want their forecasting system to…
Q8. Regarding forecasting, what would you like your current system to do that it doesn’t do at present? (n=54)
44% Automatically estimate the effect of cannibalization for non-promoted products
44% Take advantage of machine learning
35% Take advantage of weather data and weather forecasts
70% Automatically consider all relevant factors, such as price change, promotion type, product category and in-store display / and product category, when forecasting promotional uplift *
63% Automatically consider weekday-related variation in demand at the store-product level / product level *
50% Automatically estimate the effect of stock-outs on demand through calculating lost sales
2% None of the above
*Question text varied for online only stores versus all others
18
Most retailers claim to have implemented automatic store / distribution center replenishment
re-order points or min-max limits for most of their product range39%re-order points or min-max limits for some product categories 30%forecasts for some product categories17%forecasts for most product categories7%
93% Have implemented automatic store / distribution center* replenishment based on…
Only 7% have not implemented automatic store / distribution center* replenishment and place orders manually.
Q9. What is the state of your [store/distribution center] replenishment? (n=54)
*Question text varied for online only stores versus all others
19
64% 64%58% 56% 56%
New products Fresh products Center-store /Ambient products*
Seasonal products Promotions
Efficiency/Accuracy in Automatic Replenishment (Top 3 Box)
Mean 7.827.76 7.52 7.82 7.34
Q10. Please rate how efficient and accurate your automatic [store/distribution center] replenishment is for each of the following. (among those who have implemented automatic store replenishment, n=50)
…and those grocers are most confident with replenishment of new and fresh products. Still, there is quite a bit of opportunity for them to increase efficiency and accuracy of auto-replenishment overall.
*Question text varied for online only stores versus all others
20
In-house solutions are the most popular type of system used for automatic store replenishment...
10%
33%27%
31%
<1 year 1-3 years 4-7 years >7 years
Q17. What is the current state of your retail and supply chain planning systems?: Automatic Store Replenishment – Type/Vendor & When Implemented (among grocers that are not online only, n-52)
Developed in-house
40%
Part or add-on module to the ERP system
23%
When System Implemented –Automatic Store Replenishment
Type of System/Vendor –Automatic Store Replenishment
…And many systems are very old
Best-of-breed
system17%
Spreadsheets/
No system19%
21
Only about 6 in 10 grocers are satisfied with their automatic store replenishment system, and 85% have plans to develop, upgrade, or investigate replacement solutions.
Q17. What is the current state of your retail and supply chain planning systems?: Automatic Store Replenishment ––Overall satisfaction (1 to 10) Top 3 Box & Plans for 2019-2020 (among grocers that are not online only, n-52)
Mean= 7.38
60%
Overall Satisfaction with Automatic Store Replenishment System (Top 3 Box)
Plans for Improvement –Automatic Store Replenishment System
15%
25%
29%
31%Investigate replacement
system
Minor development
Upgrade current system
No plans
22
Specifically, grocers want their automatic store replenishment system to…
45% Automate store replenishment of ingredients used in products manufactured on-site in stores considering the products’ bills-of-material
45% Level out incoming deliveries to stores for more efficient in-store goods handling
33% Dynamically adjust safety stock levels in accordance with weekday-level variation in demand to maximize on-shelf availability and minimize spoilage of fresh goods
31% Use the same replenishment system for center-store and fresh products
49% Drive orders through all levels of the supply chain based on store inventory needs
47% Automatically consider planogram data in replenishment planning to account for visual minimums and shelf capacity
45% Get timely and accurate alerts of upcoming issues, such as forecasted out-of-stocks or risk of spoilage in stores
45% Have the system automatically select the most appropriate batch size, such as case pack or pallet size, per product and store based on demand
4% None of the above
Q11. Regarding automatic store replenishment, what would you like your current system to do that it doesn’t do at present? (among those who have implemented automatic store replenishment and are not online only grocers, n=49)
24
Distribution center forecasts are most often based on planned or projected store orders, but are also frequently based on historical outbound deliveries from the DC or store demand forecasts.
planned or projected store orders
Q12. What are your distribution center forecasts mainly based on? (among grocers that are not online only, n=52)
40%
historical data on outbound deliveries
from the DC
29%
store demand forecasts
31%
25
Distribution center inventory management systems vary...
7%
44%
26%22%
<1 year 1-3 years 4-7 years >7 years
Q17. What is the current state of your retail and supply chain planning systems?: Distribution Center Inventory Management –Type/Vendor & When Implemented (n=54)
Spreadsheets/ No system
24%
Best-of-breed system22%
Developed in-house
28%
Part or add-on module to the ERP system
26%
…and tend to be relatively newer systems.
When System Implemented - DC Inventory ManagementType of System/Vendor – DC Inventory Management
26
Only 46% of grocers are satisfied with their system and 80% have plans to develop or improve their system.
Q17. What is the current state of your retail and supply chain planning systems?: Distribution Center Inventory Management –Overall satisfaction (1 to 10) Top 3 Box & Plans for 2019-2020 (n=54)
Mean= 7.20
46%
Overall Satisfaction with DC Inventory Management System (Top 3 Box)
Plans for Improvement – DC Inventory Management System
20%
26%
26%
28%Minor development
Upgrade current system
Investigate replacement system
No plans
27
Specifically, grocers want their distribution center inventory management system to…
46% Automatically consider supplier-related order restrictions, such as full truck load orders, minimum order values or agreed minimum number of pallets, when calculating order suggestions
46% Automatically produce multiple order proposals within a day when needed, based on near real-time inventory management
44% Automate replenishment of ingredients used in manufactured products (e.g. sandwiches) considering the products’ bills-of-material*
57% Automatically consider the effect of planned changes in the stores’ replenishment schedules or assortments on the DC forecasts*
48% Automatically consider batch-level expiration dates and forecasted spoilage for fresh products when calculating order suggestions
48% Calculate out-of-stocks in stores and at DCs caused by supplier availability or delivery issues
4% None of the above
Q13. Regarding distribution center inventory management, what would you like your current system to do that it doesn’t do at present? (n=54; except where * notes question was not asked among only grocers, n=52)
29
Store assortments are most commonly based on store size and customer demographics.
Q14. What are your store assortments based on? (among grocers that are not online only, n=52)
58% 58%
48%42% 40% 38%
Store size Customerdemographics
Store format Store location Other clusteringof stores
Stores can offersome localproducts
Store Assortments are Based On…
30
And while few are ‘highly compliant’, a majority are at least 75% compliant with planograms.
Q15. What is the level of planogram compliance in your stores (i.e. to which extent are planograms implemented in your stores)? (among grocers that are not online only, n=52)
About 1 in 3 grocerswould like their system to monitor planogram compliance
4%
69%
23%
4%
> 90% 75 – 90% < 75% We do not useplanograms
Planogram Compliance
31
11%
31%37%
20%
<1 year 1-3 years 4-7 years >7 years
Q17. What is the current state of your retail and supply chain planning systems?: Assortment Management –Type/Vendor & When Implemented (n=54)
Spreadsheets/
No system13%
Developed in-house
28%
Part or add-on module to the ERP system
41%
…And many grocers have been using their system for several years.
When System Implemented – Assortment ManagementType of System/Vendor - Assortment Management
Best-of-
breed system19%
ERP systems/add-on modules are the most popular system for assortment management...
32
A majority of grocers are satisfied with their assortment management system and about 60% have no plans or only minor development plans for modification.
Q17. What is the current state of your retail and supply chain planning systems?: Assortment Management –Overall satisfaction (1 to 10) Top 3 Box & Plans for 2019-2020 (n=54)
Mean= 7.93
72%
Overall Satisfaction with Assortment Planning (Top 3 Box)
Plans for Improvement – Assortment Planning
22%
17%
22%
39%Minor development
Upgrade current system
Investigate replacement system
No plans
33
13%
27%
37%
23%
<1 year 1-3 years 4-7 years >7 years
Q17. What is the current state of your retail and supply chain planning systems?: Planogramming –Type/Vendor & When Implemented (among grocers that are not online only, n-52)
Spreadsheets/ No system
17%
Developed in-house
23%
Part or add-on module to the ERP system
33%
…And several of grocers have been using their system for many years.
When System Implemented - PlanogrammingType of System/Vendor - Planogramming
Best-of-breed system27%
ERP systems/add-on modules are the most popular system for planogramming...
34
Just over half of grocers are satisfied with their planogramming system and 38% are planning an upgrade to their current system.
Q17. What is the current state of your retail and supply chain planning systems?: Planogramming –Overall satisfaction (1 to 10) Top 3 Box & Plans for 2019-2020 (among grocers that are not online only, n-52)
Mean= 7.52
52%
25%
15%
21%
38%Upgrade current system
Investigate replacement system
Minor development
No plans
Overall Satisfaction with Planogramming System (Top 3 Box)
Plans for Improvement – Planogramming System
35
8%
40% 38%
13%
<1 year 1-3 years 4-7 years >7 years
Q17. What is the current state of your retail and supply chain planning systems?: Macro space / floor planning –Type/Vendor & When Implemented (among grocers that are not online only, n-52)
Spreadsheets/ No system
17%
Developed in-house
31%
Part or add-on module to the ERP
system25%
…And most grocers have been using their system between 1-7 years.
When System Implemented -Macro Space / Floor Planning
Type of System/Vendor –Macro Space / Floor Planning
Best-of-breed system27%
A variety of systems are used for Macro Space / Floor Planning...
36
About 6 in 10 grocers are satisfied with their macro space / floor planning system and a majority are planning either minor development or an upgrade to their current system.
Q17. What is the current state of your retail and supply chain planning systems?: Macro Space / Floor Planning –Overall satisfaction (1 to 10) Top 3 Box & Plans for 2019-2020 (among grocers that are not online only, n-52)
Mean= 7.63
60%
23%
12%
31%
35%Minor development
Upgrade current system
Investigate replacement system
No plans
Overall Satisfaction with Macro Space / Floor Planning System (Top 3 Box)
Plans for Improvement – Macro Space / Floor Planning System
37
Specifically, grocers want their space and assortment planning system to…
42% Planogram all fixture types (including promotional displays and customized fixtures)
35% Use forecasts rather than past sales as the basis for planogramming
35% Monitor and report planogram compliance in the stores
54% Recommend localized store-specific assortments
52% Automatically produce localized planograms based on store-specific sales data or forecasts and store fixtures
50% Get store-level recommendations concerning how much space to allocate to the different product categories
48% Cluster stores per product category based on local shopping patterns to optimize local assortments 6% None of the above
Q16. Regarding space and assortment planning, what would you like your current system to do that it doesn’t do at present? (among grocers that are not online only, n=52)
39
Despite overwhelming desire for features of new retail and supply chain planning systems, complexity of current systems and budget issues are major barriers to investing.
59%56%
52%46%
39%
Investment tied up in in-house developed
legacy systems whichare complicated to
improve
Budget issues Complexity of theproject
Other higher prioritiesexist in the business
Investment tied up inmajor ERP systems
which are not flexible
Q18. What are the main things that would stop you from investing in new retail and supply chain planning systems? (n=54)
Factors that Would Prevent Investment
41
The primary ways grocers are addressing the ‘Amazon threat’ is focusing on improving operational efficiency while increasing urgency and tech budgets.
54% 52%48% 46% 44%
41% 39%
Increasingfocus on
operationalefficiency
Increasingurgency andbudgets for
new initiatives
Increasingtech budget
Implementingan online
channel (if notalready
available)
Leveragingexternal
partners (techvendors,
suppliers, CPGfirms, etc.)
Helplessbecause ofAmazon'smassive
resources
Stay focusedon our
strengths, nobig changes
Q19. What best describes your company's reaction to the threat of Amazon in grocery? (n=54)
42
Focus on technology and the threat of Amazon are big challenges in the grocery landscape, but also open up new opportunities. Fresh and convenient continue to play a role for the shopper while omnichannel is becoming more and more essential to the grocery channel as well.
46%43% 43% 43%
39% 39% 39% 37% 35% 35%31%
Technology ismore
essential thanever before
Amazon takesaway market
share
Faster pace ofchange thanever before
Newopportunitiesfor growth are
opening up
Morecompetitive
than ever
Grocery hasalways beencompetitive,no change
Shoppers aremore in
charge thanever before
Omnichannelis essential
Fresh andfood-to-go
areincreasingly
important
Opportunitiesfor growth areharder to find
More globalretailers areentering the
market
Q20. What is your assessment of the current competitive environment in grocery? (n=54)
These two data points demonstrate the polarity of perspective in the grocery industry
44
Job Profiles
Manager19%
Director35%VP / Sr. VP
20%
C-level / President / Owner
26%
100%SUPPLY
CHAIN/INVENTORY MANAGEMENT
46%MARKETING/SALES
44%STORE OPERATIONS
44%ECOMMERCE
JOB LEVEL FUNCTIONS OF INFLUENCE
S1. What is your level within your organization? (n=54)S2. Over which of the following functions do you have influence or decision-making responsibility? (n=54)
45
Company Revenue and Business Type
15%
6%
9%
28%
43%
Q1. What was your company’s revenue for the last completed 12-month period? (n=54)Q4. Which of the following describes your business? (n=54)
Combined brick and
mortar and online
59%
Brick and mortar
only37%
Online only4%
>$10 billion
$5 billion - $10 billion
$1 billion - $5 billion
$500 million - $1 billion
$250 million - $500 million
47
Comparison of Type of System Used by Purpose
24%
17%
17%
17%
19%
13%
22%
27%
24%
27%
17%
19%
28%
23%
26%
31%
40%
28%
26%
33%
33%
25%
23%
41%
Distribution center inventorymanagement
Planogramming*
Demand forecasting
Macro space/floor planning*
Automatic store replenishment*
Assortment management
Q17. What is the current state of your retail and supply chain planning systems? *among grocers that are not online only, n-52; all else among total, n=54
Spreadsheets/ No system
Best-of-breed system
Developed in-house
Part or add-on module to the
ERP system
48
Comparison of System Implementation Timing by Purpose
7%
13%
9%
8%
10%
11%
44%
27%
33%
40%
33%
31%
26%
37%
41%
38%
27%
37%
22%
23%
17%
13%
31%
20%
Distribution center inventorymanagement
Planogramming*
Demand forecasting
Macro space/floor planning*
Automatic store replenishment*
Assortment management
Q17. What is the current state of your retail and supply chain planning systems? – When implemented *among grocers that are not online only, n-52; all else among total, n=54
<1 year 1-3 years 4-7 years >7 years
49
46%
52%
59%
60%
60%
72%
Distribution center inventorymanagement
Planogramming*
Demand forecasting
Macro space/floor planning*
Automatic store replenishment*
Assortment management
Q17. What is the current state of your retail and supply chain planning systems? – Overall satisfaction (1 to 10), Top 3 Box*among grocers that are not online only, n-52; all else among total, n=54
7.93
7.38
7.63
7.78
7.52
7.20
Mean
Comparison of Satisfaction with System by Purpose
50
20%
25%
19%
23%
15%
22%
28%
15%
33%
35%
29%
39%
26%
38%
37%
31%
25%
22%
26%
21%
11%
12%
31%
17%
Distribution center inventorymanagement
Planogramming*
Demand forecasting
Macro space/floor planning*
Automatic store replenishment*
Assortment management
Q17. What is the current state of your retail and supply chain planning systems? – Plans for 2019-2020*among grocers that are not online only, n-52; all else among total, n=54
No plansMinor
development
Upgrade current system
Investigate replacement
systems
Comparison of Plans to Modify System by Purpose
51
Corporate Headquarters
8550 W. Bryn Mawr Ave. Ste. 200,Chicago, Il 60631
Phone : +1 773-992-4450Fax : +1 773-992-4455
New Jersey, U.S.
One Gateway Center 11-43,Raymond Plaza West, 16th FloorNewark, NJ 07102
Phone : +1 201-855-7600Fax : +1 201-855-7373
Toronto, Canada
20 Eglinton Ave. West, Suite 1800Toronto, On M4R 1K8
Toll Free : +1 877-687-7321Fax : +1 888-889-9522
Montreal, Canada
1425, Boulevard René-lévesque OuestLocal 202, Montréal (Québec), H3g 1t7
Phone : +1 514-446-9580
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