Grocery retailers today face several critical supply chain challenges, including:
Online grocery sales are expected to reach $155 billion by 2025, representing 12% of total grocery spending in the United States. US click-and-collect sales will grow 10.1% to reach $109.36 billion in 2024, with over three-quarters (78.7%) of those sales coming from grocery.
Leading grocers are leveraging multiple strategies to address these challenges, such as:
This white paper focuses on solving eCommerce profitability and fulfillment efficiency challenges. By addressing key pain points in grocery order fulfillment, businesses can foster operational efficiency, enhance customer loyalty, and ultimately position themselves as industry leaders in an increasingly competitive landscape.
Our promise to delivery solution framework takes an end-to-end view to offer a true omni-channel experience to customers while balancing profitability for retailers. The framework includes:
This framework integrates selling channels, OMS, fulfillment centers (DC/store/3rd party/vendor), and last mile delivery to:
Balancing the equation between customer-centric fulfillment practices and sustainable profitability requires a nuanced understanding of the specific pain points within the grocery supply chain. From inventory management challenges that impact product availability to the intricacies of substitution, managing discounts, order picking, packing, and the logistics of last-mile delivery, each aspect of the fulfillment process plays a pivotal role in shaping both the customer journey and the financial health of the business.
Having an accurate view of inventory enables grocers to meet customer expectations. This involves understanding how much inventory is available and where, exposing just the right amount of inventory online to cater to e-commerce shoppers without limiting inventory for in-store shoppers.
For grocery, the inventory turnover ratio is very high, and the traditional way of calculating Available To Promise might not work. Therefore, incorporating an AI-driven approach to analyze SKU/location-level forecasted demand for availability calculation becomes crucial to enhance accuracy and efficiency.
A leading grocery retailer in the UK improved their order fill rate by 5% to reach 99% with accurate inventory visibility.
Slot management offers customers flexibility in selecting curbside pickup or delivery windows from available options. Stores can scale up by adopting dynamic slot management that considers factors like item types, quantity, availability, store location, delivery distance, van capacity, and existing appointments. Dynamically splitting or merging slot windows maximizes resource utilization and enhances customer experience, enabling businesses to efficiently adapt to varying demands and streamline the fulfillment process.
Optimizing order fulfillment capacity and providing hassle-free slot visibility and availability often lead to improved conversion rates. Customers are more likely to complete orders when slots are available at their convenience, enhancing their experience and reducing risk for retailers.
A leading Canadian supermarket chain generated approximately $70 million in incremental annual sales with dynamic store slot optimization and reduced the variance of the number of items per slot to within 5%.
Substitution is a major issue for store-based fulfillment, impacting NPS scores, churn rates, and P&L. An Intelligent Item Substitution Engine aids retailers in managing stock-outs, enhancing fulfillment productivity, and improving the customer experience.
Retailers need to optimize and publish accurate inventory availability to minimize out-of-stock (OOS) items and protect margin erosion from substitutions by providing AI-enabled, personalized, relevant substitution recommendations. Offering a substitution opt-out option and predetermined real-time substitution options for high OOS items can enhance customer experience and minimize returns.
A leading UK grocery retailer improved their acceptance rate by 5% on almost 13 million item rejections per year.
Given the volume of orders grocery retailers handle and the manual labor required in the picking process, there is tremendous scope for productivity gains by increasing the pick rate. Retailers can use the following strategies:
A Canadian supermarket is realizing operational cost savings of approximately 16.8 million CAD once all fulfillment stores are optimized.
Price changes, flash sales, and item substitutions are common in grocery, and OMS must ensure additional repricing logic for the picked order. This includes repricing substitutions to match the original item, clear and transparent demarcation of the price difference for accounting purposes, and capturing it while approving the head. This leads to a seamless customer experience, reducing frustration due to recurring changes in order total and bringing transparency to pricing.
Retailers also benefit from reduced traffic to their call centers and improved customer loyalty. Repricing logic can be implemented after picking to account for price changes on the final order.
A leading UK grocery retailer reduced customer service costs by 23% with accurate and transparent basket pricing.
Inability to meet the customer promise due to last mile delivery disruption can have a significant impact on customer satisfaction. It is critical to have flexibility and agility in delivery capability, allowing additions or changes as required, considering new options are being offered to customers on an ongoing basis. Delivery visibility and communication are important parts of last mile delivery, providing transparent visibility to customers and internal stakeholders to ensure promises are met. This should also make transaction finalization easy for customers (accept/reject items in the order).
A spirits and wine retailer grew total order value by 7% with an efficient last mile delivery partner solution.
In addition, leveraging AI during the fulfillment process can enhance a grocery retailer’s efficiency and help improve customer satisfaction. One of the key areas where AI has already made a difference is inventory management. By predicting demand and optimizing stock levels, AI helps reduce waste and ensures that popular items are always available for customers. Additionally, incorporating AI has led to improvements in automated checkout, delivery optimization, fraud detection, and quality control. AI optimizes delivery routes and schedules to guarantee timely deliveries with minimal waste. Moreover, AI can be leveraged to monitor product quality, identifying spoiled produce and detecting foreign objects in packaged goods.
As grocery retailers navigate a complex landscape of operational intricacies for order fulfillment, embracing these capabilities enables businesses to overcome current challenges and position themselves as leaders in the rapidly evolving landscape of online grocery shopping.
If your business wants to optimize fulfillment and better serve customers, talk to Publicis Sapient. Through end-to-end supply chain solutions, your organization can make the improvements it needs to drive new levels of efficiency and profitability.
SATYENDRA PAL
Global Omni-fulfillment Practice Lead, Publicis Sapient
satyendra.pal@publicissapient.com
MOBARIZ AHMED
Associate Director, Product Management, Publicis Sapient
mobariz.ahmed@publicissapient.com
Publicis Sapient is a digital business transformation company. We partner with global organizations to help them create and sustain a competitive advantage in a world that is increasingly digital. We operate through our expert SPEED capabilities: Strategy and Consulting, Product, Experience, Engineering, and Data. Combined with our culture of curiosity and deep industry knowledge, this enables us to deliver meaningful impact to our clients’ businesses by reimagining the products and experiences their customers truly value. Our agile, data-driven approach equips our clients’ businesses for change, making digital the core of how they think and what they do. Publicis Sapient is the digital business transformation hub of Publicis Groupe, with 20,000 people and over 50 offices worldwide. For more information, visit publicissapient.com.