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Taking A Fresh Look at Food Inventory Optimization

By Scott Fenwick,
Taking A Fresh Look at Food Inventory Optimization

Three trends are changing the grocery and food service industries. Each is important on its own, but looking at them together, we can see both a need and a major opportunity for better inventory management. Which companies are going to be able to take advantage? The companies who apply the right technology are the ones who will reap the rewards.

Omnichannel expands beyond fashion retail

The first trend affecting grocery and food service companies is a move to provide new and time-saving shopping experiences at the local grocer. As consumers demand more speed and convenience than ever before, a range of new options has emerged, including curbside pickup, locker delivery, click and collect and home delivery, with additional possibilities on the way. The popularity of these offerings is poised for explosive growth. Consider:

  • According to recent surveys, 47 percent of internet users have purchased groceries online, and 55 percent of people said they would do so in the future.1
  • At the same time, 59 percent of consumers said they would change brands if their grocery store did not meet expectations in terms of dispatch and delivery.2
  • New entries in the grocery and food service spaces – the Amazon/Whole Foods partnership, meal kits, home delivery options and more – raise customer expectations and make execution crucial.

Just as it has in other industries, omnichannel in grocery and food service presents inventory challenges. Multiple shopping experiences are being offered to the consumer but still need to be fulfilled from the store. Each new fulfillment option creates a new source of demand with its own lift and potential demand shift. It’s more complicated than ever to have the right products in the right place at the right time.

Unlike other industries, spoilage in grocery and food service adds another layer of difficulty. Great customer experiences hinge on having enough product in stock. But carrying too much inventory affects margins – especially when dealing with perishables. How can you balance inventory and meet demand from multiple channels and in the store – without losing too much to spoilage?

Freshness is essential

The second driver of change is the increasing importance of fresh foods. With growing customer focus on non-processed and organic foods, fresh is a key differentiator and a critical factor in retaining customer loyalty.

  • In fact, 40 percent of grocery revenue comes from fresh products.3
  • 70 percent of people surveyed said access to the best quality fresh products is their most important consideration.4
  • Food retailers report that improvements in fresh offerings commonly result in 5-10 percent sales gains and 2-4 percent margin improvement.5
  • At the same time, according to the USDA Economic Research Service on food waste, supermarket losses due to spoilage range from an average of 12 percent for fresh fruit to 4.5 percent for fresh meat, poultry and seafood.6

Of course, knowing how much fresh food to stock is difficult because it spoils. You need enough to win customers and build loyalty while also minimizing waste. Once again, inventory management is the key to balancing the ability to offer perishable items while maintaining margins.

New technology creates perpetual benefits

The third major trend evolves from the introduction of new in-store technology which enables grocers to greatly improve their ability to maintain an accurate perpetual inventory.

Previously, grocery store employees walked the aisles, evaluating if there were any inventory discrepancies. They’d typically carry large, brick-like mobile devices, verifying inventory levels, capturing updates and even manually inputting replenishment orders. This process was very labor intensive and did not allow the business to take advantage of modern, automated replenishment technologies.

Today, a new breed of solutions allows stores to focus on the fundamentals of capturing changes in inventory instead of manual ordering. These tools enable scan-based receiving when new shipments arrive from the DC and inventory adjustments when products are accidently damaged, and they utilize best-in-class processes, like cycle counting, to offset the long periods between the stores’ physical inventory. Together, the result is more robust accuracy in store perpetual inventories.

These advancements create a new opportunity for grocers to shift buying tasks away from manual ordering. In turn, that enables centralized buying teams to leverage proven inventory optimization principles to automate much of the forecasting and replenishment workload. The results? Better inventory management and better operations, as store associates have time to focus more on their shoppers and the integrity of the stores themselves.

Manhattan quenches your thirst for growth

Manhattan Associates is uniquely positioned to help grocery retailers and food service distributors seize this moment. Our technology plays key roles in the supply chains of leading grocery and food service companies. The proven technology to optimize inventory is now available to solve a range of grocery and food service issues:

Shelf life management: We apply machine learning to ensure the supply plan is constantly optimizing to account for shelf life limitations of perishable items.

Expiry control: Leveraging deep insights into product spoilage dates, Manhattan ensures waste doesn’t derail your ability to service customers with consistently fresh, high-quality food products.

Omni Inventory Optimization (OIO) for grocery: These unique approaches to optimizing retail inventory apply to grocers that have openly embraced the growing complexity of online grocery fulfillment options.

Promotional planning: The power of machine learning ensures grocers can clearly understand which promotions have the greatest impact on consumer sales.

Mobile: A modern mobile solution keeps store personnel in tune with the enterprise’s inventory strategy while also giving them the ability to share local insights directly with the corporate buying team.

Turn trends into your competitive advantage

Major shifts are transforming the ways food moves through the supply chain. But as the saying goes, change can be good. Manhattan has the expertise, vision and technology to help you optimize your inventory, regardless of the role you play in food distribution. Simply put, our goal is to apply technology innovations which enable grocery and food service organizations to win customers, drive sales, minimize waste and improve margins.

In my next article, I’ll do a deeper dive into some of the solutions that can help you elevate inventory management in stores, in the DC and across your supply chain.

For more information on how Manhattan can help you, visit Manhattan Active Inventory.

1 Fevad/Médiamétrie, April 2018

2 Nielsen and the Food Marketing Institute (FMI) 2018

3 McKinsey A fresh take on food retailing

4 Oliver Wyman Getting Fresh: Lessons from global leaders in fresh food

5 Oliver Wyman Getting Fresh: Lessons from global leaders in fresh food

6 NCR A Fresh Approach: Reduce spoilage and increase profits with demand-driven replenishment

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