With a strong emphasis on meeting shopper needs, new IGD research reveals that the evolution of retailers’ multi-channel strategies has led to the development of a number of different supply models.

The evolution of retailer supply chain models

When considering the level of engagement with online, grocery retailers can be split into three groups. Most have had to evolve an online offering to run in tandem with their existing business, such as Tesco. Some have an exclusively online presence, such as Amazon, which offers ambient grocery deliveries in the US, UK and Germany and has trialled fresh food deliveries in the US. Finally, there are those who have yet to venture into the online market.

As online propositions have evolved from traditional store based operations, existing grocery supply chains have had to adapt to support the channel's unique requirements. With online demonstrating strong growth in many markets and becoming much broader than web-based ordering to include mobile and social commerce supply chain modification will need to continue.

IGD research reveals that as retailers focus on capturing the opportunity online represents they have to consider several factors, such as where and when customers wish to collect orders or if they would prefer to have them delivered. They also have to think about where to assemble orders: in a traditional store or a 'dark store', at distribution centres or at manufacturers.

What does this mean for suppliers?

Although retailers' supply chains have had to undergo a significant amount of change to accommodate the needs of online, as yet many manufacturers report they have not yet needed to change their supply chain operations. Most say they are assembling project teams to look at this, as although it is currently viewed as too small as a proportion of total business to drive change, it is viewed as a channel for future growth.

IGD's research with suppliers from over 15 countries, reveals that most are focusing on developing their internal capabilities in order to position their businesses to grow, and on being able to operate an effective supply chain in a multi-channel environment. Some suppliers highlighted the need to consider their storage and delivery solutions, and to understand how the cost to serve will be impacted by this.

To prepare for an increasingly multi-channel future, IGD research highlights that suppliers are taking one of five approaches:

• Developing supply chain structures to support new channels
• Aligning data internally to support retailers’ websites information demands
• Developing customer integrated demand planning to drive increased responsiveness and the push for shorter lead times
• Investing in supply chain collaboration to better understand customers’ requirements in this environment, particularly around service levels and inventory
• Developing direct selling propositions to gain expertise and capability in the channel

For more on the impact of multi-channel retailing on the supply chain please click here.