The forces shaping food and grocery supply chains in 2019

Date : 16 January 2019

Identifying the trends that matter now is a challenging task. It’s certainly possible to identify 20 trends at random, which at some point in the future will have a significant impact. Assessing near-term relevance requires a deep understanding of the drivers of change.

At the start of each year, we put forward the trends we expect will influence and shape food and grocery supply chains in the year to come, helping both businesses and individuals prepare for change. To support our thinking, we’ve used several IGD research inputs covering retail, shopper insight and supply chain insight as “filters” to pass our ideas through, providing a holistic perspective on an industry in change.

Some trends threaten to take-off but never do, some fly under the radar and catch businesses cold. Some are simply hype. A small percentage are transformational. This year, we’ve put forward the following:

  1. Micro-fulfilment on a macro scale
  2. Eager experimenters
  3. Clarity on circularity
  4. Capitalising on connections

These trends will support the evolution of food and grocery retail, account for new shopper demands and help build a supply chain for growth. Let’s take a look at them in more detail.

Micro-fulfilment on a macro scale

Micro-fulfilment is an umbrella term used to describe small-scale warehouse facilities close to consumers. These represent the industry’s response to shoppers’ desire for speed and a choice of fulfilment options at nominal or no extra cost – something that continues to fragment food and grocery retail around the world.

To meet this need in a way that regulates the spiralling cost of fulfilment, retailers are innovating and experimenting with micro-fulfilment.

There is no cookie cutter design; facilities range from retrofitted garages, to Retail-as-a-Service (RaaS) automated fulfilment centres. Reflecting the growing urgency, a variety of very different solutions have emerged to meet local conditions and consumer demands.

One thing that is consistent is location. Largely located in urban areas, they tap into the gig economy for flexible, last-mile options where necessary. Due to the growing need for space, these sites don’t replace traditional facilities, they complement them.

Source: 1 Why obsolete warehouses on the ‘last mile’ are attracting institutional investors, Scott Marshall, CBRE

As you’d expect, technology is a key enabler, supporting operations within facilities, as well as outside of them, through apps for pick-up or delivery.

Eager experimenters

This trend reflects the need to better synchronise structured ways of working with an increasingly unstructured external environment. This is achieved by establishing and embedding a self-disruptive supply chain culture, underpinned by objectives that incentivise people to experiment.

As the supply chain moves closer to a management by exception function, the value people offer will be through the things humans do better than machines. As the emphasis shifts, supply chains must shape strategy and prepare accordingly. A sentiment called out in our recent Supply Chains for Growth research.

Source: Supply chains for growth, IGD Supply Chain Analysis, 2018

Food and grocery businesses are diversifying, playing in new areas. Simultaneously, new players are entering the industry, bringing with them new ideas. Where we look to learn and be inspired is changing as western markets exclusivity on best practice evaporates.

In 2019, improved understanding of new challenges and what it will take to succeed will be enhanced by looking externally. Inspiration from new sources will support brave, customer-centric decision-making. Translating “what’s new” into objectives will help define your part in the plan, formalising the expectation for more experimentation.

Clarity on circularity

Developing a more conscientious, sustainable supply chain, operating above minimum expectations provides an opportunity for competitive advantage. Turning this vision into reality will require a more circular approach to business activities.

When done well, circularity can generate both direct and indirect economic value. Keeping products, components, and materials at “their highest utility and value at all times”1 is key to dispelling the notion that sustainability, through circularity, is simply a noble cause.

Source: TOMRA Collection Solutions

The Ellen MacArthur Foundation describes the circular economy as “a framework for an economy that is restorative and regenerative by design. It entails gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system.”

Manufacturers, retailers and consumers all have a role to play if the circular economy is to thrive, but consumers are the catalyst for change. A progressive, ambitious Corporate Social Responsibility (CSR) strategy is now a base consumer expectation.

Capitalising on connections

In recent years, we’ve profiled several technologies that will influence supply chain development. Each is at different stages of its development; some are barely beyond the testing phase.

Developments continue, with progress on several fronts. This includes more reliable and affordable sensors in Internet of Things (IoT) devices, a better understanding of blockchain’s potential and appropriate uses, autonomous ‘things’ that are better able to interact with operators and environments. At the leading edge, 5G’s potential to improve data transfer rates and reliability and Deep Machine Learning (ML) supported by Quantum Computing could be game changing.

Source: Not just speed: 7 incredible things you can do with 5G, CNET, 2018

In 2019, breakthrough value will be achieved by connecting two or more of these to form cycles of generation, transmission and analysis delivering a truly digital supply chain. The collective impact of combining several potentially transformational technologies for use in supply chain operations will be a game changer.

The result will be an improved ability to serve time-sensitive consumers better, but supply chain people need to have strategic input along the way.

Conclusions

Not all of these trends selected will be a total surprise. What is new is our deepening understanding of the finer points, and that is why we have chosen them. The significance of this evolution will shape our thinking in 2019, informed by the clarity gained last year.

It’s crucial to consider how the trends highlighted will help you do the things you currently do better, as well as helping you do new things. There is no delivery date on brilliant basics. It’s a process of constant refinement.

Those that embrace the trends identified, exploiting them to deliver long-term value, while continuing to do the ordinary extraordinarily well will be set up to win in 2019 and beyond.

We’ll will be following these trends through 2019, producing research on global food and grocery supply chain development. The full report is available to read at igd.com/supplychainanalysis

Sources:

1 Ellen MacArthur foundation

Chris Irish

Chris Irish

Supply Chain Insight Manager

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