Food - groceries - is an extraordinarily demanding retail environment. Every ‘beep’ at every point-of-sale, every new order on the e-commerce website impacts stock levels and restocking requirements. Between the large number of different products, the strong competition, the sustainability challenges and the thin margins, companies distributing food navigate a demanding and ever-changing environment.
Here are five reasons why food retailers should adopt an OMS to help them meet these challenges.
There are several ways to reduce the incidence of missing or out-of-stock products. The first step lies in continuously improving supply chain planification through a strong ERP: by basing your production and stock replenishment on past years demand trends, you increase the likelihood of having just enough product (and hopefully not too much) to serve your clients. That’s especially important in a sector like grocery, where some products are highly seasonal - and most have an expiry date.
But planification can only take you this far, and unifying all of your inventory and managing it in real-time is key to reaching a higher level when it comes to limiting out-of-stock. That’s where an OMS comes in.
Remove silos to maximize inventory display... and sales
By unifying inventory, we mean removing silos between channels: does it really make sense to display a product as out-of-stock on an e-commerce website because it’s no longer available in the warehouse, but there’s a ton of it in a nearby store? It might, depending on your strategy. But then again, there might be greyer areas where you’d rather not miss a sale because of a missing product, or you might need to change strategies in the future. An OMS provides this kind of flexibility, seeing your inventory as one large pool which you can dynamically allocate to whatever channel or client category you prefer at the moment - leaving you the opportunity to easily change the rules if needed, without having to re-think your whole IT stack.
With its real-time inventory management capabilities, an OMS also ensures a single source of truth for available inventory levels, thus enabling new restocking possibilities for high-volume retailers like the food sector.
For example, an OMS can identify that a specific store is running low on a best-selling item, and can automatically and proactively plan a restocking of this product on that same store before it becomes a missing product. In fact, an OMS can be configured to entirely automate the restocking of all points of sale.
Reduce out-of-stock and missing products
Also unlike ERP solutions, an OMS is also designed to deal with what can be referred to as “hybrid” stock. For instance, yoghurts may be sold in trays of four or eight pots; in the event of the ‘eight’ tray being out of stock, the OMS ‘knows’ to substitute in two of ‘four’ trays. This helps to reduce the incidence of incomplete orders, improving revenues and avoiding disappointed customers. While we’re on substitution: an OMS can help by knowing which products can, if essential, be replaced by which others (taking into account their expiry date); can provide information about the substitution to the client; and can even ask for the customer’s approval before completing the order.
But there's more.
With the best will and effort in the world, not all orders will always be entirely fulfilled. Even with everything optimized by the retailer, to reach a situation in which 100% of all orders are completely fulfilled is a difficult step to take. By creating a suitable dashboard focused on missing products, your OMS can help you understand the reason why they're missing, so you can continuously get closer and closer to a perfect score. For instance, if the dashboard shows that you find yourself having missing donuts everyday until 9am, after inspection you might realize that donuts cannot be packed if they are still frozen, and that they are defrosted too late in the morning to allow early orders to be completed.
Offer new customer journeys and deliver on your promise
Competition is fierce and it’s a battle to win market shares. Customer journeys and the consequent customer satisfaction are part of that. A well-configured OMS, with its unified view of inventory and advanced order management rules capabilities, can:
- help you to create innovative new omnichannel customer journeys quickly to adapt to competition or become a pioneer through test & learn.
- manage omnichannel orders through one single platform, either in the same way or with channel-specific differences. You decide, based on your business processes, priorities and goals.
- help increase conversion rates through the provision of personalized customer experiences.
Delivering on your promise is also a major component of the overall customer experience for food retailers and impacts future sales. No-one likes an incomplete grocery order, not least because one missing item can compromise an entire meal plan or recipe. For food retailers, this means knowing accurately what is available-to-sell (ATS) or available-to-promise (ATP), and then aiming to always deliver on that promise in the form of perfect orders (OTIF for On Time In Full): no missing products, and all delivered on time/ready for pick-up at the time agreed.
To help you confidently make accurate, realistic promises, an OMS takes into account the actual, real-time capacity of your supply chain. This includes in-store picking capacity, transport schedules, and any other relevant constraints. And since today’s customers like to have a choice, it can provide several options and display all the necessary information for better decision-making: delay, price, even carbon cost.
Improve your bottom line
We’re not teaching you anything here: in a sector with such thin margins, any initiative allowing to raise revenue and reduce costs is welcome. We’ve already covered the first: better customer experience, limited out-of-stocks and larger display of inventory are all ways to increase revenue.
An OMS also has a positive impact on supply chain costs, since it’s meant, by design, to optimize order fulfillment. One of its main added value is the capability to calculate, in real-time, the best possible way to execute an order, depending on your own priorities; while those can differ widely from one retailer to another, from our experience, the cost per order is more often than not part of the equation.
Apart from making sure that orders are fulfilled (in part) in the most cost-efficient way, an OMS also reduces storage costs by accelerating stock rotation and limiting overstocks, minimizes errors and, as we’ve mentioned, can help with substitution to reduce its overall cost.
Support your sustainability commitment and reduce food waste
We’ve mentioned financial cost before, but the optimization capabilities of an OMS also help in reducing the supply chain’s carbon cost and overall impact on our planet. Limiting shipments by regrouping orders or restockings, fully packing a transporter’s truck by prioritizing one order over another, having a product sent from a local store rather than the main warehouse, are all examples of how an OMS can play a part in supply chain decarbonation.
It can also support more obvious initiatives, like circular economy programs or reducing waste - a daily issue in a sector where some fresh food products have a shelf-life of just two or three days. In fact, tackling food waste is a major challenge, as it reached more that one billion tons in 2022 and generated 8% to 10% of global greenhouse emissions. Read more on this particular subject here.
Both circular economy and food waste reduction initiatives benefits the bottom line, limiting the number of products bought but not sold as well as waste disposal costs.
Never be overwhelmed by transaction volumes
Throughputs of thousands of transactions per second are simply the mark of a successful retailer, and should not be a cause for concern over whether your OMS can cope. A high-performance OMS will cope with extremely high volumes of transactions, wherever in the world those transactions are made.
Ready to learn more about why Kbrw’s OMS is perfect for grocery retailers? Visit our dedicated OMS for Food Retailers page.