Craig Ryder, Director of Go Supply Chain Consulting Limited, considers the recent growth of the new food consumer, and the challenges this presents to supply chain and logistics operations
Gone are the days when a customer bought a food item blindly without considering its source, ingredients or how long it took to get into the store. The thinking customer is a fairly new phenomenon; he or she is looking for locally sourced fresh food with fewer additives, simpler packaging and less processing. Food-to-go, call-and–collect meals to take home and on-line shopping are growing niches. It seems that changes in buying habits are moving faster than innovation in the food industry supply chains.
WHAT DOES THIS MEANS FOR THE FOOD INDUSTRY?
It’s a type of disruption that growers and manufacturers cannot ignore; customers want clean food provided by environmentally- responsible companies delivered in a sustainable way. Traditional logistics solutions will no longer be adequate, innovative solutions are required to meet the needs. Companies that react too slowly to the changing landscape and unpredictable demand will lose market share and feel the threat of competition.
CUSTOMERS WANT TO KNOW WHAT THEY ARE BUYING AND HOW IT MOVES
Consumers are increasingly interested in the contents of their food, nutritional details, preservatives and allergens as well as organic certification and region of origin. This data can be included on most types of packaging to satisfy the consumer but it is not embedded in the simple barcode, limiting the usable information for retailers and manufacturers.
How evolving consumer demand is changing everything
According to a White Paper published in mid-2015 by Technomic.com and Deloitte⃰ entitled, ”Food Industry Logistics: Trends that Matter”, there are three main accelerating drivers of change that will demand attention:
1. Eating habits
There are visible shifts in what consumers prefer to eat and their need for transparency. They
- Are more health-conscious
- Have dietary preferences and restrictions
- Need more variety as eating habits change
- Care about sustainable sourcing
2. Convenience: Consumers want food to be available when and where they want it.They need
- Freshness, meaning shorter farm-to-fork times and distances.
- Food on the go, prepared in front of them.
- Healthy snacks in small packs
3. Demographics: “One size fits all” no longer works. The changes are due to:
- Urbanization: this means smaller drops and more frequent deliveries.
- Generational differences: The three core adult groups (Boomers, Generation X and Millennials) have different food preferences and use mobile technology for research food information and make purchases.
- Growth in dual-income households has changed demand patterns for convenience food.
Online grocery shopping wars
Although the on-line grocery shopping market is still very small in the UK, Amazon Fresh has seen a gap and will take on Ocado and other major retailers and also some localised specialists, like Hubbub in London. A fairly new innovation, click-and-collect has shown favour with dual-income families with limited time to shop.
The design of logistics networks has to adapt to the new landscape. More responsive and closer-to-market facilities will be required as well as better real-time information and predictive demand analytics.
What tools will we need to manage the new logistics?
Organizations will need to continually model scenarios and alternative solutions based on industry intelligence. Cross-functional, enterprise-wide collaboration will be needed with increased focus on and usage of formal planning programs (e.g., S&OP). Hand-held technology will be a differentiator, used extensively for track-and-trace and obtaining instant feedback.
What else can we do to deal with the challenges?
On a practical level, the study team at Technomic and Deloitte is of the opinion that we need to:
- Look for increased reliance on unconventional transportation channels with emerging advanced technologies (e.g., drones, future driverless trucks, Uber).
- Make better use of idle assets (both humans and vehicles). Consider worker availability and driver capacity
- Expand the use of technology in the supply chain creating better visibility
- Work out how to deal with same-day delivery and its potential for increased urban congestion and environmental issues.
Prepare for the future
Logistics will be the key differentiator to set your company apart from the competition. The ability to understand and meet the new consumer demand patterns, especially the Millenials, will be major success factor in food retailing.
Reference: Food Industry Logistics: Trends That Matter
Craig Ryder is a Director of Go Supply Chain Consulting, a specialist in optimising logistics in food supply chains.