How HelloFresh is Using Data to Create a More Efficient Supply Chain
I attended the 2019 Home Delivery World conference in Philadelphia last week. Over the course of two days, the retail logistics conference featured speakers from brands such as QVC, Giant, and Etsy, presenting on topics ranging from grocery and e-commerce, to parcel and heavy goods, to last-mile delivery and returns. A session in the Data & Analytics track focused on how meal-kit provider HelloFresh is using data and analytics to innovate its order fulfillment and shipping processes.
Achieving Supply Chain Efficiency Through Data at HelloFresh
HelloFresh is currently the only global direct-to-consumer, subscription-based meal-kit company. Founded in 2012, the brand expanded rapidly and now serves over 2 million customers, providing pre-portioned ingredients and recipes delivered right to customers’ front doors. HelloFresh has a very unique and aggressive supply chain, due in large part to the perishable nature of the fresh food in its meal kits as well as consumers’ inflexibility on the quality of product and timing of delivery. Adam Kalikow, senior director of operations at HelloFresh, spoke about the challenges the brand faces every day to ensure that all customers receive meal kits with fresh ingredients, while also avoiding food waste.
“Food waste is really a supply chain problem because you have a perishable product and you have to throw it out if you don’t use it, so you need that efficiency” to deliver the product as quickly as possible, said Kalikow. The key to solving this complicated issue is simple — matching supply and demand.
HelloFresh’s direct-to-consumer model allows the brand to streamline the traditional food supply chain, cutting extra steps and pulling products directly from growers into the warehouse and then out to the customer. This completely disrupted supply chain pushes orders out to customers within three days of their purchase. But in order to have just the right amount of product, the supply needs to meet the demand. Kalikow says the key to achieving this lies within HelloFresh’s subscription commerce model, which fuels its optimized product selection offerings as well as its proprietary forecasting algorithms.
“Because of the business model and the data we collect from our customers, we’re able to demand forecast a lot more effectively than a typical retail or e-commerce store selling food,” say Kalikow. The subscription model allows HelloFresh to calculate when customers might want certain types of food over others, when customers want to receive orders, and when they might take a pause from ordering. The brand then offers optimized product selections to customers, limiting the amount of product needed to meet customer needs without waste.
“Over time, we’ve been able to build up a ton of data … and develop internal proprietary algorithms that we can apply to improve that forecasting,” Kalikow noted. This improved demand forecasting has helped HelloFresh “maintain a small delta between supply and demand.”
Kalikow also spoke about using customer feedback to shape inventory demand as well as drive growth and innovation. HelloFresh mines data from a variety of internal sources, including customer orders, surveys, customer care interactions, and browsing activity on its e-commerce site. In addition to having this valuable data, Kalikow stressed the importance of cultivating top talent as well. HelloFresh has worked to cultivate a "data culture" throughout its organization — with the help of high-level talent.
“We all need to obsess about how to continue pulling high-quality talent into this industry, into supply chain, to be able to leverage this wealth of data,” said Kalikow.
Related story: 5 Technology Trends Poised to Transform Retail Supply Chains