Operational Efficiency in the Grocery Industry is Vital as Demand for Delivery Accelerates

COVID-19 has upended the way consumers shop for everything, especially groceries. Last year, delivery represented 3 percent of U.S. grocery sales; in the last month, grocery delivery services like Instacart have shared statistics showing that 9 percent of U.S. grocery sales are now via delivery. As many consumers hesitate to return to any kind of normal, the demand for online groceries will continue to accelerate, which drives focus for operational efficiency like never before.

The rapid acceleration of grocery delivery demand has caused major delays, sold-out items, and operational glitches stemming from siloed technology. An actual store visit fails to offer much of a solution, with sold-out inventory and limited availability of technological advancements like cashierless checkout making it almost impossible to remain a safe six-foot distance from other shoppers.

You might think that sales increases would mean higher profits. While the pandemic has increased demand and top-line sales for grocery retailers, low-margin products and additional costs associated with hiring more staff is unlikely to create larger profits.

A need for operational efficiency improvement among grocers isn’t new, but the pandemic has certainly brought a much stronger focus as the world adjusts to a "new normal." In fact, there’s potential that by applying the latest technology, grocers could double store profitability. When it comes to grocery delivery, reducing delivery costs can make it just as profitable as in-store operations.

Addressing these challenges to drive operational efficiency requires moving towards becoming a truly connected retailer. Below are three areas that can move us toward a more connected, efficient and safe grocery experience:

• Liberate data: It's widely acknowledged that attaining value from data will be the largest winning strategy across all businesses during this decade. Retailers, like other businesses, have multiple silos of data from customers, products, and inventories. Multiple perspectives are confusing and limit efficiency. They must be connected, aligned and made available in real time, regardless of the data’s location. Aligning and connecting across silos in this way liberates the data and allows for improved process flow and decision making.
• Operationalization: Liberating data enables retailers to do a number of new things that drive operational efficiency. Real-time access to data can paint a picture of what's happening right now, giving actionable insight and the ability to automate decision making — e.g., responding to issues and opportunities. Combining real-time data from stores and supply chain operations along with predictive models and emerging technologies like artificial intelligence (AI) and the Internet of Things (IoT) can enable a truly connected store. This will enable new possibilities — e.g., store associates can be proactively directed to where they're needed, and time-consuming tasks such as inventory management or price and promotion execution can be automated, saving many hours of store labor each week. Operationalizing data in this way can also improve visibility or shelf-level demand in the upstream supply chain, thus improving in-store availability.
• Align processes: Leading grocers are becoming more process-centric, seeking improvements in operational efficiency by undertaking time and motion studies of store operational tasks. This is a great start, but there’s so much more that can be done, like enabling task-centric data collection that can be used for process mining to drive continuous improvement.

Becoming truly connected in this way isn't easy, but the benefit potential is huge. Data silo elimination is key as it becomes the foundation to unlock the potential of emerging technologies like IoT and AI. Together these will drive insight, automation and improve decision making, which for the truly connected retailer can redefine operational efficiency.

Oliver Guy is the global industry director, retail at Software AG, specializing in retail digital transformation and omnichannel technology strategy.