Big Grocery Chains Ramping Up Pressure on Food Suppliers


Supply Chain Briefing

January 18, 2018

According to a Wall Street Journal article, Kroger (#2 grocery chain in the U.S.) and Walmart are ramping up pressures on food suppliers.  There is too much lost money due to shortages!  Thus, the industry is waking up to the critical importance of on-time delivery and customer service especially as they compete with on-line retailers like Amazon.  Kroger is fining suppliers $500 per order that is more than 2 days late to any of its 42 stores.  That can certainly add up!  And, Walmart is charging 3% for late deliveries.  This could prove transformative.  

How are you performing in terms of delivery performance?   No matter the industry, delivery performance is having a significant impact on scalable, profitable growth – or lack thereof.  My best clients are paying close attention and finding ways to get ahead of this curve.

What Should We Consider and/or What Impacts Could Arise?
Let’s start at the beginning.  Do you know what levels of service you provide to your customers?  Is it the same level to your A customers as well as your C customers?  Find out.  On-time-in-full (OTIF) is rapidly becoming the standard for measuring this performance.  If you don’t have a metric, just start with this one as a base.  Or, worst case, start with whatever you can measure rapidly – and evolve over time.  Of course, service alone won’t cut it.  Lead times and other factors enter the equation….

Clearly, if you are not high performing in the food and beverage industry (and consumer products in general), you will not stay viable anymore.  Amazon will be happy to fill the gap.  However, since I work with small and medium, family-owned manufacturing companies to  private-equity backed firms to large multi-billion dollar enterprises across a wide variety of manufacturing and logistics industries, it is quite clear that food and beverage is not alone!  Actually they are late to the party.  For example, aerospace companies track OTIF but it goes beyond an internal exercise – their customers (ex: Boeing) provide scorecards to monitor performance on a monthly basis.  If you aren’t in the highest category over extended time frames, there are likely to be negative impacts to your business.  Get on top of your delivery performance as it is no longer a differentiator; it is a baseline requirement to enter the game.