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Alarms Bells or Opportunity for Change

As Consumer Spending Cuts Hit Grocery Retailers Jez Tongue of @logistics Reply Explains Why Food Producers Need to Review Warehouse Management Processes.

Until last month the grocery retail sector had largely escaped the tightening of household budgets with big ticket items, such as cars and electricals mostly taking the hit.

However, the rising cost of ingredients and the utilities needed to run production plants and delivery fleets, has pushed the price of essential food items and day-to-day consumables beyond the means of many people. As a result consumers are looking carefully at the products they purchase and the retailers they buy them from.

In May food sales fell by 3.5% according to the Office for National Statistics (ONS), the biggest decline in grocery sales since June 2008. The Retail Price Index paints a similarly gloomy picture and research published by Kingston University this month revealed that consumers are no longer prepared to accept low quality goods and poor customer service from retailers. As an immediate result, online grocery sales have taken a major hit, largely the result of failures in picking processes and missed delivery slots.

From a supplier perspective it is irrelevant whether a customer -retailer or consumer – are online or in-store. Customers want quality, value-for-money and optimum service. Neither is prepared (or able) to accept mis-picked or poorly substituted orders any more, and with the average household facing a cost of living rise of at least £900 a year, consumers can no longer afford to write-off poor quality produce.

The warning signs are here. Without significant process reviews along the supply chain, the next big casualties of the recession will come from this market.

However, this "threat" to the profitability and survival of businesses supplying the white-label food producers behind the own-brand products of Britain’s retailers, should actually be seen as an industry call to action. A time for the food production and distribution industry to review its processes, increase efficiencies and, by cutting unnecessary costs, ensure that profit margins can be maintained whilst ensuring quality and price integrity for consumers.

The need for agility in today’s volatile and competitive market can no longer be supported by manual warehouse management processes. There are too many suppliers; storage areas – dry, ambient and frozen – and distribution channels to be managed by pen and paper. Perishable stock items need to be rotated. Seasonal items factored into put-away processes, and now, with Next setting the precedent for next day order guarantees, highly demanding picking and distribution schedules overseen.

Flexible warehouse management systems (WMS), which offer rapid-time-to-value with limited capital and operating expenditure, and which can be "switched on or off" in line with demand are ideal for warehouses requiring rapid start-up and for those which operate in uncertain scenarios or with very high stock movement.

Following a simple, low-cost "connection to the grid", or in this case "the Cloud", the WMS aligns the warehouses’ needs to the number of functions activated on the system, so only the "capacity" used is paid for. If the WMS is no longer needed or seasonal demand dictates greater use, it is no harder than (de)activating a utility.

For businesses that want to avoid interruption to their cash flow and day-to-day business, as well as unnecessary use of their own, limited, IT resources, outsourcing the solution to experts who will manage the software for them is becoming an increasingly desirable option in today’s economic climate.

All the warehouse team needs to do is use the intelligence provided by the WMS to achieve an ultra-lean warehouse. Shift patterns can be reviewed; picking accuracy and efficiency improved with the introduction of RF or voice picking applications that deliver fulfilment instructions and best picking routes directly from the WMS to the picker.

Automated picking also enables real-time stock tracking and logging of damaged goods. This introduces the option of just-in time stock ordering and item rotation to reduce waste and ensure the longest shelf-lives are always delivered to retailers, and in turn to their customers.

Automating a warehouse using a Cloud-based WMS is low-risk and low-cost. And because it works on a ‘pay-as-you-grow’ payment model, users are always on the latest release; eliminating the necessity for costly and time-consuming product upgrades. This means that it has the ability to scale as the business grows in complexity and volume; providing companies with the customisable scalability to pay as little as they wish for the functions they need at any particular time- with no contractual constraints.

Increased supply chain efficiency will cut overheads. Lower costs will mean the maintenance of profit margins despite the growing cost of ingredients and fuel. Healthy margins could mean retailers don’t need to pass rising costs on to the consumer or compromise on quality. Let’s face it, with the research published this month, there is no margin in the mix for poor customer service!

Automating a warehouse using a Cloud-based warehouse management system, such as Side-Up from @logistics Reply, is quite literally fool-proof and could be the root of change needed to save grocery retailers from the grip of the recession.

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