Getting a full grasp on the grocery store supply chain can be difficult, especially when many aspects of it are so far removed from your small grocery business.
However, by having a solid understanding of what the grocery store supply chain is and the technology at your fingertips, you’ll be better equipped to minimize supply chain disruption.
In this article, we’ll give you an overview of the supply chain, the main factors that can impact your business, and six best practices you can follow to stay ahead of it.
In short, the grocery store supply chain is the complex network of companies, processes, people, and information that moves a product from raw ingredients to a customer’s shopping basket.
The grocery store supply chain has six components:
Let’s look at an example of the supply chain in action using a loaf of bread.
As you can imagine, a sudden change at any step can ripple forward and backward along the supply chain and cause disruption. For example, a sudden spike in demand for a certain style of bread, thanks to a popular cooking show, or a grain shortage can lead to suddenly empty shelves.
“Supply chain disruption” is often used as a blanket term for when products suddenly rise in price or go out of stock. But what does it actually mean?
Supply chain disruption can happen for many reasons, but here are some of the most common:
Which of these issues will affect you the most at your grocery store? The unfortunate answer is all of them. Even aspects of the supply chain that are far out of your control can directly impact your business.
The more you prepare for supply chain disruption, the better position you’ll be in to combat its effects.
As anyone in the grocery industry knows, supply chain disruption happens all the time — but that doesn’t mean there’s nothing you can do.
Here are six practical tips to minimize expenses and keep customers happy in the face of supply chain shifts.
The most impactful thing you can do to stay ahead of supply chain issues is to understand your inventory. However, if you’re tracking inventory manually, that’s easier said than done.
Grocery store inventory management software provides better visibility and helps make processes more efficient, improving your reaction time when demand suddenly shifts.
At its core, the inventory management features of your point of sale (POS) system will allow you to track stock levels in real time, updating every time you receive an invoice or make a sale.
Additionally, it helps staff stay on top of inventory shortages using:
Traditional inventory tracking methods are reactive by nature. Inventory management software lets you take a more proactive approach, helping you avoid stockouts, cut down on food waste, and spot unexpected swells in demand before they affect customer satisfaction.
Supply and demand. At some point, we all learned about it in school: when the availability of sought-after goods decreases, prices go up.
In the face of rapid price increases and other disruptions, raising prices across the board can be tempting. However, this approach can quickly lead to dissatisfied customers and lost sales.
Our advice: don’t panic. Instead, take a strategic approach to price changes.
Use the reports on your POS system to understand the profit margins and sales history for individual items or product categories. You might find that for some items, a slightly lower profit margin won’t offset the upset resulting from a sudden price increase.
A data-driven approach will also help you figure out a fair amount to adjust prices by. Setting prices that help you maintain healthy profits without scaring customers away is essential.
Related Read: 8 Retail Pricing Strategies for Small Retail Businesses
In many cases, your ability to respond to product shortages is determined by your suppliers. The fewer suppliers you use, the less flexibility you have.
This is why it’s important to maintain relationships with several reliable suppliers to have some level of redundancy. Further, you should periodically review your sales data to see how profit margins and other expenses compare between vendors and negotiate better rates.
When assessing your suppliers, look at their:
Another critical aspect of the grocery store supply chain is distance. The farther a product travels to your store, the more chance there is for something to go wrong.
This is why it’s vital for small grocery stores to forge strong connections with other local food businesses. Not only will this help you avoid supply chain problems, but it will also create a better shopping experience for customers who enjoy small supermarkets for their more niche and local selection.
Demand forecasting refers to how grocery stores use internal and external data to predict sudden shifts in demand. While it might seem like something only big chains with lots of resources can do, you’d be surprised.
Let’s give an easy example: the winter holidays! Using the historical data on your grocery store POS system, you can see what items were most popular and roughly how much sales volume increased for those items during the last few weeks of December and the start of January.
Using that data, you can plan to stock more of certain items or even maintain safety stock for particularly popular items.
Tracking your sales data regularly helps you discover correlations between local events, holidays, game days, seasons, and even weather. Implementing demand forecasting can help you stay ahead of demand shifts and make smarter purchasing decisions.
It’s difficult to stay ahead of customer demand if you don’t know what your customers are demanding. While you likely have a general idea of what’s popular in your store, backing up your intuition with sales data is an excellent way to diversify your most popular products and keep customers happy.
Use the reports on your POS system to understand your:
Knowing exactly what products your customers love will help you make better purchase decisions. In other words, with better visibility, you can expand product selection in the areas your customers care about the most.
Related Read: Grocery Analytics: 5 Ways To Inform Buying Decisions
Our last tip is less process and technology-focused, but no less valuable. As a small business, your capacity to weather losses from supply chain disruption will be less than that of a big chain or a corporate supermarket.
Put another way, you simply won’t be able to compete on price alone. That’s why it’s more important than ever for independent grocers to double down on high-quality customer service.
People will be willing to pay more if you can consistently provide friendly customer service, great recommendations, and better quality. Do what you can to retain great staff and focus more on what makes your store unique compared to the competition.
Another tactic to employ is to tweak your customer loyalty program. Most grocery store POS systems have various ways to manage your loyalty program's points earned or rewards. In times of supply chain disruption or higher prices, it might be a good idea to boost the rewards customers receive to encourage them to keep shopping at your store.
Advertise any changes to your customer loyalty program via your newsletter or signage. People won’t take advantage of a great deal if they don’t know it exists!
The good news about most supply chain disruptions is that they’re temporary. If you have a solid plan, you’ll weather the storm.
That said, your ability to quickly react to change will largely determine your success — the right technology can help.
IT Retail was built on over 30 years of experience in collaborating closely with independent grocers, supermarkets, and international markets. We’re determined to give small businesses the specialized tools they need to stay competitive, reduce costs, and make their customers happy.
Schedule a custom demo today to see how IT Retail can transform how you forecast demand, keep shelves stocked, and understand your customers.