Grocery sector could save billions with smarter supply chains: report

Posted by James Ferre on 12th October 2009

A major new report released last week in the UK reveals the sizeable opportunity which the retail sector can realise through improving data practices in the supply chain.

The report, ‘Data Crunch’ by not-for-profit supply chain standards and solutions organisation GS1 UK, estimates that UK grocery retailers and suppliers can realise savings of at least £1 billion (A$1.77b) over the next five years as data inconsistencies are ironed out across the industry and pass the benefits to consumers through better informed choices and improved shopper experience. The report also outlines the existing business opportunity for retailers and suppliers to address the issue of increased demand for better product information from consumers, governments, regulators and pressure groups.

The grocery sector recognised the need to review its product data and worked closely with GS1 UK to develop the report. In collaboration with the country’s four largest supermarkets, Tesco, Sainsbury’s, Asda and Morrisons, and four of the largest product suppliers, Nestle, Unilever, Procter & Gamble and Mars, GS1 UK used IBM’s analytics capability to assess the product data, which included more than one million records from the participating retailers and suppliers.

By comparing the product data held by suppliers with that stored on the supermarkets’ systems, the research uncovered inconsistencies in what should have been identical information in over 80 per cent of cases. After calculating the impact this has in terms of lost or late deliveries, inaccurate orders, surplus transport costs and duplicated work, GS1 UK found the savings opportunity for the retail industry was more than £700 million and a further £300 million opportunity for new sales.

“The ‘Data Crunch’ report highlights the significant benefits for both retailers and suppliers in adopting data standards across the industry,” GS1 UK Chief Executive Gary Lynch, said. “We’ve been very encouraged by the collaborative action the industry has taken to date in helping us develop this report and are confident this joint work will continue apace as the issue is addressed across the UK grocery industry.”

“By working together to improve their supply chain systems, both retailers and suppliers stand to benefit considerably from reduced costs and greater productivity.”

Mike Coupe, Trading Director at J Sainsbury – one of Britain’s largest supermarket operators, acknowledged that the relationships along the supply chain needed to be improved.

“It’s in everyone’s interests for the industry to work together towards building smarter supply chains,” he said. “From a retailer’s perspective, we’re constantly exploring ways to provide greater business insight to help drive improved decision making and operational efficiencies. We must all work with our suppliers to ensure a reliable flow of information and product data to make this happen.”

The estimated opportunity for savings were found to fall into two main areas: avoiding shrinkage and eliminating workaround processes (such as manual investigations to cross check the accuracy of the data).