The retail sector in is characterized by low margins and fierce competition between the major players. As a consequence the sector is very innovative and predisposed to deploy organizational and technological advances.
A strategy to increase their competitiveness and to increase customer frequencies in their outlets consists in offering a wide variety of fresh produce procured from all over the world. This strategy requires a slim and highly efficient procurement and logistics process.
PARADIGMA's solution comprises a business process model, adressing the particulars of the transport of perishable goods in such a setting; a set of electronic documents (order, delivery, transport, ..) required to complement the physical movement of goods; a customizable IT platform to be integrated into existing IT systems of retailers.
Experiences with this solution provided the following insights and benefits that accrue to the various actors in the supply chain:
- Bundling allows the producer to have one delivery for multiple retailers at the same time, reducing transport costs and enhancing his market access through new business contacts with multiple retailers.
- Retailers benefit from the reduction of the number of unloading operations at the docking ramp, as a result of the previous bundling of different orders to different suppliers performed by the logistics operator. This reduction of unload operations is expected to translate into a reduction of workload.
- Reduction of the order-delivery cycle has a positive impact on the freshness of the produce on the shelves. A corollary to these effects is the reduction of disposable waste, as the lot size of the orders is expected to decrease. Current estimates of waste amounts to 15%. Increase of turn in the warehouse by virtue of the increase of the order cycle will result in an improvement of the retailer’s cash flow in this product category.
- Albeit point-to-point delivery remains the fastest delivery mode, bundling of orders likewise has the potential to reduce the delivery time at least by one day. Assuming an average freshness period of 10 days (5 days for ultra-fresh produce) a one-day reduction of transport time will extend the shelf time by 10% and 20% for ultra-fresh produce respectively.
- The availability of an information pool (market place) with listings of expected product availabilities by producer (quality, volumes, prices) is expected to alleviate the retailer from the burden to check availabilities in advance; in today's environment 3-4 people on average in the procurement offices of the retail chain are engaged. A 50%-75% reduction seems possible.