How to Build an Agile Supply Chain Ready for What's Next in Retail

By: Susanna Zhu, Vice President, Head of U.S. Supply Chain Operations, The Hershey Company

Susanna Zhu, Vice President, Head of U.S. Supply Chain Operations, The Hershey Company

There is no doubt that shopper behavior is changing at a frenetic pace. Today, the shopper has many choices: home delivery, order online pick up in-store, a visit to the local market, subscription services and more. It’s hard to imagine how different the retail landscape will look in a few short years.

There’s one thing we know for sure: There is no longer a divide between online and off when it comes to shopping. In fact, according to Hershey research, shoppers spend significantly more (~6X) when they shop all of a retailer’s commerce platforms – online, in-store and mobile. And with both in-store and digital trips up, the entire retail ecosystem is ripe with opportunity.

From what I see in the market, retailers that are transforming successfully are leaning into collaborative partnerships with their suppliers. Some of the shopper expectations retailers and brands are addressing together, include:

1. Speed & Convenience – Shoppers want a quick, easy shopping experience. At the same time, retailers want to find ways to streamline processes. We’ve witnessed this come to life in recent years via both click & collection as well as self-checkout in stores. Click & collect allows consumers to place orders online whenever and wherever they are and saves time for shoppers. Self-checkout also saves consumers time with shorter lines in-store and allows retailers to use staff more efficiently. We expect more fulfillment models like these to emerge.

2. Personalization – The shopper wants to feel that their favorite retailers know them and are personalizing their experience – whether online or in-store. In return, retailers are exploring ways to create unique experiences for their shoppers and are looking to their brand partners to offer solutions – from varying price points to unique packaging to precision media– that help meet their consumers’ needs.

3. Any Product, Anywhere– Retail space is getting more competitive and the lines are blurring in terms of what products are sold where. Consumers demand access to affordable, quality and convenient products across the different channels they shop from c-stores to big box retailers and everywhere in between.

It’s unrealistic to put all the pressure on retailers to meet and exceed shoppers’ expectations. Now more than ever, strong relationships with brand partners who understand the needs of both their retail partners and consumers are vital. With more than 15 years of experience in the consumer goods space, I’ve seen firsthand the success retailers can have breaking through in a competitive market place when they partner with brands that possess the following:

• Consumer relevant brands and diverse product portfolio (now and in the future) –Powerful brands consumers love will draw shoppers into your retail ecosystem. It’s critical for brand partners to bring new and exciting products through a robust innovation pipeline. Brand partners who invest in brand-building, innovation, advertising and media will help drive traffic and continue to bring shoppers back to your store.

• Product availability on shelf in-store and online – Consumers expect to see the brands they love when they want them, and brand partners with the highest in stock levels will win. If they can’t find what they’re looking for, you risk losing the sale. Hershey’s supply chain team monitors our OTIF (on time in full) to retailers, and have taken differentiated approached to ensure we meet shopper needs.

• Strong digital commerce capabilities – In today’s retail world, it’s critical to have connectivity between the digital and physical shelf. Packaging and merchandise must be thumb-stopping ready on a five-inch screen and foot-stopping in a 20-foot aisle. To build a best-in-class product description page online, it’s imperative that brands deliver the best content – including product imagery, user-generated reviews, images of suggested product usage occasions and more. That’s why at Hershey, we’re investing in strong digital content. Swiping through content on a product description page is equivalent to picking up a product from the shelf and examining it. It’s the final step before a shopper decides to put the item in their basket. Content also enables online search. If a shopper can quickly and easily find what they’re looking for, you’re much more likely to win the sale.

• Adaptability and Flexibility–The most successful relationships are with partners that have a solution-based mentality to support the retailers. Your brand partners need to be able to adapt to the needs of your business and the end consumer – and have the infrastructure to support these evolving needs. I frequently meet with our retail customers to discuss their short-mid-and long-term growth strategies to ensure we’re investing in the right ways to support their goals.

If your brand partners check all the boxes above, you’re in a good place. But, in order to continue delivering best-in-class service, ensure your partners are also making investments across their supply chain.

Ensuring Manufacturing Capacity and Efficiencies

Manufacturing capacity impacts a broad range of consumer experiences, from new product formulations, to packaging and merchandising to digital commerce. Today, we’re seeing the rise in smart plants that use the latest technology in robotics, automation and artificial intelligence to help brands better meet consumer requirements with product flexibility and improved costs. In return, these investments enable business and job growth for both the retailer and the brand.

Additionally, partners who actively develop and acquire new brands to their portfolio must look at their capabilities from the supply chain perspective and determine what makes sense for them to create in their current facilities and what they should buy from others – using co-manufacturers to produce. In these scenarios, it’s about finding the right balance in speed to market, fixed supply assets, scalability and cost.

Continuous Capabilities Enhancements

With consumers shopping the holistic retail ecosystem, products must be easily seen (or searched) in-store and online. Therefore, packaging must be mobile-ready, compelling, engaging and thumb-stopping. At Hershey, for example, our research identified that about 20 percent of shoppers walked away from a candy purchases due to difficulty finding a specific product (according to Hershey’s recent Aisle Satisfaction Survey). In response, we completely overhauled our packaging of both take-home and instant-consumables product portfolio to help drive growth for our retailers.

Beyond packaging, it’s critical that brands regularly invest in their warehouse operations and logistics to enable more efficient product movements and customer service. This includes warehouse management systems as well as data sharing with retailers to provide end-to-end supply chain visibility.

At the same time, improving demand planning capabilities allows brands to leverage technology and advanced analytics to improve forecast accuracy – a key to driving OTIF performance and successful customer service. In short, the most successful brands deliver the right product at the right quality and cost to the right place at the right time.

With ever-evolving shopping behaviors, retailers are looking to both their manufacturer and distributor partners to help solve critical challenges and stay ahead. Whether it’s new products, shelf availability, eye-catching packaging or personalized experiences, everything is aimed at captivating the shopper and keeping them engaged. None of this can be done without supply chain transformation. By analyzing the path of a product – from factory to store shelf– brand companies like Hershey are here to help drive growth for retailers and get the right product with the best quality into consumers’ hands.