Supply chain redesign for supermarket

At a glance:

  • For grocery retailers, optimizing their warehouse footprint can improve performance and lower costs

  • Achieving an optimal footprint requires strategic analysis of issues and opportunities along the supply chain

  • For one supermarket chain, an IG&H supply chain analysis and warehouse consolidation strategy revealed a potential 15% reduction in logistics costs







Significantly lower logistics costs for a supermarket chain.

Increased labor costs and a scarcity of workers, combined with consumer demand for more product choice and service, is necessitating a shift towards warehouse automation for food retailers looking to lower logistics costs and increase competitiveness. Ongoing growth left this top supermarket chain struggling to keep up with demand, which led to higher costs and difficulty maintaining the quality of store deliveries. With the goal of improving supply chain performance, the retailer initially enlisted the help of IG&H to develop scenarios for optimizing their warehouse footprint, ultimately choosing them to implement one of the scenarios.


Improving logistics performance through holistic analysis

To gain a better understanding of the current situation, IG&H began by assessing the company’s growth outlook, benchmarking current cost performance, and assessing bottlenecks and opportunities within their existing supply network. Based on these insights, the IG&H team developed several warehouse footprint scenarios based on best practices, each with their own bottom-up business case. For transportation, a center of gravity study was done in which different delivery models were analyzed and simulated using state-of-the art route optimization software. For the consolidated footprint scenarios, a high-level mechanized material handling solution was designed, together with the initial building and location specifications. Finally, IG&H did an assessment of a potential new warehouse location, accounting for a variety of strategic factors, risks and unknowns.


Throughout the project, IG&H facilitated a transparent and controlled decision-making process across multiple internal and external stakeholders.



 

The results

IG&H was able to identify a value case that would enable an 11-15% reduction in logistics costs per year with an attractive payback period. The follow-up included a comprehensive international tender for the material handling solution and collaboration with real estate professionals to realize the new logistics site. IG&H also set up a program management infrastructure and is overseeing the entire transformation effort.

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