Lynne Sampson | Content Strategist | August 21, 2023
Grocery stores are one of the first retail experiences for many of us. Some of us have fond memories of sitting in the seat of the shopping cart as our parents pushed it around the store, picking out colorful packages and tossing them in. But did you ever wonder, as a child, where all that stuff came from?
The answers have to do with the grocery store’s supply chain. In this article, we’ll look at the complexity of grocery store supply chains and give you an appreciation for everything that goes into making them run smoothly.
A supply chain is the network of companies, employees, machines, information, and other resources involved in moving a product from raw material to the end customer. Manufacturers source raw materials from suppliers, trying to get the best quality materials at the best price. The raw materials are shipped to a manufacturing plant, where they’re assembled into a product (soap, canned goods, sliced bread, and so forth), inspected, and packaged. The final products are shipped to buyers, which might include giant consumer goods companies such as Unilever, national grocery chains with big warehouses, or small distributors that sell to independent grocers. The final product goes from those buyers to the grocery store shelves and ultimately into your shopping cart.
Every step along this complicated supply chain must be controlled and monitored. Employees must plan for the right amount of raw materials, coordinate transportation routes, manage inventory levels, and ensure quality control. They often rely on supply chain software to help manage these complicated processes. This type of software falls under the category of supply chain management systems.
The grocery supply chain includes sourcing raw ingredients, processing and packaging them, and delivering them to stores for sale. Fresh fruits and vegetables don’t require much manufacturing or processing. They go from the farm to the store more or less as is, but perishable items must be refrigerated during shipping. Packaged goods—such as crackers, breakfast cereals, and margarines—follow a typical manufacturing journey. Raw ingredients are shipped from supplier to manufacturer, processed, combined, and cooked or baked (with varying degrees of automation along the assembly line). The final products are packaged and distributed to buyers, warehouses, or directly to retail grocers.
Grocery supply chains require close coordination among many players to ensure that producers have access to the right resources, customers receive quality products on time, and stock is made available whenever needed. In recent years, supply chain disruptions have become more common for several reasons (a pandemic, wars, climate change, and so on). As a result, more companies are investing in supply chain management (SCM) software to make their distribution networks more efficient. SCM software is available for every step in the supply chain, from demand planning to order management to logistics and warehousing. Today’s SCM systems often include built-in artificial intelligence (AI) and machine learning to identify potential problems and recommend solutions. Manufacturers and other stakeholders use the systems to streamline their processes and get better visibility into their operations.
The grocery supply chain is a complex process by which food and other household staples travel from their origin to neighborhood stores. Grocery retailers typically don’t interact directly with food manufacturers. Instead, they buy products from third-party distributors or warehouses. Once the products arrive in stores, retailers must organize them in a way that makes it easy for shoppers to find what they’re seeking. Grocery retailers also track inventory so they can order more of an item before stock runs out. It’s a complex network that makes food accessible to billions of people every day.
Grocery supply chains connect food producers with retailers. Steps along the supply chain include raising fresh foods on farms, transporting the food, and often, processing raw materials into packaged goods. Food manufacturers sell processed and packaged goods to food brands, warehouses, or wholesale grocers, which then sell them to retail grocers.
Today’s grocery supply chains depend heavily on machines and software, so many of the key challenges are related to technology. The top challenges include everything from integrating data from hundreds of systems to determining the best delivery routes to keep food fresh.
Grocery supply chains have, for many years, relied on software to coordinate and track shipments; nevertheless, only parts of the supply chain were automated. Today’s newer technologies, such as AI built into cloud software, can help automate nearly all parts of the supply chain, making them more efficient and agile.
The future of the grocery supply chain will depend on technology. Already, technologies such as AI, machine learning, blockchain, and predictive analytics are becoming more important to supply chain efficiency. For example, AI and machine learning can analyze data generated by Internet of Things sensors attached to product crates, shipping containers, and other “things” and identify potential problems, such as whether a container can’t maintain the proper temperature to prevent food spoilage. Blockchain can power intelligent track-and-trace systems, securely tracking the journey of individual items along every step from farm to table. With more automation and improved analytics in place, companies can optimize their inventory levels and minimize waste, making food industry operations more efficient.
Oracle’s supply chain management and grocery retail applications provide real-time insights into inventory levels, shipment status, number of orders fulfilled correctly, costs, and other key performance indicators. With cloud-based analytics tools, grocery retailers can identify areas where they can improve the delivery process, reduce waste, and optimize pricing. Oracle's applications integrate with major ecommerce platforms, letting grocery retailers manage online orders as part of one central supply chain system. For example, grocery stores can let customers purchase in-store, place orders online, or use mobile apps on the go. Many of the world’s leading grocery retailers use Oracle to collaborate with more than 250,000 suppliers.
What is the supply chain of grocery stores?
The grocery store supply chain typically consists of suppliers, wholesalers, distributors, and retailers of food, beverages, and other household products.
How does a grocery store supply chain work?
Grocery store suppliers grow or manufacture fresh or packaged foods and other products. Wholesalers purchase those items in bulk from suppliers and resell them to retail grocery stores. Distributors move those goods from one place to another. The grocery stores themselves stock those items for sale to the public in-store or online.
Why is there a shortage of groceries?
Grocery shortages happen for any number of reasons. Different parts of the supply chain get disrupted because of labor strikes, trade disputes, worker shortages (think truck drivers), adverse weather conditions, and other “shocks” (such as the COVID-19 pandemic). Droughts, torrential rains, and sudden insect infestations can cause crop failures. Shortages also happen at individual retail stores because of inadequate supply chain management processes and systems.