ORLANDO, Fla. -- By the year 2005, technology will have radically transformed the way the grocery business operates today. That includes everything from the way consumers shop to the way the industry handles logistics.
Such a vision was the subject of a detailed presentation at the Food Marketing Institute's Midwinter Executive Conference here. "The consumer of the 21st century will not be served by the dysfunctional supply chain of the 20th century," said Jim Morehouse, vice president of global supply chain integration at A.T. Kearney Inc., Chicago. Morehouse presented a view of the future of logistics with Dr. Donald Bowersox, professor of business administration at Michigan State University. The presentation was the first public airing of their report, titled "Supply Chain Management: Logistics in the Future," which will be released in May at the FMI annual convention in Chicago. "The computer-literate technologically integrated shopper of the 21st century is probably going to sit down at his or her computer terminal at 4 p.m. on a Tuesday afternoon and place a grocery order for the week," said Morehouse. "Not from memory or from a slip of paper, but a computer file will come up. It will show them what they have bought over an extended period of time, how many days it's been since they shopped last, what they bought last time, and therefore what the order might be."
When finished, the shopper will press an "enter" button. "That message will be transmitted, not to a traditional retail store, but to an item-pick warehouse that specializes in the business of providing home delivery of groceries and other related products," he said. "It will be picked efficiently, probably by automatic equipment and computer control. It will be staged. It will be checked for accuracy. It will be put on a delivery vehicle and delivered to that shopper at home by 8 p.m. within plus or minus 15 minutes, and unloaded in their kitchen," he said. Morehouse explained that such a scenario would not cover 100% of the market and is not for all products. "Probably not perishables and meat, and other fun items," he said. "But for basic, reusable consumable commodities, it may be an alternative." Other alternatives to traditional supermarket shopping would be well-managed food-service operators, and small, local stores that specialize in fresh foods. "The power of the supply chain will be focused on the consumer," said Bowersox. "The food and fiber system of yesterday will become a totally different multi-organizational enterprise tomorrow, and built in will be several conduits of extreme importance."
The speakers listed these conduits as:
· Information -- "A smooth, absolutely transparent communication of information to all of the supply chain partners," said Morehouse. · Goods -- "The heartbeat of the entire logistics process," said Bowersox. "What will happen will be a revolution in the way we think about moving goods in concert with moving information. We will orchestrate a flow of goods that will rapidly move from point of manufacture to point of consumption, with a minimum amount of handling and a maximum velocity."
· Electronic Funds Transfer -- "Ultimately, everyone will be paid via an electronic funds transfer to your bank account each night, based on the actual sales of your product that went through the scanner or was delivered to a consumer," said Morehouse. The speakers said the scenario for 2005 would be possible due to changes that trading partners would be making by 1998. For example, they assumed that the business practices of Efficient Consumer Response would be taking place. They looked at three areas: · Efficient Replenishment -- "The shining star of ECR," said Bowersox. "Goods are moving to market faster, arriving fresher, and shelf-life is longer. EDI [or electronic data interchange] is increasingly becoming a way of doing business and we're questioning the 'why' of certain kinds of traditional paperwork." · Efficient Promotion -- "Some progress," said Bowersox. "Forward buying and diversion are still with us, but declining.
"Aided by electronics, we see pay for performance much more the norm than it is today, and the promotion dollars will be more frequently passed on to the consumer in the spirit of Efficient Consumer Response, rather than being used to one way or another cushion the reality of price."
· New Product Introductions -- "We see some, but much less, progress in this area," said Morehouse. "We think that the number of new products improved each year will be declining."