Commonly Used E-commerce Supply Chains for Fast Moving Consumer Goods: Comparison and Suggestions for Improvement



Commonly Used E-commerce Supply Chains for Fast Moving Consumer Goods: Comparison and Suggestions for Improvement

Authors

L Deketele, Procter & Gamble Eurocor nv, BE; D Van Hove, T Vanelslander, University of Antwerp, BE

Description

The paper identifies the most commonly used e-grocery supply chains in Western Europe. These supply chains will be described and subsequently quantified. The conclusion will consist of recommendations for their improved efficiency.

Abstract

Online grocery retailing, even though occupying a relative small share of the market, is growing quickly. This growing trend is characterised by more and more brick-and-mortar retailers entering the online market, effectively transforming themselves into so called click-and-mortar retailers.

Next to these multichannel operators, so called pure play retailers also exist. These companies aim to be successful by removing the cost of having a brick-and-mortar store network. However, achieving profitability seems to be tough due to the financial burden of high investment costs and the low margins in grocery business. The case of the pure play grocer Webvan is an often cited example of a business that failed due to the burden of high investments, among other factors. Furthermore, most shoppers are not willing to pay for the full cost of picking and delivery operations. This obliges e-groceries, both multichannel and pure play, to continuously strive for the most efficient operations while at the same time preventing investment costs from hampering profitability.

This paper will focus on the picking, packing and last mile distribution operations of the e-commerce supply chain for grocery items. An extensive literature review, together with a review of the Western European online grocery business will be conducted to identify the most commonly used supply chain setups, both pure play, as well as click-and-mortar models.

Firstly, these supply chain setups will be described in a generalised manner. Hereafter, they will be associated with representative retailers, whose current setups will be discussed in relevant detail.

Secondly, the most significant cost drivers will be identified using the insights gained from the analysis of these supply chains. These cost drivers will then be quantified with the help of data from public sources. Wherever data is missing or not available, the associated cost structure will be modeled and simulated to estimate the cost of those parts of the supply chain.

Lastly, using the results from this quantification, an attempt will be made to draw generalised conclusions for these supply chain setups. Also, by specifically looking at the cost structure of the different elements of these supply chains, it will be possible to give recommendations for their improved efficiency.

The structure of the paper will be as follows: section 1 will describe the online grocery market in Western Europe and will focus on the examples identified. Section 2 will present a descriptive analysis of their supply chains, which will be quantified in section 3. Lastly, section 4 will conclude the paper and consist of some recommendations to improve the efficiency of e-commerce grocery supply chains.

Publisher

Association for European Transport