Walmart Archives

How Autonomous Delivery Vehicles Are Redefining Last-Mile Logistics

Artificial Intelligence | By Jim Frazer • 10/16/2024

Autonomous delivery vehicles (ADVs) are bringing significant changes to last-mile logistics, an essential component of the supply chain. With the rising demand for faster and more cost-effective deliveries, ADVs are becoming a viable solution to a variety of logistical challenges. For professionals in logistics and supply chain management, understanding the implications of this technology is crucial, as it has the potential to fundamentally change the way goods are transported and delivered.

The Technology Behind Autonomous Delivery Vehicles

Autonomous delivery vehicles rely on a number of technologies to operate effectively:

Artificial Intelligence and Machine Learning: These systems allow ADVs to navigate streets, assess obstacles, and optimize delivery routes. Machine learning improves the vehicle’s performance by analyzing data from past deliveries and refining its operations.
LIDAR and Sensors: LIDAR (Light Detection and Ranging) and other sensors, such as cameras and radar, help ADVs detect their surroundings in real time. These technologies ensure that the vehicle can avoid obstacles, follow traffic rules, and make decisions about its environment.
High-Precision GPS: Accurate navigation is essential for deliveries, and high-precision GPS systems ensure that ADVs reach the correct destination efficiently.
Cloud Computing: The data collected by ADVs is processed through cloud platforms, enabling real-time communication, route adjustments, and fleet management.
5G Connectivity: The speed and low latency of 5G networks allow ADVs to communicate with infrastructure and other vehicles in real time, improving safety and operational efficiency.
These technologies work together to create autonomous delivery systems that can manage the complexities of urban and suburban logistics.

Strategic Benefits

For companies that integrate autonomous delivery vehicles into their operations, benefits include:

Cost Savings: Autonomous vehicles reduce the reliance on human drivers, which can significantly lower labor costs. Additionally, many ADVs are battery powered, use of the electric vehicles leads to significantly lower fuel and maintenance expenses.
Operational Efficiency: ADVs can operate continuously, increasing the number of deliveries made in a shorter period. These vehicles also optimize routes, in near real-time, to minimize travel time and energy use, improving overall efficiency.
Environmental Impact: Many autonomous delivery vehicles are battery powered, thus reducing emissions compared to traditional fuel-powered vehicles. This contributes to a lower environmental footprint, particularly in urban areas where transportation-related air pollution is a concern.
Traffic and Congestion Management: ADVs, especially smaller models such as delivery robots, are better configured to navigate congested urban areas rather than traditional trucks. Drones, another form of ADVs, bypass road traffic entirely, further easing congestion.
Improved Delivery Accuracy and Customer Experience: Autonomous systems can provide accurate delivery windows and real-time tracking, which aligns with customer expectations for faster, more transparent delivery services.

Real-World Applications

Several companies have already started using autonomous delivery vehicles in practical scenarios:

Amazon has launched its “Amazon Scout” autonomous robot, which delivers packages to customers. Amazon is also testing drone-based deliveries through its “Prime Air” program.
Nuro has developed an autonomous vehicle designed for transporting groceries and small packages. Nuro’s vehicles are being evaluated by retailers such as Walmart and Kroger.
Starship Technologies operates fleets of delivery robots in various cities, handling deliveries for food, groceries, and parcels. These robots navigate sidewalks and make deliveries in short-radius urban areas.
FedEx and UPS are also exploring autonomous delivery technologies. FedEx has developed Roxo™, the FedEx SameDay Bot for local deliveries, while UPS has experimented with drone deliveries, particularly in rural locations.

These implementations demonstrate that autonomous delivery technology is not hypothetical but is being tested and used in real-world settings.

Challenges and Considerations

While the benefits of autonomous delivery vehicles are clear, several challenges must be addressed:

Regulatory Issues: Regulatory frameworks for autonomous vehicles vary across regions. There are continuing discussions around safety standards, liability, and operational guidelines. Companies need to work closely with regulators to navigate this evolving landscape.
Safety: Although the technology behind ADVs is improving, safety concerns remain, particularly in busy urban areas. Pedestrians, cyclists, and other road users need to be protected, and ADVs must be thoroughly assessed to ensure they can manage unexpected situations.
Workforce Impact: The deployment of ADVs may reduce the demand for human drivers, raising concerns about job displacement. Companies need to consider how to manage this transition, through workforce retraining or by creating new roles related to managing and maintaining autonomous fleets.

Future of Last-Mile Logistics

The use of autonomous delivery vehicles in last-mile logistics will continue to expand as the technology matures and regulatory barriers are addressed. Companies that adopt ADVs can expect reductions in operational costs, improvements in efficiency, and lower environmental impacts. However, integrating these systems will require careful planning, particularly regarding regulatory compliance and managing workforce changes.

As logistics companies assess long-term strategies, it is essential to consider how autonomous technology fits into their broader operations. In the future, ADVs will become an integral part of the logistics ecosystem, offering an interesting new way to address the challenges of last-mile delivery.

With the potential to reduce costs, improve efficiency, and mitigate environmental impacts, ADVs present a viable solution to many of the challenges currently facing the logistics industry. However, companies must also navigate regulatory hurdles and manage the impact on their workforce as they integrate this technology into their operations.

For industry professionals, the task is clear: understand the technology, assess the benefits, and plan for its implementation in a way that aligns with broader organizational goals. The future of logistics is increasingly automated, and companies that are prepared for this shift will be in a stronger position to compete and lead.

Watch Jim’s video on “How Autonomous Delivery Vehicles Are Redefining Last-Mile Logistics”, right here:

https://www.youtube.com/watch?v=jBgswAkxrM4

Walmart’s Massive Investment in a Supply Chain Transformation

Supply Chain Planning | By Steve Banker • 05/10/2021

Walmart has been very open about what it takes to compete with Amazon. Following their fourth quarter results, top executives talked about their supply chain and omnichannel strategy at a high level. Brett Biggs, an executive vice president at Walmart, summarized the investments by saying the retailer is spending on increased fulfillment capacity, supply chain, automation, and technology. This new infrastructure will allow the retailer to expand ecommerce assortment while reducing both shipping time and cost. Walmart is making investments in warehouse automation in distribution centers to deliver aisle and department-ready pallets to stores. Walmart is also investing pickup and delivery capacity.

On March 21st, David Guggina – the senior vice president supply chain, product, and engineering – filled in more detail on the specifics of their supply chain journey while speaking at Blue Yonder’s virtual Icon user conference. Blue Yonder is a leading provider of supply chain software solutions including several solutions that will be mentioned in this article – demand management, inventory optimization, replenishment, warehouse management, warehouse control systems, yard management, and transportation management.

Walmart’s fiscal 2021 ended on January 31^st. With $555 billion in sales, the world’s largest retailer grew by 6.8%. Walmart’s operating income was $22.5 billion, 4.1% of sales.

Amazon is smaller. Amazon’s fiscal year ended on December 31^st. The company had $341 billion in retail revenues. Amazon is less profitable. Retail operations had an operating income of $9.4 billion, just 2.8% of sales. But with 38% year over year growth, they are growing much faster than Walmart. If this continues, it will not be too many years before Amazon is the world’s largest retailer.

Around the world, ecommerce is growing much faster than in-store sales. Walmart knows this. Brick and mortar retailers that do not have a strategy to grow sales based on an omnichannel strategy are going out of business with an increasing frequency. Walmart has been working to pivot to omnichannel for several years to help speed growth. For Walmart, “omnichannel” is defined as a customer-centric experience that seamlessly integrates ecommerce and retail stores into an offering that saves time for consumer.

Walmart’s U.S. ecommerce sales contributed approximately 5.4% of comparable sales last year. Walmart defines ecommerce sales as those that originate online but which be fulfilled by either dedicated ecommerce fulfillment sites or by leveraging their stores. The store omnichannel services include pickup at store, ship from store, and digital pharmacy fulfillment options. The company has 7,300 pickup and 5,200 delivery locations globally.

The US is where Walmart’s digital transformation is centered. Walmart’s investment in ecommerce, supply chain, and technology in the US was over $11 billion over the last two years. For retailers, remodeling stores and building new stores is usually where most of the capital has historically been spent. At Walmart, their digital transformation – spending on ecommerce and supply chain technologies, combined with new investments in supply chain infrastructure – represented 72% of their strategic capital expenditure in the US for their 2020 and 2021 fiscal years.

Mr. Guggina talked about how Walmart is approaching their supply chain transformation. “For many of our customers, saving time is as important as saving money.” That has led to growth in ecommerce. But Walmart will not abandon their strategy of being a low-cost provider – what the company calls “everyday low prices.” Low prices translate into having a focus on cutting costs; this in turn means having an efficient supply chain.

But there is tension between price leadership and service. In a store, customers have access to 100 to 150,000 stock keeping units (SKUs). But when a consumer goes online, they can access hundreds of millions of items. But there is a challenge around slow selling items. Where should slow movers be held so that orders can be fulfilled both economically and with speed.

Delivering many items ordered online quickly depends upon shorter lead times and the ability to support a variety of fulfillment options such as curbside pickup or ship from store. Distribution centers that traditionally just replenished a given set of stores will be increasingly asked to also fulfill ecommerce orders. Mid-mile and last mile transportation capabilities need to be improved. “That is a steep ask for any supply chain,” Mr. Guggina stated.

This is where Walmart seeks more “precision.” The use of demand management, inventory optimization, and replenishment applications can help this retail behemoth achieve much better inventory placement and fulfillment flexibility. Investing in supply chain applications also, Mr. Guggina asserts, helps them with their “relentless cost focus.”

The pandemic created a challenging year for their supply chain. “I’m glad we had our leadership and strategy in place,” Mr. Guffina said. “The pandemic propelled our omni strategy ahead by 3 to 5 years.” Pick up at store and home deliveries grew quickly because of the pandemic.

So besides forecasting, inventory optimization, and replenishment, how are those billions of dollars being spent in the supply chain area?

Walmart is reducing packaging waste by right sizing packaging; for some products packaging might not be required at all. This initiative requires capturing product dimensions and other product attributes with higher accuracy. The packaging algorithms do not work if this data is not up to date.

In their distribution centers, Walmart is modernizing their warehouse management system (WMS). The system, which will launch later this year, will have better labor planning, as well as providing better inventory control.

Walmart is making extensive investments in warehouse automation. The company has deployed autonomous mobile robots for moving pallets. The retailer is also investing in the use of automation for picking/putting to and from containers. There are large investments in sortation equipment; sortation systems automatically sort products down the correct shute as they move through a warehouse on a conveyor. When it comes to these projects, warehouse control systems are used to interconnect the automation assets – the hardware – with the warehouse management system software.

Investment is being made in a highly automated warehousing solution from Witron surrounding produce. Vegetables and fruits will be able to be delivered more quickly and cheaply as a result.

In transportation, Walmart is engaged in numerous projects. The company is doing a proof of concept to see if trucks can move about autonomously in their yards. The autonomous trucks will need to be integrated to an improved yard management system for this. That will lead to better flow in their yards.

There are experiments with over the road autonomous trucks. There is work being done to improve optimization associated with trucks moving inbound from suppliers to their distribution centers. There is also a project surrounding freight matching and freight pay. Not surprisingly, a command center visibility solution is being developed.

There are also new tools and applications for the cab of a truck. Their 11,000 drivers will have new onboard computers. Last mile will be improved as stores increasingly become a starting point for consumer deliveries.

“We are moving faster than ever, Mr. Guggina said. “We are partnering with Blue Yonder to help to continue to transform our supply chain.” Walmart has been known as a company that developed many of their applications in-house. “The days of buy versus build are over.” Walmart has shifted being a buyer of supply chain software.

Over my 25-year career, I have heard executives from several supply chain software vendors say that Walmart was using their solution in some part of their operations. Unfortunately, they said, they were not allowed to publicly name Walmart as a customer. Having a Walmart executive give the keynote at the Blue Yonder user conference, and publicly name Blue Yonder as a key solution partner, is a noteworthy occurrence.

This Week in Logistics News (January 11 – 17)

logistics news | By Chris Cunnane • 01/17/2020

One hundred and one years ago Wednesday, a bizarre disaster struck the city of Boston: the Great Molasses Flood. The disaster has also been known as Boston Molasses Disaster, the Great Boston Molasses Flood, or, in a clever play on words, the Boston Molassacre. In the North End, a storage tank filled with 2.3 million gallons of molasses burst, sending a 25 foot tall wave of molasses through the streets at speeds of 35 miles per hour. Pedestrians were hurled through air as debris flew in all directions. The wave of molasses was strong enough to toss a truck into Boston Harbor. In all, 150 people were injured, and 21 were killed. The cleanup efforts took weeks for the immediate downtown area, and months for the rest of the Greater Boston area and its suburbs. Residents claimed that for decades, you could still smell the sweet aroma of molasses on a hit summer day. And now on to this week’s logistics news.

The trade war between the US and China has taken its toll on both countries. Now, the two nations have signed a partial trade agreement as “phase one” of trade negotiations comes to an end. In an agreement signed this week, China agreed to purchase $200 billion worth of additional US goods and services compared to its orders in 2017, when it imported over $185 billion of US goods. Among the products it has promised to buy are soybeans, pork, cotton and wheat. In return, the US has agreed to cut tariffs on $120 billion of Chinese products from 17 percent to 7.5 percent. However, all signs point to a more difficult second round of trade negotiations, with tensions between the two nations continuing to build.

In the past, I have written about how retailers are moving beyond the use of robots in the warehouse and deploying them in the store. In that article I mentioned that Walmart has deployed Bossa Nova robots at more than 350 of its stores nationwide. The company is now doubling down on its efforts and will expand its robotic workforce to over 650 stores nationwide by this summer. The robots are equipped with 15 cameras and roam the store aisles checking for pricing issues, out-of-stocks, and shelf irregularities. The robots then notify a store associate via their handheld device of any issues that need to be resolved. The shelf scanning capabilities free up associates to attend to other tasks and service customers. As NRF 2020 showed, the role of the store associate is rapidly changing, and robots can help to usher in this new era.

Citing poor performance, Amazon temporarily suspended FedEx’s ground delivery for Prime shipments last month. Questions abound as to whether this was really based on performance or if Amazon wanted to use its own logistics arm for the bulk of its holiday deliveries. The decision certainly caught some third-party sellers off-guard, leaving them to scramble to find new carriers. Amazon said that once the performance of FedEx improved, sellers would once again be able to use the company’s ground and home services. Earlier this week Amazon informed third-party sellers that they can resume using FedEx’s ground delivery shipping services. According to FedEx, service levels had been strong during the peak holiday season, with an average transit time of 2.4 days for Ground packages and 18 percent of Ground packages were delivered early. It will be interesting to keep an eye on the Amazon-FedEx relationship moving forward.

Instacart is known as one of the pioneers of the now established crowd-sourced grocery delivery model. However, one thing that many people may not have known is that the company offers a grocery pick-up service at more than 1500 stores across 30 states. The service includes over 50 retailers, including Albertsons, Publix Super Markets, Wegmans Food Markets, Schnucks Market, Price Chopper, Gelson’s Markets, Shop ‘n Save and The Fresh Market. Instacart sees 2020 as the “year for grocery pick-up” and is increasing its click and collect service to reach all 50 states by the end of 2020. The service allows customers to choose a pick-up location that is most convenient for specific days. It also includes location-based notifications to alert the store when the customer is close so the order can be waiting curbside.

As supply chain sustainability gains more steam and companies look at ways to reduce or eliminate emissions, Werner Enterprises is joining the parade of zero-emission battery-powered electric truck testing underway in California. The Omaha, NE-based truckload company will use a Peterbilt 579EV model capable of hauling 80,000 pounds for a year of testing in the Los Angeles area. Not surprisingly, California is seeing a surge in electric truck tests given its strict emissions laws. The state makes testing zero-emission trucks quite affordable as it uses money raised from excessive carbon fines as incentives to reduce the cost of electric trucks. California wants to rid its highways of diesel-powered trucks by 2035.

Speaking of sustainability, Taco Bell announced plans to make all of its packaging recyclable, compostable, or reusable by 2025. This includes everything is customer facing, including the wraps that hold your taco, the bag it comes in, cups, straws, and boxes. The company will install recycling and composting bins in restaurants where local infrastructure permits, and the new packaging materials will also be free of PFAS, phthalates, and BPA. The task will certainly be difficult however; just because items are deemed reusable (such as its mini-skillet bowls that are microwave-safe), does not mean that customers will actually reuse them. The ultimate goal will be to make all packaging recyclable, compostable, or reusable, and get customers on board to discard of it appropriately.

Ford has shown itself to be innovative in the use of technology for last mile deliveries, especially with its partnerships with Walmart and Dominos for autonomous vehicles for home delivery. The company is now taking part in trials for both warehouse and last mile robots. The robots are designed by Agility Robotics, feature arms and legs, and walk upright. The robot can be used within the warehouse to move items between locations and to a pack station. Ford is also testing the robots for the last 50 feet of deliveries. The robot can feed information from its sensors back to the delivery truck to receive additional computing power enabling it to overcome unexpected obstacles. This is certainly an exciting approach to the use of robots.

Transplace has acquired Lanehub, a cloud-based platform and community focused on shipper-carrier collaboration by automatically identifying and connecting companies with complementary freight lanes to save on shipping expenses. According to Transplace, Lanehub’s software is geared towards matching recurring freight lanes on a consistent basis, resulting in reducing transportation cost, increasing fleet revenue, and also improving carrier service and performance. A purchase price was not disclosed.

GlobalTranz has acquired Cerasis, a customer focused, technology driven and data empowered provider of managed transportation and third-party multimodal logistics services. This is the latest move in GlobalTranz’s growth by acquisition strategy, and eleventh in the last three years. According to GlobalTranz, Cerasis will help expand the company’s growing managed transportation, final mile, and reverse logistics capabilities.

That’s all for this week. Enjoy the weekend and the song of the week, Stevie Ray Vaughan’s Texas Flood.

Walmart Expands Use of Bossa Nova’s Robots from 50 to 350 Stores

Demand Management | By Steve Banker • 04/30/2019

It was recently announced that Walmart has expanded its use of autonomous mobile robots (AMRs) used for real-time, on-shelf product data. Walmart will put these AMRs in 350 stores. The robots come from Bossa Nova Robotics.

I recently had the chance to talk to Sarjoun Skaff, the cofounder and chief technology officer at this San Francisco based company.

I had seen AMRs with cameras designed to track inventory in stores before. The robots I saw were designed to track on-shelf inventory. But they did it badly. They could not really count the number of units of a stock keeping unit in a slot because they could not see the units behind the item in front. They also had a hard time identifying products that were twisted on the shelf.

Mr. Skaff explained that is not what their robots were designed to do. They identify whether a slot is empty or full. They identify which stock keeping unit (SKU) is in a slot and the price associated with that slot.

This is not trivial. Having items incorrectly priced is illegal if the goods have been promoted at a lower price in advertisements or online. It is also poor customer service. Knowing that a stock keeping unit is not on the shelf allows workers to stock the item and capture sales they would otherwise lose.

Recent ARC survey-based research shows average front of store inventory accuracy is 88%. That is abysmal when you compare it to the 99.9%accuracy you can get in a warehouse using a warehouse management system and scanning. The poor inventory performance not only leads to lost sales, it lowers demand forecast accuracy. If the store system thinks an item is in-stock, when it is not, and the product is not selling, the forecasting engine can decide that a fast-moving item is a slow mover. A rough rule of thumb is that a 1% forecast improvement leads to a 2.5% reduction in the amount of inventory that needs to be held. That is big money for retail chains! Poor in-store inventory errors can proliferate and cascade in a manner that leads a retailer’s supply chain to get jerked around. The result is increasing replenishment costs.

On shelf availability can be a metric that improves the inventory accuracy at stores, although it clearly does not get you all the way to kind of inventory accuracy the supply chain team would like to see. But Mr. Skaff also points out that increasingly mass merchant retailers are keeping surplus inventory not just in back rooms, but on the top shelf above the slotted products on the shelves. They redesigned their robots to be able to identify whether these SKUs were present or not.

I asked how their robots integrated to a store’s planogram. A planogram is a store shelf map that shows where every slot on a shelf is, how big it is supposed to be, and what product is supposed to be in that slot. I was surprised to learn that their solution does not integrate to planograms. It provides a “Realogram, real-time visibility to the truth on the ground.” When they started, they were trying to match what their robots detected to the planogram. But that approach, “just didn’t work.”

The company started working with Walmart in 2014. “We figured things out as we went. I pinch myself that we were able to work with Walmart. That they took a chance on such a small company. I’ve been impressed with their ability to collaboratively work with us, take risks, and be patient while we figured things out.”

The problem was that planograms just changed too often, and Bossa Nova would not even know it was working off the wrong data. “We went back to the drawing board.” It is up to their customers to take the Bossa Nova data and match it to the planogram. More sophisticated retailers can load the Bossa Nova data into their planogram analytics solution and that system can reveal whether there are exceptions or not.

The accuracy of planograms is suspect, but the problem of data accuracy around product packaging is a magnitude worse. Consumer goods manufacturers are changing packaging all the time. The brand owner might add a ribbon that says “sodium free” for example and it would not be immediately clear if this is a new SKU or new packaging for an existing product. Products from the same company may have subtle differences from one SKU to the next – regular Diet Coke for example vs. Raspberry Diet Coke. Mr. Skaff said that conventional computer vision approaches required manual labeling of product images so they can be recognized on the shelves.

Having robots being able to autonomously navigate through a store without relying on 2D tags or other markers is an impressive technical feat. But it was not the toughest technical problem the robotics company had to solve. Accurately identifying products was a far more difficult technical task! Bossa Nova couldn’t adequately solve this problem until they bought HawXeye last July. HasXeye was a spin off that came out of Carnegie Mellon University’s Biometrics lab. HawXeye and the Biometrics lab were using artificial intelligence to do facial recognition. It turned out this was just the solution for identifying products, even when turned sideways. Now the robots can rumble up an aisle and within two minutes identify all the SKUs in the aisle as well as the exceptions (new SKUs or products whose label changes make them unidentifiable).

Business logic is used to drive the navigation. Instead of just navigating all the way through a store, the robots may go down aisles with fast moving products or high margin products several times a day. Other aisles might only be visited a couple times a week.

You could have a small army of store personnel checking the 150,000 products stocked in a 250,000 square supercenter and still have very poor inventory accuracy. This is a problem that needs automation, even if the automation only takes a retailer part way to the finish line of perfect in-store inventory accuracy.

2019 is the Year for Blockchain in Supply Chain Management, but Will it Have Legs?

Track and Trace | By Steve Banker • 01/21/2019

Starting in September 2019, Walmart and its Sam’s Club division will require their suppliers of fresh, leafy greens to implement real-time, traceability of products back to the farm by participating in the Food Trust Consortium. The Food Trust consortium, run by IBM, is focused on using Blockchain technologies for improved food traceability.

In addition to leafy greens, Walmart plans similar mandates for other fresh fruit and vegetable providers within the next year, according to Frank Yiannas, vice president of food safety at the world’s largest retailer. “It’s becoming a business requirement, it’s a part of our supplier agreements,” Yiannas said in an interview. The goal is to speed up response times in cases where food-borne illnesses force recalls. Starting with salads and fruits is logical. These foods are consumed without cooking. Bacterial contaminates like salmonella are killed during cooking. Contaminates on items consumed without cooking are particularly vulnerable to a recall.

A critical question is whether the mandate will have legs. Walmart imposed a RFID mandate on their 100 largest suppliers in 2005. I talked to over 50 of those suppliers at that time. The supply chain executives saw the mandate as providing value for Walmart but being counterproductive for them. They believed the initiative provided little value to their supply chains but was certain to increase their costs. Not surprisingly, the RFID mandate failed.

In August, I got details from IBM’s Suzanne Livingston, Offering Director, IBM Food Trust and Ramesh Gopinath, VP Blockchain Solutions, about how the Food Trust solution works.

Architecturally, this is a distributed system; in other words, a system that runs on multiple nodes in multiple data centers. The nodes are run by “trust anchors” – basically, some of the largest companies in this end-to-end supply chain. A blockchain involves having copies of the transactions being stored across the different database nodes. IBM believes that a few dozen nodes are necessary to establish a trusted chain of data.

GS1 standards are used to make sure all participants are speaking the same language. But in addition to providing the hardware, software and Cloud components, insuring that the data is clean and logical is a big part of what IBM brings to the table. Some players in the food supply chain will provide serialized numbers at the case layer, some at the pallet level, and some only at the lot level. “Not everyone is at the same level of maturity,“ Mr. Gopinath stated. “There are data gaps.”

It is not clear what Walmart is demanding of their suppliers, but in August IBM’s view was they just wanted new participants to give a bare minimum of data to get started on a trace. “Then we will work with companies to grow their maturity.” It is likely that once companies get started, some participants in the value chain will want additional information. For example, retailers may want to know whether refrigerated products were kept in the proper temperature range and may also want visibility to in transit information. A food manufacturer may want to know how much product has been received at myriad different stores in a retail chain.

IBM is taking an interesting approach to pricing the solution. Companies that want to join the Food Trust, will be able to provide traceability data for free. These companies will need to inform IBM on who they are, the products they want traced, and who they will be interacting with from a one up, one down perspective. That company may need to do some work to understand the GS1 standards, make sure they can provide clean data, and figure out how that data will be sent to the blockchain.

IBM seeks to monetize their effort by charging to display analytics information, for example statistics on the timeliness and quality of transactions provided to other members of the chain. And IBM will charge a subscription fee to share certificates. For example, a farmer may claim that they offer organic strawberries. An auditing firm verifies this, and IBM charges for uploading the organic certification to the blockchain.

While the initial focus is traceability, the solution could easily grow into something much bigger. Mr. Gopinath pointed out that this is a platform for sharing information. Initially that shared information is focused on traceability, but “food waste, food fraud, food safety issues are all related to problems with effectively sharing information. We want to leverage by third parties to deliver more value to the ecosystem.”

Will this mandate have legs? If the initial plan is followed, and suppliers’ costs for participating are minimal and they are allowed to walk before they run, it will achieve supplier acceptance.

But the question then becomes, how much does it increase Walmart’s costs? Once the retailer starts to generate data they will have to see how increased costs surrounding Food Trust are balanced by lower costs in recalls; how much prices for produce will need to increase; whether those price costs can be passed along, and similar cost/benefit trade off questions. In short, the viability of Blockchain for traceability is not assured yet, despite the mandate.

Blockchain for Supply Chain Management will be discussed at ARC’s upcoming Driving Digital Transformation forum February 4^th to the 7^th in Orlando.

Prices that Walmart Can’t Touch

Retail | By Steve Banker • 07/24/2017

On a recent visit to Munich, Germany my wife and I shopped in a Lidl. Lidl is a global discount supermarket chain, headquartered in Germany, that operates over 10,000 stores across Europe. They offer prices that Walmart can’t touch.

We bought a bottle of wine, a decent brand, a large box of mint chocolates, and a Liter of Coca Cola Zero. The charge was 5.22 Euros, $6.10 in the US. The same price at our local warehouse discount grocery store here in the US would probably be at least $14 – ten dollars for the wine, three for the chocolate, and one for the cola.

The Lidl Supply Chain

There is a supply chain story here. Here is what the web site and a little independent research reveals:

These are small stores that have a limited number of stock keeping units. “Instead of offering a myriad of brands in every category, our stores offer carefully curated selections…” Unlike traditional supermarkets with an average product range of 10,000 food and non-food items, or big box stores with as many as 50,000 items, Lidl offers between 1,000 and 3,000 products.In red wines, we had perhaps ten choices. In contrast, at our local discount big box store, there are several aisles devoted to just red wine. But limited choices don’t have to mean bad choices. This year Lidl won several medals at the Indy Independent Wine Competition and LA International Wine Competitions.
“You’ll notice while shopping at Lidl that most of our assortment is our own private label – around 90% of our products, in fact. This means we’ve especially developed these products to match our high standards and allows us direct oversight of product integrity. Each product undergoes a rigorous testing regimen, which includes taste, quality and sensory testing.” Global and national branded products cost more. Lidl’s products don’t have that mark-up. And small, hungry manufacturers will settle for smaller profit margins.
“We keep overhead to a minimum and eliminate any unnecessary costs. Take our ‘bring your own bag’ policy. Not only does it mean we don’t build the cost of bags into our prices, this policy also saves you time at the register and is a greener solution. Additionally, we display our products in custom boxes instead of replenishing and stocking item by item. Our associates simply replace the boxes as needed, saving hours every week on stocking shelves. These simple steps allow us to pass our savings on to you.”They aren’t kidding about the low overhead. The look and feel of the store was stark, there was nothing fancy about the neighborhood (lower real estate costs), and the staffing was clearly lean.
They compete with an Every Day Low Price strategy where promotions are minimized and demand is far more stable. Promotional surges can be hard for a supply chain to efficiently handle. Stable demand promotes higher inventory turns. Further, in general, discount retailers are not as concerned about product stock-outs as other retailers. Traditional retailers consider it a lost sale. Discounters would rather error low on the forecast and trust that customers will pick a competing brand. This also drives high inventory turns.
Merchandising and supply chain management are well aligned. In the US, the Head Office Supply Chain Department is “split into two distinct areas: Supply Chain and Layout Management. In the Supply Chain area, the department has a strategic role, focusing on optimizing both the availability and freshness of product. The Layout Management team supports store operations in determining the optimum placement of product groups and individual items.”By having merchandising and supply chain operations report up through the same organization, product revenue contribution, a core focus of most retailer’s merchandising department, and cost savings from efficiencies, a focus for supply chain management, are better aligned; growing product category revenues does not come at the expense of an efficient supply chain. Lidl stores in a region have the same layout, which leads to both warehouse and store replenishment efficiencies.
Lidl has grown fast. This helps to support a denser and more efficient transport network. In the UK, for example, three Distribution Centers support 640 stores.

Lidl Store Opening in Richmond, VA

Lidl recently opened its first store in the US. Should Walmart, BJ’s, and Amazon be worried? Absolutely!

A complete analysis of logistics trends, technologies, and services

The Lidl Supply Chain

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