SUPPLY CHAIN: Complex, costly and unpredictable

The new reality of retail distribution

Few of us think about it while pushing a trolley down a supermarket aisle, but every product on every shelf has already completed a complex journey – one that is becoming harder, more expensive and far less predictable by the day. Retail distribution is no longer just a back-end logistics function. It has become a competitive battleground where cost, speed and service are constantly being traded off against one another.

Behind the scenes, distribution networks are under strain. Rising fuel costs, volatile operating conditions and demanding delivery windows are forcing retailers and their logistics partners to rethink how goods move from warehouse to store, and ultimately to the consumer. In South Africa, the challenges are even more pronounced. With the country’s main port infrastructure centred in Durban, its economic hub 500km inland and long distances to smaller and rural towns, logistics is not only operationally complex but inherently expensive.

What was once a relatively linear supply chain is now far more exposed. Factors that were once considered nice-to-haves have become critical to whether a business succeeds or not. Consumers are not only no longer willing to wait for their goods, but they are also more and more unwilling to pay more for the privilege.

An example, he says, is a distribution network that can involve multiple warehouses, cross-docking facilities, long haul transport routes and last-mile delivery vehicles. “Without a connected view across these layers, inefficiencies and operational blind spots quickly emerge.” Another challenge is maintaining consistent service levels while managing operational risk. Temperature-sensitive goods, driver safety, vehicle utilisation and delivery reliability all need to be monitored continuously.

When systems operate in isolation, decision-making becomes reactive rather than proactive, he says. “Increasingly, retailers and logistics service providers are focusing on building connected ecosystems where transport fleets, warehouse assets and cold-chain equipment are visible within a single operational environment.” The strain on the system is clearly visible in how fleets are managed and how goods are moved across the country. Predictable volumes, fixed delivery cycles and stable routes are falling away, replaced by models that demand far greater flexibility in how cargo is transported and delivered. Put simply, goods need to move more fluidly – without driving up cost or compromising efficiency. That is a difficult balance to strike at the best of times. In South Africa, it is even more challenging.

According to Riaan Kleinhans, Director of Operations at DSV South Africa, fleet strategy has already shifted from a fixed replacement cycle model to a more dynamic, cost-conscious approach, prioritising operational efficiency and spend control over routine fleet renewal.

“The transformation has been profound and has completely changed our daily operations,” he tells Supermarket & Retailer. As little as five years ago, retail replenishment relied on planned bulk deliveries. Volumes were predictable, the routes stable and the frequency relatively reasonable. Today, delivery frequency has increased across virtually every retail category, with drop sizes smaller and more delivery points. Supply chain optimisation, says Hennie Serdyn, Partner and Advisor at FLOW Advisory, is a meticulous task.

“It requires breaking down silos between departments. It means procurement, planning, ware housing and distribution must all understand their impact on the end-to-end chain. Without this shared understanding, decision-making often becomes reactive, with the loudest voice determining the process, frequently leading to sub-optimal outcomes.” He says decision-making needs to be driven by data rather than instinct. Logistics service providers need to focus more on in-depth data analysis, looking beyond the averages.

E-commerce drives smaller, faster, more complex flows Covid-19 marked a turning point for retail. As consumers shifted online during lockdowns, e-commerce moved from being a growing channel to a core part of how goods are bought and delivered. It shows no signs of slowing down – if anything, e-commerce is accelerating and continuing to mature, changing distribution in the process.

E-commerce is no longer limited to online-only retailers, but has changed how most retailers operate. Omnichannel models have become the norm for both large and small players. While this has helped level the playing field in some regard, it has also introduced a far more complex operating environment. Distribution networks now have to support both store replenishment and direct-to-consumer fulfilment, often from the same facilities and using the same fleet, says Kleinhans. “Running two distinct fulfilment models – one designed for bulk store delivery and the other for individual customer orders – in parallel is a growing challenge.”

Sutherland adds that this is also changing how distribution networks are structured. “Retailers are now expected to support higher order volumes, shorter delivery windows and more frequent replenishment cycles,” he says. In many cases, networks that were designed around bulk store deliveries are having to support a hybrid model that includes direct-to-consumer fulfilment alongside store replenishment.

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