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Morrisons is increasing investment in its wonky veg offer with a raft of new pledges designed to boost its popularity and address shoppers' concerns about food waste on farms.

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Head of Supply Chain Insight, Alistair Balderson, considers how leapfrog technologies can pave the way for transformational change.

Winning in innovation

Last week, Morrisons and Blue Yonder were announced as the winners of our 2017 Supply Chain Innovation award. Their entry was for a new automated forecasting and replenishment system, which is transforming Morrisons’ approach to on-shelf availability.
This new system replaced a traditional method of in-store teams placing time-consuming manual orders, fraught with inconsistencies. Morrisons is now implementing an advanced data-led solution from Blue Yonder which incorporates cutting-edge artificial intelligence. This makes use of advanced machine learning algorithms – the more data it processes, the more intelligent it becomes. Morrisons’ intention is to leapfrog from behind its peers to leading the way.

Disruptive technologies

The concept of leapfrogging is a driving force in today’s economy. It creates disruptive forces that can move a radical new concept into the mainstream space in what seems like no time, making intervening technologies redundant just as quickly. Sometimes this happens in a planned way, as Morrisons and Blue Yonder are aiming for with their new system. The alternative is more accidental, when technology leapfrogs ahead because users find a way to exploit the innovation in an unexpected or unplanned way. An example of this is M-Pesa, a form of mobile money originating in Kenya which has challenged traditional banking and cash systems which were not serving the needs of a rural population with little access to the formal economy.

In supply chain, there are many innovations with the potential to disrupt. We’ve recently published reports on Supply Chain Analysis exploring two such areas: Blockchain and the Internet of Things. Both are available on the Transformed by Technology hub.

The challenge

But these new technologies present a big challenge to many established businesses. Perhaps you’ve invested a great deal of time and money over recent years to install and improve your current systems and equipment. Maybe the benefits of the new technology you’re looking at aren’t fully clear, making the payback analysis challenging. Should you minimise risk, retrofitting some small upgrades into your existing technology, or go all out and fully replace today’s kit with something new?

There are two key lessons that I take from the award-winning Morrisons and Blue Yonder case study which will help decision making, along with a final thought.

  • If you’re already behind your peers, don’t invest just to catch up. You need to get ahead and create a competitive advantage.
  • Technology is moving and changing quickly. Consider whether you can build up experience quickly enough, or whether you need to collaborate to get the benefits.

Finally, don’t forget that the world around you isn’t standing still and there will be plenty of others coming up behind to leapfrog you. The benefits of many of these innovations cannot be known in advance, because they only come from using it and making new connections.

Alistair Balderson
Head of Supply Chain Insight

Thought of the week: Alex looks at the recent trend of supply chain collaborations.

After seeing many major announcements over the past few weeks, from Morrisons and McColl’s agreeing a major supply chain partnership to Walmart and JD.com developing their strategic relationship, it seems that collaboration really is as popular as ever, so I thought I’d check for myself. After reviewing our last 50 news stories on Supply Chain Analysis, I found that 38% mentioned either ‘collaboration’ or ‘partnership’ within them. As the industry becomes tougher, and the low hanging fruit seemingly gone, it seems like businesses are now increasingly open to collaborative opportunities in order to unlock breakthrough change.

What areas of your business are open to collaboration?

To continue the discussion, check out our annual Supply Chain Summit, Thursday 9th November 2017.

Morrisons and UK convenience chain McColl's have announced a major long term supply initiative that will enable British shoppers to once again by Safeway private label products.


Morrisons to supply McColl's from 2018


Through the partnership Morrisons will begin supplying both Safeway products and national brands to 1,300 McColl's convenience stores and 350 newsagents across the UK. In time the partnership will replace McColl's existing supply arrangements. Morrisons supplied products are expected to begin appearing in McColl's shops from January 2018. Following its announcement last year that it would be be reviving Safeway as a brand for the wholesale channel, Morrisons has developed a range of over 400 fresh frozen and ambient products, many of which are produced at Morrisons food manufacturing sites. McColl's will be given a one year exclusive access to Safeway products.


What this means for Morrisons


The deal is a major milestone in Morrisons journey towards delivering against the £50m-£100m incremental profit opportunity identified by CEO David Potts last year. It expects the McColl's partnership to make an initial profit contribution in 2018/19 and the deal will accelerate the growth in the contribution of wholesale activities to Morrisons like-for-like sales. Partnering with McColl's will greatly extend Morrisons reach into the expanding convenience channel where it remains under represented, and with minimal capital investment. The deal will also allow Morrisons to make better use of capacity at its 17 UK food processing plants. Morrisons now expects wholesale revenues (including tobacco) across all of its partners to reach £700m by the end of 2018, putting it well on track to reach its longer term £1bn target.


What this means for McColl's


The partnership will significantly advance McColl's fresh food credentials, an increasingly vital part of the retail offer for shoppers deciding which convenience store to visit. The exclusivity agreement to use the Safeway brand - albeit only for 12 months - should provide an important boost to McColl's in 2018 - and using Morrisons as its sole partner will significantly simplify its operations. This is particularly important given the jump in McColl's scale created by the acquisition of 298 stores from the Co-op last year.


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Presentations

02/05/2017
In this report, we provide you with our forecast for the online channel, retailer’s strategies and the implications for manufacturers.
05/04/2017
Morrisons is using artificial intelligence (AI) to improve stock availability in-store, along with helping it improve efficiencies and customer service.
07/03/2016
We explore AmazonFresh, its latest developments from across the world and what it could mean for UK grocery retail.

Discover how segmenting your customers can help drive profitable growth within your business. This presentation and accompanying practical tool will help you manage your resources more effectively.

The ‘last mile’ is becoming an increasingly competitive place, as the food industry and disruptors continue to create solutions that make online shopping even more convenient.

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A practical one day workshop for all roles in suppliers, to help develop your understanding of the vital part that supply chains play in underpinning FMCG businesses.