Ups & Downs While some industries only encounter ups & downs periodically, they are a daily reality for grocery retailers. To find out what this means in practice, SCOPE spoke with Piet Verbakel, manager Forecasting & Replenishment at Jumbo. TEXT Joost van der Haar DESIGN Caitlin Riesewijk
From forecast chart to shopping cart
“Everything begins with the customer at Jumbo”, Piet explains, “and the customer wants their products to have high availability, to be as fresh as possible and to be as cheap as possible”. Ultimately, providing the best possible customer experience is the goal. Yet this is not as straightforward as it might sound, as Piet elaborates: “Supermarkets operate in an environment that is both very dynamic and very complex. On the one hand, you are in direct contact with the consumer. On the other hand, Jumbo has tens of thousands of products and hundreds of stores. Consequently, there are millions of product-store combinations which all have their own patterns and trends.” Ups & Downs These patterns and trends can take many different forms and shapes. There are of course seasonal influences such as people’s tendency to buy special food for the holidays. However, there are also influences of a more temporary nature. Roadworks can cause a supermarket to become less accessible, fairs can attract new SCOPE DECEMBER 2021
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customers and a new competitor can lead to the loss of existing customers. One pattern that Piet finds particularly interesting is the influence of weather: “Easter is for example very different when it is 16° and cloudy than when it is 26° with clear blue skies. This is the difference between gourmet and barbecue for dinner”. Furthermore, Piet notes that the relation between weather and demand differs between products: “While demand for water always tends to increase when the temperature increases, we see that demand for beer behaves differently. It only increases up to a certain temperature and remains stable, or even decreases, if the temperature goes beyond that level.” As demand for certain products is strongly correlated to weather, changes in weather predictions at the last moment can have a big impact on Jumbo and its supply chains. The expected demand for certain products can see a big increase, while at the same time the expected demand for certain other products can see a
big decrease. “We only tend to eat stamppot if it’s cold outside”, Piet clarifies. When a change in weather predictions occurs, it is therefore important to react by intervening where possible. This can however be challenging, as Piet explains: “In the end, you are dependent on the many links in the supply chain. Some of these are outside the control of Jumbo, such as harvests, factories and producers.” One factor that is within Jumbo’s control is its pricing strategy. Jumbo believes in Every Day Low Pricing (EDLP), so that customers can always rely on getting the lowest price for their products. This means that Jumbo does not do a lot of short-term promotions that last for only a week. It instead has the lowest price guarantee and longer-lasting promotions that last for several weeks. With this approach, the impact of volatility on the supply chain is decreased when compared to a high/low strategy. Nevertheless, demand volatility will always exist and there are still many cases where interventions provide value.
