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Abstract

The innovative omni-channel supply chain models that have reshaped many parts of the retail industry continue to evolve in response to market changes. One of these changes is the increasing demand for grocery products ordered online, a trend reinforced by the COVID-19 pandemic that imposed restrictions on the use of physical stores for grocery shopping.

A challenge for traditional grocery retailers is how to develop omni-channel supply chains that support both online and offline buying channels and deliver seamless customer service profitably.

To explore this challenge, researchers at the MIT Center for Transportation & Logistics built a supply chain model as part of a project sponsored by one of the world’s largest food retail groups. The model shows that omni-channel can deliver improved performance and reduced costs in the grocery business. The work also highlights further research opportunities.

Lack of integration

Many supermarket chains—including outlets operated by the sponsor company—have created “click and collect” purchase options, where customers place orders for groceries online and collect the products at a brick-and-mortar store on the same day. However, home delivery of online orders is still the most common option in e-commerce.

While these service configurations offer some of the benefits of e-commerce, most retailers manage their offline and online channels separately. To fully exploit the advantages of omni-channel retailing, the channels must be integrated.

The main goal of the research project was to evaluate the impact of supporting the home delivery of online orders for groceries using an integrated distribution network. The work focused on the two key research questions that follow.

  1. How can grocery retailers integrate online and offline channels to better serve their customers while remaining cost-efficient?
  2. Should the sponsor company use its existing brick-and-mortar facilities to fulfill online orders?

This article describes research carried out for a capstone research project in the MIT Supply Chain Management Master’s Program (SCM). Sergio Caballero and Eva Ponce are project advisors. The research was carried out and authored by Wassim Aouad and Nikhil Ganapathi. They can be contacted at waaou@alum.mit.edu and nikhil_ganapathi@alum.mit.edu