Hot Prices, Cool Tech and Burrito Bowls: The Week in Supply Chains
This week’s newsletter is full of updates you won’t want to miss. We start with wholesale inflation spiking to its highest levels in a year and how it could impact rising costs for your business, consumers and last mile logistics. Plus, we’re dipping into some exciting innovations: a Montreal startup is rethinking manufacturing with mini-factories that could change everything from delivery times to product costs. And don’t miss our feature on Chipotle — they’re using new tech to make sure your favorite burrito ingredients are always ready and waiting. We’ll also share some insights from industry experts on the latest trends related to consumer products, inventory shrinkage, retail theft and more. So grab a coffee and let’s get into it!
Wholesale Inflation Hits Its Highest Figures in a Year
Let’s start with a look at the latest U.S. economic figures, which point to a significant uptick in wholesale inflation — its highest levels in a year. With the Producer Price Index (PPI) climbing to 2.2% for the year ending in April, what should stakeholders across the supply chain possibly brace for?
The Immediate Impact on Business Ops
The PPI not only increased more than expected over the past year but also saw a significant spike of 0.5% from March to April — surpassing the anticipated 0.3% increase. This rise in wholesale costs is particularly impactful for businesses that deal directly with consumers. As businesses face these higher costs, they must make a tough choice: Absorb the added expenses to maintain their competitiveness and customer relationships, or pass these costs on to their customers and risk sales and loyalty.
Strategic Adjustments for Retailers
For retailers, the uptick in PPI directly affects procurement costs. With service prices marking the fastest rise since March 2022 and the overall goods sector close behind, retail pricing strategies need a thorough review. The key is to maneuver through these increases while maintaining customer trust. Whether renegotiating supplier contracts, tweaking inventory levels or optimizing last mile delivery to enhance efficiency and cut costs, now’s the time to explore all avenues.
Relocalize Shakes Up Supply Chains with Innovative Microfactories
Let’s now turn the focus toward something very exciting — Relocalize, a startup from Montreal, just closed $5.8 million in seed funding. What has people so excited is its potential to transform the production and delivery of goods by rolling out autonomous, container-based microfactories right where the action is: at distribution centers.
Cutting Out the Middleman
Imagine manufacturing products right where needed — at or near distribution centers, instead of transporting them long distances from factory to store. Relocalize is bringing this vision to life by establishing small, self-sufficient microfactories that handle production on-site. This approach dramatically cuts down on long-haul delivery routes, reduces transport costs and headaches, and taps into consumer demand for quicker commerce . It could also lead to quicker turnaround times and fewer logistical challenges for anyone managing a supply chain.
Autonomy in Action
Relocalize is also making these microfactories smart, with autonomous operations. These microfactories operate independently, mirroring the activities of a full-scale factory but on a much smaller scale — about 5% of the traditional size. This automation also allows for 24/7 production without the labor costs typically associated with large factories. For industry professionals, this means a significant shift toward smarter, more sustainable production methods that various sectors could replicate, from food and beverages to everyday consumer goods.
Chipotle’s RFID and Visibility Revolution
Now, let’s talk about Chipotle and how it’s revolutionizing the restaurant industry by implementing RFID (radio frequency identification) technology to track and manage inventory at its 3,500 locations worldwide.
Inventory Visibility Made Easy
Manually checking stock and chasing down inventory errors are a thing of the past, with RFID tags enhancing visibility . By adopting this technology, Chipotle’s staff can get instant updates on what’s in stock with a simple scan. They can instantly check stock levels, drastically cut down the time previously lost to manual counts and checks, and significantly reduce errors. RFID capabilities run laps around what your ordinary barcodes can do, by allowing for real-time tracking of ingredients from supplier to kitchen, and Chipotle certainly understands that. This RFID initiative started as a pilot in Chicago and proved so successful that it’s now going national.
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Beyond Tracking: A Total Supply Chain Transformation
Chipotle’s tech overhaul doesn’t stop at RFID. They’re also pioneering a ‘supplier visibility’ project in collaboration with Oracle to incorporate various technologies that give a crystal-clear view of the entire supply chain — from raw materials to the hands of the burrito-loving customer. Beyond offering the ability to keep tabs on inventory and ingredients, it also has the potential to enhance overall operational flow and make every step from farm to table as efficient and transparent as possible. By the end of the year, all 3,500 Chipotle locations will be part of this savvy system.
2024’s Big Shifts in Consumer Products: What’s Shaking Up the Market?
In a recent Forbes feature , Sarah Richter, Chief Marketing Officer at SAP Emarsys, pointed out several trends testing how consumer companies keep up with their customers.
Pricing Pressures: It’s Getting Hot in Here
With everything from climate change to inflation throwing curveballs, advertising isn’t just expensive — it’s 40% pricier than before. What’s more, the cost of making our favorite products, like cereals and beverages, is also seeing up to 40% spikes. While companies feel the pinch and might pass these costs onto consumers, they can’t forget that consumers demand more than just bargains. Quality and ethics matter, too, so it’s a real tightrope walk for brands to keep consumers happy without overly hiking prices.
The Data Balancing Act: Too Much or Not Enough?
Too much or too little data? CPG companies are struggling to find their balance. Brands like Coca-Cola manage enormous datasets, while smaller players yearn for more insights. The optimal strategy lies in valuing quality over quantity. By refining data management strategies, brands can enhance customer understanding and engagement without the enormous costs associated with massive data pools. Taking this approach trims expenses and, at the same time, sharpens the focus on what truly drives consumer connection and loyalty. It’s about getting smarter, not just bigger.
Tackling Retail Shrinkage: Insights from Industry Veteran Steve Haas
Finally, following last week’s special on inventory shrinkage and visibility, and the recent release of OneRail’s OmniPoint Inventory Visibility platform , we add more context and substance by featuring an interview GLG Insights conducted with industry veteran Steve Haas. Haas has decades of experience at leading retailers like Nordstrom and Macy’s, so his insights into the current state of retail theft and how businesses are fighting back carries weight.
Understanding the Scale and Types of Shrinkage
When the topic of shrinkage comes up, it’s easy to think only about shoplifters. However, the reality is that product shrinkage is a complex blend of challenges that include internal theft, consumer theft, and even errors in paperwork. Haas breaks it down into roughly equal parts, with internal and external theft, each making up about 40% of incidents, and administrative mistakes making up the remaining 20%. This multifaceted problem means that theft can occur anywhere — from warehouses to the shop floor — while complicating loss-prevention efforts across the board.
Lingering Pandemic Effects and Theft Prevention
Haas also notes how the pandemic led many retailers to cut staff to save costs, while inadvertently making theft easier due to fewer employees monitoring the store. Compounding the issue was the rise of self-checkout systems, which, while efficient, increased the risks of shrinkage from less oversight. Retailers now strive to balance effective theft prevention with a customer-friendly shopping experience that doesn’t take things over the top. For instance, tight security measures are understandable for high-value items like $1,000 Gucci handbags. However, applying heavy security across the board can scare customers off. Nobody wants martial law at the supermarket.
Keep Ahead of the Curve with OneRail
We’re living through an interesting period as we tackle a week filled with higher-than-expected inflation, tech innovations and shapeshifting trends. Whether you’re feeling the pinch of rising costs or integrating new tech like Chipotle, OneRail’s services offer the perfect solution:
No matter your industry, OneRail can transform your logistics strategy. Schedule a demo today to find out how.
This article was first seen on OneRail's blog here .