5 Benefits of Reimagining Grocery Supply Chains: AI and Sustainability in the Gen Z Era
At a Glance
- 37% of shoppers are willing to pay a premium for sustainable practices.
- 71% of grocers prioritize improving sustainability in 2023.
- Top focus areas for grocers include waste reduction (83%), packaging improvement (66%), and energy utilization (77%).
- AI infusion expected to inject over $100 billion into the grocery sector.
- This article explores the advantages of a tech-infused and sustainable supply chain.
Recent macro events like the COVID-19 pandemic, the Ukraine crisis, oil spills, and semiconductor shortages have shaken traditional supply chain systems. These disruptions have forced the grocery supply chains, rooted in age-old practices, to reconsider their strategies. The modern world is increasingly turning to the power of artificial intelligence and big data analytics, and it's becoming evident that integrating these technologies into sustainable supply chains can yield data-driven insights that drive cost savings, process optimization, and the creation of a more equitable and sustainable future.
The advantages of embracing sustainable and green logistics are plentiful. Firstly, these practices are paramount for safeguarding the environment and mitigating the ecological impact of logistics operations. Moreover, they can lead to significant cost savings for companies through reduced energy consumption, minimized waste, optimized packaging, and enhanced transport efficiency. This lowers fuel costs and ensures efficient deliveries to meet the demands of omnichannel Gen Z shoppers.
According to our Grocery Doppio research, 37% of shoppers are willing to reward grocers for adopting sustainable practices by paying a premium for sustainable products. Furthermore, AI-driven sustainable practices have the potential to enhance brand reputation and elevate corporate ESG reporting standards, effectively future-proofing retailers in the face of evolving compliance and sustainability regulations. Below, we mention the advantages of adopting AI-fused sustainable supply chain processes.
AI Smart Logistics: A Path to Grocery Retail Sustainability
Incorporating AI into sustainability efforts for grocers can bring about significant cost-saving opportunities for the grocery retail industry. Grocery Doppio’s,” State of Digital Grocery Performance Scorecard in January 2023” reveals that 71% of grocers consider improving sustainability a top priority for 2023, with waste reduction (83%), packaging improvement (66%), and energy utilization (77%) emerging as the top three focus areas. Grocers can enhance customer retention and bolster their bottom-line savings by concentrating their efforts on these critical areas to drive sustainability initiatives.
As these sustainability measures mature, they can pave the way for a unique synchro-modality model that prioritizes cost efficiency, optimized processes, and sustainability by reducing the carbon footprint. Notably, Grocery Doppio’s article on "Impact of AI in Grocery” research suggests that the anticipated value of AI adoption in the grocery industry is an impressive $113 billion, with $58 billion attributed to optimizing supply chain efficiencies.
Hence, the strategic integration of AI and sustainability efforts empowers retailers to establish a novel synchro-modality framework. This framework facilitates sustainable practices, fosters efficient communication, and optimizes processes while aligning with the industry's net-zero goal by 2030.
Loyalty of the Centennial Shopper
The latest cohort of shoppers, comprising Millennials and Centennials, embodies a new era of consumerism deeply rooted in sustainability and data-driven decision-making. These omnichannel shoppers demand convenience and are passionate about preserving the planet for future generations. Equity, social responsibility, and adherence to regulations are their values' core. They seek brands and companies that share their vision and actively contribute to environmental responsibility. According to Grocery Doppio's research, 73% of these conscious shoppers desire sustainability-related product information on their digital channels.
Moreover, they are willing to go the extra mile, offering a premium of 11% to 17% for sustainable products. This margin should be noticed in an industry known for razor-thin profits. Grocers that proactively inform customers about recycling-friendly packaging, certifications, upcycled products, and the reduction in carbon footprints achieved through sustainable product choices are poised to establish a robust sustainability-driven rapport with their customers.
Sustainable Branding and Reputation
According to the insightful findings from Grocery Doppio's report, "The Times They Are A-Changing: Impact of AI in Grocery," the grocery industry is on the cusp of a remarkable transformation. The infusion of AI is expected to inject over $100 billion into this sector, with a staggering 73% of executives anticipating AI integration into most software within the next two years. Concurrently, another of our reports reveals that 43% of grocers either already have or plan to appoint an executive dedicated to spearheading sustainability initiatives.
These investments, accompanied by compelling data showcasing the imperative for AI integration in supply chain operations and the growing necessity for sustainability efforts, are poised to position grocers as formidable competitors in the future.
Intriguingly, researchers at MIT's Sloan School of Management have discerned that consumers are willing to pay between 2% to 10% more for products that offer supply chain transparency. Such initiatives work to pioneer a sustainable supply chain, fortifying resilience against potential disruptions and fostering an essential brand reputation.
Opportunity in Eco-Assortment
In the grocery retail sector, the potential for eco-friendly product assortments is expanding as consumers increasingly turn to private-label products, creating higher-margin opportunities for sustainable brands. Grocers hold a unique position to shape consumer behavior by facilitating environmentally friendly assortment planning, ethical sourcing for purchasing decisions, carbon-reducing allocation and inventory plans, incorporating recyclable materials in product development, and confidently launching and promoting new eco-friendly ranges.
The investment world is increasingly conscious of the far-reaching consequences of unsustainable supply chain practices. Research by McKinsey reveals that 62% of executives identify the scarcity of available data as the leading impediment to the full integration of Environmental, Social, and Governance (ESG) considerations when evaluating trading partners.
In recent years, the media has shed light on numerous irresponsible supply chain practices, some of which have adversely impacted the stock prices of the involved companies. As part of a concerted effort to align with the ambitious net-zero target of 2030 and the sustainable aspirations encapsulated in SDG 17, partnerships are instrumental in collectively achieving these objectives.
By embracing AI and sustainable practices within their supply chain operations, grocers ensure their investors' trust and credibility and maintain unwavering faith in their investment landscape.
Infusing AI and emerging technologies into supply chains presents a unique dual advantage. Firstly, it elevates organizational efficiency and effectiveness. Secondly, it champions significant environmental benefits, specifically in reducing pollution and reducing an organization's carbon footprint. In our forthcoming article, we will delve into the intricate challenges that the supply chain ecosystem faces.