Empowering Grocers Through Automation: A Conversation with Mikko Kärkkäinen, Co-Founder and CEO, RELEX Solutions
Tech-forward grocers distinguish themselves with their ability to comprehend consumer sentiment at various lifecycle stages and harness data to elevate customer service and deliver exceptional performance. To make this a reality, grocers must implement an inventory management system that encompasses assortment planning, fresh replenishment, demand forecasting, and help influence consumer demand.
Supply chain and retail planning platform RELEX specialize in optimizing and establishing efficient supply chains for retailers. Its strategy centers on tackling grocers' woes by helping manage omnichannel growth, streamlining replenishment processes through automation, and implementing demand-shaping technology. By leveraging artificial intelligence (AI) and machine learning (ML), grocers can access real-time insights derived from store-level data, enabling them to significantly enhance the efficiency and value of the consumer goods value chain. This, in turn, results in a more streamlined and rewarding shopping experience for customers.
In this exclusive interview, Grocery Doppio and RELEX Solutions co-founder and CEO Mikko Kärkkäinen
discuss the company's vision and objectives for transforming the retail grocery industry by providing unified solutions for supply chain planning, resulting in a significant increase in grocer revenue and happy customers.
Grocery Doppio: Can you discuss the company's founding and how you came up with the idea.
Kärkkäinen: In 2005, my co-founders Johanna Småros, Michael Falck, and I founded RELEX Solutions with a single goal to make the consumer goods value chain more efficient and adaptive to change. We were frustrated by the enormous volume of wasted products, time, and money we saw in the operations of retailers, including grocery stores, wholesale and distribution companies, and consumer packaged goods and manufacturers.
Based on our research, we were confident that by leveraging data, intelligent algorithms, and emerging high-performance data processing, we could help make the consumer goods value chain immensely efficient and responsive to consumer demand.
Grocery Doppio: RELEX offers a range of solutions across merchandising and supply chains. Can you explain how RELEX Solutions has helped grocers improve their pricing strategies to maximize sales and profits.
Kärkkäinen: We help grocers improve fresh replenishment through more accurate inventory data, empowering store teams through efficient merchandising solutions, and providing a unified solution for supply chain planning and in-store execution. Our solution enables grocers to achieve unparalleled levels of on-shelf availability and product freshness, which helps improve sales and profits. With the prevalence of shrinkage and the short shelf lives of fresh items, demand forecasting teams can use RELEX real-time insights and store-level data to stay on top of the stock. Fresher data points can combat these issues, such as current on-shelf availability and updated expiration status. Otherwise, demand projections get weighed down by stale and inaccurate data, resulting in costly over/under-ordering.
An example is Coop Estonia, a cooperative organization with 13-14 hypermarkets, supermarkets, and about 180 small stores or convenience stores across Estonia. They partnered with us in 2019 to centralize their forecasting and replenishment. Last year, they invested in our promotion planning tools since promos contribute roughly 20% of their overall revenue. Every month, Coop Estonia runs 2,000 promos. Before RELEX, purchasing managers at the store level guessed what volumes of certain promotional products to order. RELEX eliminated the guesswork and enabled stores to collect and deliver the precise amount of these promo items. This contributed to better margins and significantly reduced time spent managing promos. Time saved is money earned.
Grocery Doppio: What are some examples of how RELEX Solutions has helped grocers improve their forecasting and demand planning.
Kärkkäinen: Our forecasting data can determine how much inventory is needed in-store and how much to save for online orders based on evolving customer buying habits. These estimations allow retailers to make a virtual ring fence around products reserved for online sales while ensuring enough for those customers who prefer in-store shopping. RELEX helps grocers quickly and effectively influence customer demand to match existing supply better using demand-shaping strategies and tactics. Demand-shaping technology helps them gain some control amid supply chain chaos and carve a path toward profitability. For instance, they can use a surplus inventory of a particular item — say bread — and offer a two-for-one promotion or $.50 off to incentivize shoppers to purchase.
By leveraging demand sensing, machine learning, and granular point-of-sale data, grocers can quickly respond to changes in consumer demand and shape demand by aligning decisions with operational requirements and fluctuating buying patterns.
Grocery Doppio: How does the company ensure that grocers have the right products in stock, particularly for seasonal and high-demand products, to meet consumer demand.
Kärkkäinen: An end-to-end supply chain solution is what RELEX offers
1) helps grocers achieve the correct assortment of goods for well-stocked shelves
2) takes advantage of forecasting data
3) balances deliveries instead of having high peaks
4) optimizes shelving space
5) increases stock efficiencies
6) and alleviates workforce issues by reducing manual workloads.
As for seasonal sales, our solution can help grocers meet demand based on past historical data. For instance, consumers will bake more in December or eat more watermelon in the summer, and RELEX can help ensure grocers have what their shoppers want to satisfy their needs.
Grocery Doppio: How does RELEX Solutions handle assortment planning for retailers, including selecting private labels and new product introductions.
Kärkkäinen: An example is Bennet, a leading Italian chain of 73 hypermarkets and an e-commerce channel. They were searching for a provider to improve product availability, reduce stock levels, decrease food waste, and optimize replenishment of 30,000 items, including packages, ultra-fresh, and non-food items. They chose RELEX for our integrated supply chain, space, and assortment planning. We have offered supply chain optimization and integrated category management, allowing Bennet to anticipate and satisfy customer trends and needs, in-store or online.
Grocery Doppio: How does the company integrate its software with a grocer's existing systems to provide an omnichannel experience for customers.
Kärkkäinen: To improve product management and cut down on manual, repetitive, and low-value tasks, local teams need access to forecasts that accurately capture demand variation while ensuring high visibility of on-hand inventory.
RELEX can use an enormous amount of information, far more than any individual or even local store team could process, to create these forecasts automatically. With access to this broader data pool, which can include necessary details like supplier availability and regional demand trends, store teams can improve and automate their orders while also ensuring the quality of the items on their shelves.
Grocery Doppio: Can you describe some of the inventory management pain points that grocers experience and how the company addresses those challenges.
Kärkkäinen: Rising costs have driven grocers toward greater efficiency and innovation as they, too, are feeling the pinch from inflation. As such, grocers can squeeze operational costs to give them more leverage and freedom in pricing. To do this, they use automation and AI-driven insights to optimize their supply chains and reduce costs. Omnichannel growth has been up since the pandemic, so grocers are trying to unify their e-commerce and brick-and-mortar presence to reduce costs and avoid happenings that erode the customer experience, like stockouts. One of the biggest causes of stockouts is a lack of employees. Even amid 2023's economic uncertainty, the unemployment rate in the United States, for instance, fell to 3.4% in April — the lowest reading since 1969. Grocers feeling the labor crunch are using AI-driven workload forecasting, which can take external and internal labor drivers into account to predict potential peaks and fluctuations throughout the week, day, and year. This helps grocers accurately plan tasks, such as staffing more employees when deliveries are scheduled to arrive and matching the anticipated daily workload at their store. Replenishment inefficiencies impact profitability, and it's nearly impossible to achieve accurate, item-level control with manual store ordering.
An automated replenishment system monitors stock, sales, and demand 24/7 and eliminates human errors. And since it factors in changes in demand forecast and adjusts replenishment orders automatically, grocers can improve service levels, sales, and customer experience.
Grocery Doppio: How does RELEX Solutions address the unique challenges of e-commerce and online grocery ordering, such as the need for fast delivery and accurate order fulfillment.
Kärkkäinen: To speed up online order fulfillment, some larger retailers are turning to dark stores and grocery centers that shoppers don't enter. The proper planning solution can automate dark store-specific shelf and inventory optimization based on local demand forecasts. The unified RELEX system draws demand data into planogram creation and can optimize the shelf space per product. This ensures efficient inbound goods flow and localized product positioning, so high-demand items for each store are easy to pick efficiently. Quick commerce comes to mind regarding fast delivery since companies in this category promise delivery times within an hour of order placement. Some say they can deliver in just 10 minutes. The basket size is small to fulfill quick delivery. But to grow and scale, these retailers must rely on powerful, flexible tools to master demand forecasting, replenishment, and space optimization.
Grocery Doppio: Can you discuss any success stories where your solutions have led to increased sales or customer satisfaction for a grocer.
Kärkkäinen: Since 2021, RELEX has provided U.S.-based Sprouts Farmers Market with supply chain planning optimization, including forecasting and replenishment, promotion forecasting, allocation, new optimization, and forecast sharing for more than 360 stores and seven distribution centers across 23 states. Sprouts is a $5-billion plus supermarket chain offering a wide selection of natural and organic foods, vitamins and supplements, and natural body care and household items. Since using RELEX Solutions, Sprouts has dramatically reduced manual processes and reliance on Excel spreadsheets, increased time available for value-added work, leveraged AI to optimize forecasting decisions, and improved transparency across operations. And yes, this has enabled the company to increase sales and customer satisfaction. Sprouts recently added planogram and floor planning to their portfolio of RELEX Solutions.
Grocery Doppio: Considering the fierce competition in the industry, what is your company's competitive advantage? What makes it stand out from others.
Kärkkäinen: In a nutshell, we help grocers plan better, sell more, and waste less. Our company is built on three pillars — an obsession with customer success, a dedication to technological innovation, and a culture that values supply chain and retail science and engineering.
Our track record of 100% successful implementations and 100% customer reference-ability is a direct result of our commitment to delivering grocers measurable results. Our competitors can't say the same. Lastly, our sole focus is on the needs of the consumer goods value chain. Through this concentration, we've accumulated great industry expertise within the organization. We've also productized it into our unified retail and supply chain planning platform through the most extensive research and development team in this domain.
Grocery Doppio: How do you see the market for inventory management and adoption of advanced artificial intelligence and machine learning in the grocery industry evolving in the next 5-10 years.
Kärkkäinen: Human-machine collaboration interfaces will increasingly be used to improve transparency and build trust. Such interfaces enable users to interact with the AI system in real-time and provide continuous feedback, which helps understand the decision-making process. By providing additional information, grocers can adjust or correct the system's decisions, enhancing their trust and confidence in it for the long run. ChatGPT might be dominating the headlines, but human-AI connections will help grocers build the automated retail interactions of tomorrow.
Grocery Doppio: What is your company's long-term vision, and how do you see it fit into the grocery industry.
Kärkkäinen: Our long-term vision at RELEX Solutions is to revolutionize the customer experience through retail forecasting, replenishment, and space optimization. We empower retailers to optimize operations, enhance efficiency, and exceed customer expectations. We will continue to develop innovative retail and supply chain solutions, advance fully partner-led deliveries, and achieve sustainable growth. By ensuring our goals align with our customer's needs, we can bring long-lasting value and play a big part in transforming the grocery industry.
A little about yourself
We have been asking you predominantly questions about your company and would like to learn a little about you. Do you listen to music? We would like you to tell us three songs that helped inspire you during different stages of your company's development.
Grocery Doppio: Tell us a song you enjoyed throughout your journey, from ideating RELEX to its built foundation today.
Kärkkäinen: "We're Not Gonna Take It" - Twisted Sister
Throughout the journey of ideating RELEX to its built foundation today, "We're Not Gonna Take It" has been a song that I truly enjoyed. Its rebellious and determined spirit resonates with the mindset required to challenge the norms and forge a new path. It embodies the refusal to accept the status quo and symbolizes our relentless pursuit of innovation and growth.
Grocery Doppio: While establishing the company, there may have been many challenging moments. Can you tell us about a song that got you through those moments.
Kärkkäinen: "Eye of the Tiger" - Survivor
During the challenging moments while establishing RELEX, "Eye of the Tiger" was a song that helped get us through those tough times. Its powerful message of perseverance and resilience reminded us to stay focused and never lose sight of our goals. The uplifting melody and empowering lyrics were a constant source of motivation, igniting the inner strength needed to overcome obstacles and keep pushing forward. Furthermore, the song reminds us that we must stay true to the roots of power and the hunger to develop that has brought us our initial success.
Grocery Doppio: What song helps inspire you now.
Kärkkäinen: "Wasted Years" - Iron Maiden
The song is inspiring, uplifting, and full of guidance to someone like me, turning 50 in a couple of years. The significant part of the message in the song is to focus on the time we have on our hands and make the most of it.
The quote that inspires you
Kärkkäinen: "The best way to predict the future is to create it" - Abraham Lincoln
I am a solid believer in Stoic Philosophy and focusing on what we can control. Things that are in the past are beyond our control, but we can have a significant impact on the future. We have the power to shape the future through our actions and interactions with ourselves, the people in our immediate surroundings, and the larger communities that will shape the societies of tomorrow.
It's empowering to understand that the future is in our hands, but of course, it also sets a deep feeling of responsibility.