The Incredible Logistics of Grocery Stores

This video was made possible thanks to CuriosityStream. Sign up for the CuriosityStream/Nebula package to see the expanded version of this video with everything we recorded per time at CuriosityStream.com/Wendover. Supermarkets are a wonder obscured by banality. Almost everyone in the developed world uses them regularly, so we have no basis for comparison; We simply do not know a world without supermarkets. We don't know what it was like a century ago, when

grocery

stores

took the form of small storefronts, found every few blocks in towns and cities. He would give the employee a list indicating that he wanted, among other things, apples.

They would then pick apples, assuming they were in season and in stock. Today, however, you are faced with an aisle that rivals the size of those historic

grocery

stores

, displaying a tantalizingly extensive selection of Honeycrips, Fujis, Granny Smiths, Galas, Braeburns and more: all varieties, always in stock. stock, all year round. long. They sit next to pineapples from Costa Rica, avocados from Mexico and mangoes from Brazil. Up ahead, there's beef from a completely different hemisphere and fish that were alive in an ocean thousands of miles away just a few days ago. A century ago, you could certainly buy a jar of peanut butter, but now you can buy regular peanut butter, chunky peanut butter, smooth peanut butter, or organic peanut butter, and it doesn't end there.

You can get the thick Jif brand, the thick Smucker's brand, the Skippy brand, the store brand, or one of many more. You have dozens and dozens of peanut butter options, dozens of options of other nut butters, dozens of options of other sandwich spreads, and all of that is just one part of an aisle. Altogether, the stability and variety of options in modern supermarkets is

incredible

. In both big cities and small towns, American supermarkets offer an average of about 30,000 different product options that remain in stock approximately 92% of the time. While the modern supermarket concept first appeared in the US, it has since proliferated throughout the developed world.

The fact that this has become not only normal, but expected globally, is the biggest indicator of the strength of the modern global supply chain, but that doesn't mean it's easy. For consumers, it's simple: we can get everything we want, at any time, in a single store, but the complexity behind it is truly astonishing. This is a typical American supermarket: a City Market brand store in Glenwood Springs, Colorado. While this brand is small, it is part of the larger King Soopers brand, which in turn is part of Kroger's, the largest supermarket company in the United States. The entire American supermarket landscape is incredibly consolidated: the top four companies own 45% of the market, which certainly has tremendously negative consequences, but this market concentration has led to the enormous scale and complexity of our current grocery supply chain. food.

Even independent grocers now tend to rely on giant cooperatives to accumulate purchasing power and stock their shelves, so across the industry, scale and complexity are the norm. Now, supermarkets like this one are involved in a perpetual balancing act. Keeping items in stock is a primary financial concern: research on the topic has found that in the third instance that a desired item goes out of stock, consumers will go to an alternative store 70% of the time. Being located just five minutes from a Walmart, this store can't afford to run out of stock on a single item, push a customer to a competitor, and lose thousands of dollars in annual sales because they decide they like Walmart better.

Therefore, the task is to keep everything in stock as much as possible, while having as little extra product as possible. So the way this Glenwood Springs city market, along with virtually every grocery store, keeps those 30,000 products continually on its shelves is simple, at least on the surface. You see, every item in a supermarket is labeled with a barcode; generally that code is standardized across the industry, except with some white label products. When products arrive at the store, they are recorded in your inventory management software. From there, it's simple math: as products are checked out and paid for, they are subtracted from the inventory count, and as that count decreases, the store knows it's time to reorder.

It's a simple concept, except when you implement it in the real world. There is more than one way a product can leave a store: it can be stolen, spoiled, damaged, or more. That means there is always a slight disparity between the number of elements on paper and in reality. Inventory management software can explain some of that, assuming employees provide it with accurate data, but stores also perform a manual count every month or two to determine the actual disparity. This is very important for financial reporting reasons (the retailer can't know how profitable it really is until it knows how much product it lost), but it can also be used to tell inventory management software how much is typically out of order and correct it. . that in the future to make sure new orders are placed on time.

Then, there are other factors. For example, if a supermarket runs a sale on a certain item, that product will likely sell more, so inventory management software needs to take this into account in its ordering process to ensure it increases inventory accordingly. So the arrival of unusually warm weather could mean that sales of barbecue charcoal, for example, are about to increase, while sales of hot chocolate will decline, so more complex inventory management software may have take into account external factors like these and make ordering decisions based on them. Now, some products are easy to keep in stock.

Oreo cookies, for example, have a long shelf life and come from a large manufacturer with multiple production facilities spread around the world. There is a lot of slack and flexibility in that system. That is not the case with all foods. Take, for example, grapes. It is quite difficult to maintain stocks of table grapes. If there is a sudden increase in demand for grapes, you can't simply order more from the factory: their overall inventory levels are essentially decided years in advance, when growers decide whether to add or remove vines from their vineyards. What's more, grapes are very seasonal.

They do not ripen off the vine, so they must be picked exactly when they are best to eat, meaning growers have a one- or two-week window to harvest a given vineyard. Of course, grapes are found in grocery stores for much more than two weeks a year; in fact, they are almost always available. What makes this possible is a massive production cycle that spans the entire Western Hemisphere. Now, the easiest part of the year for the Glenwood Springs City Market to get its grapes is late summer. This is because California's central valley, where the vast majority of the country's grapes are grown, has its natural harvest season between mid-August and late September.

This extends into early July with “ultra-early season” grape varieties, such as Sharada UA, and then into November, with late varieties such as “king of autumn.” Therefore, there is a period of about four months in which California largely covers the entire country's grape supply. However, once that ends, things get more complicated, but the industry has learned to take advantage of global weather patterns. Peru, thanks to its fairly equatorial climate, begins its harvest just as California's harvest ends, in early December, and saturates the market until mid-February, when Chile, with its more seasonal climate, takes over. They basically act as the southern hemisphere's equivalent of California, also using early and late varieties to extend their massive harvest into May.

Next, California's Imperial and Coachella Valleys, as well as several places in Mexico, activate their harvests. These areas have a warm year-round climate that allows for a year-round growing season, but they time their vineyards specifically to align with this gap in the market until mid-July, when California's more seasonal Central Valley begins. their harvest, starting the cycle. one more time. While the general path a given food product takes varies dramatically, the only constant is that every item that ends up on the shelves at Glenwood Springs City Market passes through here: the distribution center. Now, the way surface-level distribution centers work is pretty standard: They bring in pallets of a single product, split them up at the case level, and create pallets with smaller quantities of everything a store needs.

However, the way each distribution center accomplishes this is different. Kroger's facility in Aurora, operated by a company called Windigo Logistics, uses a fairly high degree of automation. Trucks arrive from all over North America, delivering pallets of products from Kroger's various suppliers. For example, a truck might arrive from the Nabisco plant in Chicago with pallets of Oreo cookies. These pallets are immediately placed on an induction conveyor belt, where a scanner determines what they really are. Using that information, the storage software determines whether it thinks you'll need more Oreos in your system in the next three days or later.

If the answer is later, the pallets simply make a quick stop at a pallet exchange machine, which exchanges them for a new storage pallet, before conveyor belts take them to an automated long-term storage system at a separate part of the warehouse. However, if a pallet of Oreos is needed sooner, it will go to a depalletizing machine, which breaks them down to the level of boxes, each carrying dozens of units of the actual product. Those boxes are injected onto a network of conveyor belts, which takes them to a machine that places them on an individual tray. That tray is then automatically stored somewhere in a cavernous room of shelving;

Essentially, a huge vending machine. At some point in the next three days, some King Soopers or City Market store will place a new order, indicating that they need Oreos, so the warehouse software will automatically remove some trays of Oreos from the shelves and place them on another conveyor belt. which will lead them to a smaller automated racking system, closer to the palletizing area, which acts as temporary storage, holding items for no more than a few hours. Then, when it comes time to build an actual pallet of product for a given store, the trays are removed from the shelves in a specific order.

You see, the system knows the composition of the shelves in each of your stores, so it knows in what order to build a pallet. They will place items for one side of the store aisle on the bottom of a pallet, items for the middle of that aisle in the middle, and items for the other end on top. This way, store stockists can dismantle a pallet and immediately place things on the shelves in the most efficient way. In the distribution center, this palletizing process is still fully automated, and in the end, the system will deliver the completed pallets to the humans responsible for loading the outbound trucks.

Finally, once everything is finished, a truck will make the three-hour trip west to Glenwood Springs City Market, where an overnight crew restocks shelves with fresh produce. Now, even as automation is making significant strides, many grocery distribution centers still use a much more manual approach. That process is essentially the same: Pallets are received, stored, and outbound pallets are built with smaller quantities of each product, but each step is completed by humans rather than machines. However, both automated and manual processes are not perfect. Specifically, they present a problem for what is known as "slow moving inventory." You see, grocery distribution centers are traditionally set up to run on pallet loads (it's just not efficient to receive a smaller quantity), but sometimes products just aren't as popular.

However, unpopular products are actually crucial to the business strategies of modern supermarkets. The reason they can have dozens and dozens of types of sauces is that some niche brand on the bottom shelf is probably at least one person's favorite. The City Market inGlenwood Springs might sell that sauce, but Walmart or Target might not. Even if that consumer can get everything he needs at one of the competitors, he will keep coming back to City Market because he knows he can get that niche product he loves. Supermarkets see niche and slow-moving products as key differentiators and key to customer retention, so they are certainly willing to sell these products even at a loss.

In fact, Walmart experimented with reducing its product assortment by 11%, but quickly changed course when it became clear that this was ultimately having a negative impact on its bottom line, even as it simplified its distribution

logistics

. However, as far as the warehouse goes, if each store that sells that niche of sauce only sells a dozen of them a week, it will take quite a while for even the entire company to end up with just one pallet. However, in the distribution center, a single pallet in the order picking area takes up the same space as a single pallet, regardless of whether it is sold out in a day or a month.

Therefore, each additional niche product stored increases the amount of storage space needed and increases the total distance that pickers have to travel to assemble an average pallet, in the case of manual warehouses. To mitigate these effects while maintaining their niche product offerings, some supermarket chains, including Kroger's and H-E-B, have established comprehensive, dedicated distribution systems for slow-moving inventory. By setting up these facilities, they can ship certain products with less than a box and store them without slowing down the process for fast-moving inventory. Of course, this process still requires some scale to work better than the alternative: While Kroger's has implemented it in densely populated areas of the US East Coast, it has yet to do so in less populated areas.

Rocky Mountain Region is home to its King Soopers and City Market brands. There is simply not enough overall demand in the region to justify a dedicated facility. The sheer scale at which the supermarket industry operates is what has led to this level of supply chain complexity. When a single facility is responsible for distributing a sizable portion of a state's food supply, small incremental improvements in efficiency can result in huge savings for businesses. While many people find this commoditization and consolidation of the food supply problematic, ultimately the average consumer just wants a wide variety of foods at a low cost.

That's what this system provides. Any modern supply chain is shaped by what leads to commercial success, and as long as people continue to consider the convenience of having 30,000 options of what to eat at any given time paramount, that is how the developed world will continue to get its food. . So anyone who's stuck around this far in the video probably enjoys watching Wendover videos and would enjoy watching as many of them as possible, but unfortunately, YouTube's algorithm doesn't feel the same way. For any channel, there is a sweet spot of video length (for us, it's about 15 minutes) and every time we make something longer, the algorithm actually punishes us.

We always have to save time, but to not feel like that work was in vain, we started uploading extended cuts of our videos, including this one, to Nebula, the streaming site home to all your favorite educational creators. , founded by those same creators. Additionally, their unique business model allows for large budget projects, of which we have completed many at HAI and Wendover. Of course, the better way to access Nebula makes it even better. Signing up through the CuriosityStream package means you'll also get access to CuriosityStream, which is a fantastic streaming site that I use regularly and hosts a great selection of documentaries and non-fiction TV shows, like this one about the barcode and how shaped our modern economy.

If you found this video, about the supermarket industry, interesting, this short documentary is a fantastic companion that delves into how modern retail works. Best of all, signing up for this package helps independent creators like us stay independent. You can get everything, on both streaming sites, for the pretty crazy price of less than $15 a year with the current sale at CuriosityStream.com/Wendover.