Rapid Response: Konzum Supply Chain Optimization During the COVID-19 Crisis
Supply chain optimization engagement with Konzum, Croatia's largest retail chain (part of Fortenova Group), stabilizing delivery operations across hundreds of stores during the COVID-19 crisis.
Client: Konzum, Croatia’s largest retail chain, part of Fortenova Group, operating hundreds of stores and distribution centers across the CEE region.
Introduction
Konzum, Croatia’s largest retail chain (part of Fortenova Group), engaged It From Bit at the onset of the COVID-19 crisis to redesign its delivery scheduling system. The engagement is an example of our Operations & Resilience Systems practice. The output is a discrete optimization model that produces weekly delivery patterns balancing warehouse workforce, transportation utilization, and store-level service. In production since May 2020, the new system delivered a 3% improvement in the objective function and faster adaptation to lockdown-driven policy shifts across hundreds of stores in the CEE region.
In the early days of the pandemic, businesses were forced to adapt rapidly to a changing landscape. At It From Bit (IFB), we offer quick solutions in the face of unforeseen challenges. Konzum approached us with a problem that needed an immediate, methodologically defensible answer.
Problem
The retailer faced unprecedented challenges to keep up with the sudden changes brought on by the outbreak. Its supply chain involved complex interactions between three systems: warehouse workforce scheduling, delivery scheduling, and routing system. The non-digital delivery scheduling system, which had previously worked well in stable times, was no longer as effective in the face of the constantly changing policies and restrictions. The company was finding it increasingly difficult to react quickly to the changing circumstances, and this was having a knock-on effect on employees, logistics, and customers alike.
Solution
Recognizing the urgent need for a new approach, in close collaboration with the client’s domain experts, we quickly got to work devising a top-down discrete optimization model that would streamline operations and enable better reactivity to changes in circumstances. We focused on finding repetitive weekly delivery patterns that would balance the daily warehouse and transportation utilization, with a special emphasis on reducing inventory write-offs due to the aging of fresh food. Our proactive-reactive approach ensured an appropriate Service Level at the store level, guaranteeing the freshness and quality of ultra-fresh food. At the operations level, it kept the supply chain aligned through a baseline delivery pattern schedule that triggered re-optimization in case of degradation. The new automated delivery scheduling system brought a 3% improvement in the performance measure and a marked improvement in speed in adjusting to the changes, such as those imposed by lockdowns.
Outcome
Within two months, our team successfully optimized weekly delivery patterns across a network of hundreds of shops in the CEE region. At the same time, we balanced the utilization of warehouses and transportation, reducing the peak and the total number of deliveries by pairing them together from different warehouses, when possible. The system has been operational since May 2020, with measurable benefits, including a 3% improvement in the objective function compared to the previous approach.
Conclusion
IFB’s rapid-response engagement played a crucial role in helping Konzum navigate the challenges brought on by the pandemic. The swift and effective deployment of the new delivery scheduling system allowed the team to maintain a streamlined supply chain and stay ahead of changing policies and demand patterns. The proactive-reactive approach helped reduce waste and inefficiencies while delivering measurable performance gains.
Published research: The methodology and results of this engagement are documented in a peer-reviewed paper: Delivery pattern planning in retailing with transport and warehouse workload balancing — Croatian Operational Research Review, 2022.
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