Consistent Consolidation Strategies in Grocery Retail Distribution

In the food retail sector, maintaining the food quality across the supply chain is of vital importance. The quality of the products is dependent on its storage and transportation conditions and this peculiarity increases the supply chain complexity relatively to other types of retailers. Actually, in this industry there are three types of food supply chains: frozen, chilled and ambient. Moreover, food retailers run different store formats, of different sizes, assortments and sales volume. In this study we research the trade-off between consolidating a range of products in order to perform direct deliveries to the stores versus performing separate delivery routes for products with different transportation requirements. A new consistency dimension is proposed regarding the periodicity that a consolidation strategy is implemented. The aim of this paper is to define a consolidation strategy for the delivery mode planning that allows to smooth the complexity of grocery retail operations. A three-step approach is proposed to tackle a real size problem in a case-study with a major Portuguese grocery retailer. By changing the consolidation strategy with a complete consistent plan the company could reach annual savings of around 4%.