ALDI, a German-based, global deep-discount grocery retailer, finds itself in the crosshairs of the steady march of digital innovation. The singular focus of the firm to-date has been to deliver “the best quality product at the lowest possible price,” and the architecture of its entire supply chain executes against this organizational objective.  Historically, this has translated into little-to-no-emphasis on technologizing the supply chain, opting instead for driving efficiency via an almost entirely private-label product offering with limited SKUs and long-standing supplier relationships. 
More recently, the ubiquity of digital solutions in everyday life have contributed to a shift in consumer preferences, e.g., the adoption of e-commerce, and a shift in the art-of-the-possible of B2C supply chains, e.g., the analysis of big data.  Though slower to arrive, this trend is now beginning to permeate the fabric of the global grocery industry, presaging wide-ranging impacts for all industry participants including ALDI.
The benefits of digitalization for ALDI are consistent with those observed across industries, yielding lower economic costs across the board: search, replication, transportation, tracking, and verification.  In an increasingly competitive global grocer marketplace, with the cross-border expansion from domestic players and the greenfield entry of tech players, ALDI runs the risk of falling behind the digitalization curve. Were ALDI to act too slowly, it would forego the associated cost savings as others achieve them and, consequently, lose the competitive pricing edge that has been critical to its expansion and profitability.  With 39% of consumers willing to buy groceries directly from producers, ALDI will also increasingly face pressure from emerging digital-based direct-to-consumer business models from marquee CPG names. [6, 7]
Change Is All You Need
Today, only 4% of U.S. grocery sales are generated online, but that number is expected to grow to 20% by 2025, with similar growth expected across ALDI’s global geographic footprint.  The growing customer preference for a click-to-receive grocery buying experience presents an inherent last-mile supply chain challenge: enhancing the capabilities of a brick-and-mortar retail business to achieve efficient and cost-effective doorstep delivery. In a first step toward meeting the need, ALDI has announced a strategic partnership with Instacart, the well-known online grocery delivery service. Beginning in late 2017, the partners will offer customers the option of ordering groceries online via the Instacart app and receiving them within the hour at a location of their choice. 
ALDI is also beginning to make medium-term investments in the digitalization of its in-store experience. In July 2017, the company earmarked $6 billion toward the renovation and modernization of its stores globally.  The new stores, which may leverage shelf-stacking and floor-cleaning robots, are likely to afford ALDI with long-term cost improvement in order to reinvest behind better serving the evolving digital-first palate of the developed market consumer. 
What Is To Be Done?
Despite the progress the company has made downstream over the last few years, ALDI has yet to explore several opportunities for through-the-chain digital transformation that competitors are already beginning to capitalize on today. Chief among these operational improvement levers is the introduction of Internet of Things (IoT) technology into the supply chain.  A full IoT implementation would give ALDI visibility into the origin, location, and destination of all products at all times. This additional visibility, in turn, could become the backbone upon which the company would build an in-house online order-and-deliver solution (a la Instacart) and the supermarket of the future (a la Amazon’s Go store concept). 
In order to move its supply chain closer to the innovation frontier, ALDI will also need to invest behind an internal innovation agenda focused on tech-enabled supply chain R&D. Radical business transformations do not arise sui generis, but rather from a coherent chain of investment, learning, and testing decisions. Building a robust R&D competency will create a funnel of invention that can complement and feed into the supply chain implementations that ALDI is already experimenting with today.
More near-term, ALDI should aggressively leverage the in-chain data that is already available today in the context of novel, plug-and-play machine learning and data science solutions. Though the company may not have the most granular and highest frequency information on its merchandise, it would stand to benefit tremendously from bringing to bear predictive analytics on existing data in order to optimize everything from high-level inventory management to dynamic pricing with suppliers and customers alike. 
Compete At Your Own Risk
Even with a comprehensive effort toward keeping up with the digitalization of competing supply chains, it remains unclear whether ALDI will end up a loser in a full-fledged innovation competition versus Amazon and other digital innovators. Perhaps more importantly, can the grocery business that took the world by storm with low prices pivot to become a tech-centric company and sustain its expansion?
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