Kroger Wants Direct Sourcing Above 10%: Build the Import Control Layer First

Removing an intermediary can reduce product cost, but it does not remove the work the intermediary performed. It transfers that work—and its risk—to the retailer.

That is the operational reality behind Kroger's plan to expand direct sourcing. Supply Chain Dive reports that the grocer wants first-party procurement to exceed 10% of volume as it works toward an owned import and distribution model. Earlier in 2026, the publication also reported that Kroger was using supplier negotiations and direct sourcing to improve cost of goods.

The potential upside is meaningful: better purchase economics, direct supplier relationships, greater product visibility, and more control over specifications. Yet the margin previously paid to an importer, wholesaler, or agent also funded supplier qualification, consolidation, bookings, documentation, customs coordination, disruption management, and inventory ownership. A retailer should therefore treat direct sourcing as an operating-model change, not a procurement discount.

Assign ownership before the first purchase order

The first control is a responsibility map that follows the shipment from supplier approval through final distribution. Every milestone needs one accountable owner and a named backup.

Procurement should own commercial terms, supplier capacity, quality requirements, and corrective actions. Trade compliance should own classification, valuation, admissibility, origin evidence, recordkeeping, and broker instructions. Transportation should own bookings, consolidation, routing, carrier performance, and exception recovery. Inventory planning should own order timing, safety stock, allocation, and promotion readiness. Distribution teams should confirm receiving appointments, labor, temperature controls, and storage capacity.

Finance also belongs in the workflow. Payment terms, foreign-exchange exposure, duty accruals, insurance, demurrage, detention, and pipeline inventory all affect the real economics. These responsibilities should appear in the purchase-order and shipment record, not live in a spreadsheet known only to one team.

Incoterms are not a substitute for this map. They identify where specified costs and risks transfer between buyer and seller; they do not ensure that someone booked the correct service, supplied complete customs data, or reserved warehouse capacity.

Compare total landed cost, not unit price

Direct sourcing should be approved with a lane-and-SKU business case. Begin with the factory price, then add international transportation, origin and destination handling, customs duties, brokerage, inspection, insurance, inland delivery, financing, inventory carrying cost, expected spoilage or damage, and a disruption allowance.

The working-capital line deserves special attention. A retailer that takes ownership earlier may hold weeks of additional inventory on the water and at consolidation points. Lower unit cost can be overwhelmed by longer order cycles, larger minimum quantities, forecast error, or markdowns. SupplyChainBrain's discussion of cost as a supply-chain design decision argues for deliberate choices about where resilience investments such as diversification, dual sourcing, and right-shoring create measurable value.

The comparison should include at least three scenarios: normal flow, a routine delay, and a severe disruption. For each, calculate landed cost per sellable unit, cash-to-cash days, expected in-stock performance, and margin after waste or markdowns. This prevents an attractive base-case quote from hiding a fragile operating model.

Tariff exposure must also remain dynamic. Reuters reported in 2025 that Kroger was diversifying fresh-category suppliers and considering less tariff-exposed geographies. Classification, country of origin, trade remedies, and policy changes can alter the landed-cost advantage after a contract is signed.

Build an import control tower around milestones

The useful unit of visibility is not a container dot on a map. It is the purchase order connected to product, supplier, booking, customs entry, inventory need, and destination appointment.

A direct-import workflow should monitor these milestones:

• Purchase order confirmed against capacity and required ship date
• Product and packaging compliance documents approved
• Booking secured and cargo-ready date validated
• Origin pickup, consolidation, and departure completed
• Commercial invoice, packing list, classification, and origin evidence checked
• Customs filing accepted and holds resolved
• Arrival, discharge, release, drayage, and receiving appointment confirmed
• Quantity and quality reconciled against the purchase order

Each exception needs a threshold, owner, response deadline, and escalation path. A late cargo-ready date might trigger inventory reallocation. A missed sailing might require an alternate service. Missing origin evidence should stop customs submission until corrected. A destination capacity conflict should prompt appointment changes before storage charges begin.

CXTMS can provide the shared transportation record for these decisions by connecting orders, bookings, documents, milestones, costs, and exceptions. The objective is not merely more alerts. It is enough context to choose the least costly recovery action while protecting availability.

Promote suppliers and lanes through gates

Retailers should not move a large share of volume direct after one successful shipment. Use promotion gates that increase exposure only when the supplier and lane demonstrate control.

Start with a limited set of stable, non-seasonal SKUs. Measure on-time cargo readiness, documentation accuracy, booking acceptance, transit-time variability, customs holds, landed-cost variance, damage, fill rate, and destination dwell. Establish minimum sample sizes and pass thresholds before increasing purchase-order value or adding promotional items.

The lane requires its own qualification. A reliable supplier cannot compensate for chronic capacity shortages, transshipment risk, poor sailing frequency, or constrained destination drayage. Maintain alternate carriers, gateways, brokers, and suppliers for products whose absence would materially affect sales.

Governance should include a monthly supplier-lane review and a quarterly reassessment of the business case. Pause expansion when documentation errors, variability, inventory days, or exception costs exceed agreed limits. The correct metric is not simply “percent sourced directly.” It is profitable, compliant, service-reliable volume sourced directly.

Make 10% a control milestone

Kroger's target is a useful reminder that procurement scale changes the nature of the risk. At low volume, experienced employees may recover problems manually. Above 10%, fragmented emails and spreadsheets become an expensive single point of failure.

Retailers should build the import control layer before chasing the full intermediary margin. When ownership is explicit, landed cost includes risk, milestones connect to inventory, and promotion depends on evidence, direct sourcing becomes a repeatable capability rather than a collection of heroic recoveries.

Ready to manage direct-import orders, transportation, documents, costs, and exceptions in one workflow? Request a CXTMS demo to see how a connected TMS can support controlled sourcing growth.