Home ยป Supply Chain Management (Case Study : Sainsbury’s Supply Chain Strategies )

Supply Chain Management (Case Study : Sainsbury’s Supply Chain Strategies )

Supply Chain Management (ENGM078) Sainsbury’s Supply Chain Strategies Arghavan Keivani 6150405 March 2011 A brief introduction to Sainsbury’s and its background J Sainsbury plc (Sainsbury’s) was founded in 1869 and is considered as a top UK-based food retailer having around 150,000 employees. It drives a chain consist of 500 supermarkets and 290 smaller format stores through the country which offer groceries, electricals, clothing, homewares, DVD rentals and financial services. There is an Online-channel making customers able to shop online, which is nearly 3% of the grocer’s sales. 1] By having almost 150,000 employees in the United Kingdom, Sainsbury’s is providing customer-facing team, having members in 785 stores backed up by a network of logistics and other support staff. To make the employee engagement and motivation task a special challenge, 60% of these people work part-time. [2] Competitive strategy describes the set of needs of the customer which the company looks for in order to satisfy. Competitive strategy (mission) can be defined as an area of primary concern to managers, critically depending on a delicate understanding of industries and competitors.

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It is a combination of ends (goals/objectives) for which the firm is attempting and the means (policies) by which it is seeking to get there. [3] The spirit of creating competitive strategy is relating a company to its environment. Even though the related environment is very wide surrounding social as well as economic forces, the main element of the firm’s environment is the industry formatting the competitive rules of the games in addition to tactics likely available to the firm. [3] Sainsbury’s Supply Chain

In 2004, Justin King started on a new strategy focused on supply-chain service to attempt stock availability, increased competitiveness on price and improving customer relationships. By dividing the customer base into 10 sectors, Sainsbury’s is focusing on customer/market sector and it is one of the key aspects of its actions. By analysis of Nectar Card purchases, the company is gathering customer cleverness (launched in autumn 2002 in conjunction with Debenhams, Barclaycard and BP), by making use of this information; Sainsbury’s can fit its offerings to suitable market sectors.

In April 1994 a deep price war involved all the supermarkets including Sainsbury’s. The management wanted stores to reduce the costs significantly because the financial return was low. Sainsbury’s chose the strategy of increasing the size of the sales area each year to keep its share prices. Not only working as a group was a way to decrease the costs but also it improved the relationships with the suppliers. Sainsbury’s has a very good relationship with its suppliers and manufacturers to make sure that each product which is supplied by a specific supplier is always available.

So, there is no need for new contracts with new suppliers or manufacturers and also new and a higher price for sure. By this way, Sainsbury’s is making sure that it can keep the price down. Sainsbury’s needs some transportation in order to ship the products from the warehouses to Sainsbury’s itself. Although customers can pick the products by going to the stores, Sainsbury’s is providing a good service in delivery which is called Last Mile Delivery. [4] Providing excellent availability of product in store, at the best possible cost, is the overruling objective of Sainsbury’s Supply Chain.

This indicates that Sainsbury’s must get the right product in the right place, in the right condition, at the right time, as they believe that this is what their customers expect and deserve. The supply chain strategy meets the actual expected customer demand; not only focusing on the number of products sold. Here, Supply Chain process needs the effective management over 2,000 suppliers at one end of the Supply Chain and 12 million stocking points in the stores, at the other end of the chain.

By means of the introduction of home shopping and different store formats, such as Sainsbury’s Local and Country Town stores, with the growing selection of products they sell, they are developing several different Supply Chain channels and levels of service to manage this intricacy. Sainsbury’s once had six channels from supplier to Regional Distribution Centre. Now there are more than thirty including the Primary Consolidation Centres, and cross docking.

As time goes by, managing the information flow through the Supply Chain was the responsibility of the Logistics teams. And, the physical storage and delivery of products was Distribution’s responsibility. But, nowadays, these two parts are working as a one-part in order to attain shared objectives and make the Supply Chain a truly flawless flow of information and products. In order to make a balance between efficiency as the low cost product, and responsiveness as the availability of the product over all year long, company is required some specific strategies.

For example, by having the same suppliers and not to change them, company would make sure that some specific products are always available to the customer. By this way, customer is sure that he can always find his specific product and would be stay loyal to the company. It means that company is keeping its customer and it is different from making new customers, for example by providing a good quality product and making the customer to advice other people (making new customers). Another strategy which Sainsbury’s is using is providing its own product by the name of the Sainsbury’s.

In this way, company can make its own product by a quality which is concerned and also keep the price down to the customer. IT system also is a main role to gain maximum possible from leading edge technology to make improvements in service and reduce the cost. For example, automatically sorting units in the stores for efficient assembly of store orders, and also gathering the benefits of checking technology to increase alternative accuracy and speed. The most efficient use of a fast transport can be made by a new transport optimisation tool.

Other strategies witch did reduce the cost and also the impact of the operations on the environment were, the use of shared user transport, optimisation of vehicle fill and the intermediate warehouse network by reducing road miles, removing Cardboard from the Supply Chain throughout the use of returnable transit packaging in the form of plastic crates, and the use of vehicles on their journey from the store back to depot or supplier, taking crates, roll pallets and even products (The Reverse Supply Chain).

Company is focusing on customer demands to be satisfied so the relationship with its suppliers and other Supply Chain partners is turning into one of strategic teamwork in a several ways. Counting regular operational contact, data sharing (the CPS and PDS applications reachable throughout the web site), the Supply Chain Development Group, and exchange programmes. Sainsbury’s considers Customer service as the heart of its value plan in order to achieve high service levels.

One of the goals for the company, to become more advanced than the competition in the early part of the century, was improving delivery service levels. This strategy would make Sainsbury’s in a good place in future in online grocery retailing making stronger and more developed from customers that are new to shopping Online. [5] In order to improve service levels and also reduce the resource costs at the same time, Sainsbury’s got help from Oracle RealTime Scheduler.

Though bucket system approach was not on top form for the use of delivering to customer, Sainsbury’s was running this system to scheduling deliveries. Positioning and organizing Oracle Real-Time Scheduler made Sainsbury’s capable to offer its customers the one-hour time-slots. Although this strategy was rare at the time of Sainsbury’s investment and is still unusual, from an efficiency point of view, this application proved its benefits by making Sainsbury’s able to make savings on its bottom line. [1]

Sainsbury’s chose Distributor Storage with Last Mile Delivery for its design as it is shown below; Sainsbury’s manages separate delivery operations for grocery and non-food online orders. For the online grocery process, the local store is the warehouse. Items are picked from 170 larger stores, allotted by postcode, and delivered to the online customer’s address. Sainsbury’s weekly delivers around 120,000 grocery orders to the UK and Northern Ireland. To face this amount of demand, it is using over 3,000 drivers daily.

Although food is picked from the local store, non-food deliveries only pass through the store when fulfilling ‘click & collect’ orders. Because much of the non-food line is exclusive to the online channel, the stores do not hold the inventory to fulfil these orders. Products are distributed from the Sainsbury’s depot in Corby, Northamptonshire and from some suppliers which deliver directly to the customer. To ensure service levels Sainsbury’s has in-sourced the management of food deliveries; however, the vehicle fleet is outsourced on four-year contracts o third parties such as Petit Forestier and Pullman. Non-food deliveries are contracted to various drop-ship vendors and thirdparty logistics operations. a simplified representation of the grocer’s online retail supply chain, from the supplier to the consumer The main aim for choosing this design was to make customer service expectation higher in order to attain separation in the deeply competitive online grocery segment. As UK grocery retail has a highly competitive environment, a price war between the most important supermarket chains has focused implacable price reduction on groceries.

One way of competing in this deep market is discovering ways of making different through the service plan. Consequently, better managing and exceeding customer prospects, focusing on delivery services, is Sainsbury’s in progress aim to make it in good place. [1] There was a time that Sainsbury’s was thinking that the organisation could surrender on the ‘price’ aspect and by concentrating on to refurbish the store look and supply chain perfections, it has faced massive internal problems. In the year 2000, the organisation recognized that the numbers were not very approaching success.

The effective profit fell by 23. 3% when the share price radically against all market prospects and predicts. Essential changes were needed to turn around the business performance so three areas identified to get cautious control; – Stores and Customer Service – Supply chain performance which is essential to all retail business – increasing efficiency and enabling IT solutions To solve all the problems and change the faults in organization and stores, six strategic steps were chose in the usiness transformation. 1. To help distributing continuous shareholder value, it is needed to create a new and distinguished market position. 2. Dramatic change in the customer shopping experience (only achievable in deep understanding of the stores operational models and throughout service drivers). 3. Improvement of customer shopping experience in the roles of the store managers and their particular teams 4. Making the processes and systems simple and easy to understand to make them more effective 5.

Set an example among the community and employee base, in the organization, to have high performance (customer centric and the highest quality). 6. Influence new possible and predictions in B2B, E-commerce, B2C channels and taking full advantage of the synergies of the group at the same time. [3] [6] [1] http://www. oracle. com/us/corporate/analystreports/corporate/ov um-sainsbury-cs-170835. pdf [2] http://www. investorsinpeople. co. uk/Documents/Case%20Studie s/TestimonialGallery/107469_Case%20Study_SAINSBURYS. df [3] Competitive strategy: techniques for analyzing industries and competitor by Michael E. Porter http://books. google. co. uk/books? hl=en==QN0kyeHXtJ MC=fnd=PR9=competitive+strategy+definition s=joHYTrJYud=v5cg8jvmRmoLXMt_Hg8ezu6yyc#v=onepage=competitive%20strategy%20definit ion=false [4] http://www. coursework. info/University/Business_and_Administ rative_studies/Marketing/TESCO_vs__SAINSBURY__THE_S UPERMARKET_WAR_L79463. html [5] http://www2. sainsburys. co. uk/sid/info_sc_osc. htm [6] http://www. universityessays. com/example-essays/globalmarkets-sainsburys. php

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