This report has provided and analysed how ASDA operate their supply chain strategies under control by War-Mart since1999. It has been show that ASDA has improved and focused on efficiency, although still keep a level of responsiveness to meet customer demand. In addition, it has been talked about key drivers of supply chain which have been used to improve ASDA’s supply chain, particularly focusing on inventory, facility, transportation and information.
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To begin with, customer pick up distribution network is commonly used for retail supermarket, including ASDA supermarket. One of the disadvantages is high inventory cost. It costs a lot of fortune for ASDA. However, ASDA has been trying to reduce the level of inventory consistently in order to achieve efficiency. How dose ASDA reduce inventory cost? They have worked with their supplier and manage the balance between efficiency and responsiveness.
Secondly, ASDA’s plan is to expand increasing the retail store to cover and meet their target group as you can see the five year summary report. It is shown that ASDA business has been expanding consistently. So, ASDA has invested facilities which are located within network of stores in order to support those stores to have a high responsiveness and also support a future expanding ASDA’s plan. As a result, these strategies have a great contribution to financial performance of ASDA.
Thirdly, transportation has been cut down by combining rout and direction. ASDA has rebuilt their distribution network which has been moving away from each distribution centre to a regional structure. Moreover, it also has a good impact on delivering products and being more reliable.
Foully, ASDA has collaborated with their suppliers by exchanging information and wants to get learning each other in order to address problems. Moreover, these programs will be able to help both ASDA and suppliers to cope with future uncertain situations better.
Finally,
Introduction
ASDA’s intention is to offer special and various products, which are excellent mix of fresh food, household items, groceries, leisure and entertainment goods, at low price in order to be competitive with each other and attractive to customers. As we know that ASDA has been Britain’s second largest supermarket. It is also shown that 160,000 people are employed in 525 stores across the UK and has been unit of the Wal-Mart group since 1999 (ASDA, 2012). Regarding to the ASDA’s supply chain plans, they have been focusing on reducing cost in supply chain, which consist of consolidating with suppliers, combining transportation, reducing packaging and so on. It also considers environmental product. It is thought that environmental friendly system will lead more sustainable materials and lifestyle. These approaches have significantly contributed ASDA to maintain them every day smart prices (IGD, 2012).
Thus, this report will find out and analyse how ASDA define and execute supply chain strategies to reduce the operating cost and respond to the customer demand, focusing on transportation, inventory facilities and information. Finally, implementation will also be shown in this report.
ASDA’s supply chain strategies
Reducing inventory
ASDA launched supply chain strategy which have improved retailer’s current costs and have high responsiveness in their retails. This strategy also enables retails to have less stock, better availability and lower cost to serve their consumers, because they can order products from suppliers in seven days and then those orders will be delivered within 24 hours maximum lead time. On the other hand, this plan might have a negative impact on supplier’s cost if they are located far away from the hub (Knowles, 2005). In addition, ASDA have focused in their inventory which has been reduced meanwhile, products on the shelf has been focused on increasing and becoming more efficient (IGD, 2012).
Increasing facilities and expanding retail stores.
According to ASDA essential stores, it was planned to open 6 shops in 2006 which was smaller than ASDA stores and was located in town (Rohwedder and, A. Z, 2006). In 2010, ASDA’s plan still expanded their business which was more suburb area in order to cover their consumer targets. In addition, ASDA considered and filled a strategic gap in the market to complete with competitors which have already opened in city centre area. Thus, 193 Netto’s shops, which were owned by Danish company, were bought in 2011. As a result, after Buying Netto’s shops, it certainly had a great impact on ASDA’s performance and market share (Sparks, 2011). Andy Clarke (2012) said that ASDA has expanded 3 distribution centres which invest about £500 million. He believes that this distribution centres will deliver additional capacity and efficiency.
With regard to the table below, as you can see that ASDA has expanded their business to cover and meet the customer demand in the grocery market. It has been a great contribution to ASDA’s sale and market share (ASDA, 2010).
Five year summary
2005
2006
2007
2008
2009
Sales ( excluding Vat) (£m)
14,865
15,759
16,896
18,604
19,862
Number of stores
315
335
352
358
371
ASDA supercentre
21
23
26
29
29
ASDA superstore
267
275
282
289
296
ASDA supermarket
12
16
19
19
22
ASDA Living
5
7
13
21
24
George
10
12
12
0
0
Essentials
0
2
0
0
0
New stores (Net)
37
20
17
6
13
Extensions
16
8
13
11
10
Average number of colleagues
145,089
153,580
156,780
162,115
169,847
Market Share
16.5%
16.5%
16.8%
16.8%
17.1%
Table1. Five year summary (2005-2009)
Restructure warehouse network and improving transportation
ASDA transportation has been absolutely renovated to improve new efficacies, focusing on reducing transport miles and restructuring the warehouse network. It has been planned to move away from each distribution centre to a regional structure. Regarding to regional transport structure, it is shown that ASDA has divided 21 distribution centres into seven planning regions in order to combine routing, planning and resource. This is a key role of supply chain strategy contributing to ASDA to transport their products on time and driver and vehicle resources will be also optimised and more efficient (IGD, 2012).
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Information and collaborative with suppliers
ASDA’s supply chain has been trying to improve consistent by collaboration. They have provided ASDA exchange centre which ASDA and suppliers can exchange some essential information to improve their supply chain to be more efficient. Moreover, ASDA will be building an advisory board that will help and steer the solution and improvement to suppliers. It is believed that these systems will bring huge benefits and for both of them, because they can have collaborative work and share some experiences and knowledge. Then it will be able to come up with solution and evolution (Elliott, 2012).
According to using Red Sky IT’s Creation supply chain software, it is facilitated by launching new products to market because IT’s Creations make all companions in the supply chain to work together electronically in real time, decreasing the information flow between ASDA its suppliers and manufacturing sites. In addition to supply chain software support our logistic associates and third parties to connect and communicate more easily and efficiently. As a result, they can improve the amount of product launch time and increase sales (Knights, 2006).
Application and analysis of concepts, tools and techniques.
Distribution network and reducing inventory
First of all, it is clear that ASDA has chosen to use customer pickup distribution network where customer can walk into the shop or order on the internet and buy their products at retail stores. This distribution network is commonly used in grocery supermarket, such as, Tesco, Sainsbury, M&S and so on. Such network enables ASDA to have a lower transportation cost, because products have been top up at retail stores. Such network can also provide a good respond time. However, they have to carry a high inventory cost at local storage due to keeping a load of products at local storages (Chopra and Meindl 2013). In 2005, it is shown that ASDA have tried to help and reduce retailer’s costs but still maintain high responsiveness. ASDA shops have been treated to have a lower stock and cost, because products will be replenished more frequently by their suppliers (Knowles 2005). Meanwhile, it has maintained increasing the products on the shelf in order to respond to customer demands consistently.
This changing probably has a major impact on their suppliers. It is though that supplier transportation cost has certainly been increased because such suppliers have to increase picking and provide more manufacturer inventory in order to meet ASDA’s requirement. Moreover, it has concern that if such suppliers are far away the hub, it definitely has a negative effect on their transportation cost. However, this strategy has contributed ASDA to improve their inventory and reduce retailer’s cost because ASDA does not have to hold a high inventory level. Importantly, area in stores which were used for stocking space can be adapted into selling space. It is meant that each ASDA shops have more space to place their products, so they can choose to extend a new item or product to place in their shops. If this was taken it would increase their sales.
According to impact on supplier cost,
Suggest, negotiate with ASDA or build new facility which is closer to suppliers
Increasing facilities and extended their business
It is undeniable that increasing the number of facilities also increases facility and inventory cost, while it can improve the response time customer desire because high number of facilities can respond to customer demand quickly (Chopra and Meindl, 2013). So the company should decide which strategy is more suitable for their products or they have to be balance between respond time and number of facilities. Furthermore, Netto’s shops were taken over by Wal-Mart to convert to be ADSA retail stores in 2011. Sparks (2011) said that ASDA’s intention was to fill a demand gap in the market to complete with competitors, Such as Tesco, Sainsbury and Morrison. Those competitive supermarkets had already opened in the town. Such opening plan might have some obstacles because in that areas which had already had rival supermarkets so ASDA shops have to be fighting and be attractive for customers. As we know that ASDA strategy is to offer various products and cheaper prices to customers. However, Rohwedder and A,Z,(2006) augured that the cheap prices might be the last choice for shoppers who want to buy products in convenience stores. According to ASDA summary table which is shown in earlier (2010), it has been obviously shown that since 2005 ASDA have invested expanding their new retail stores which are closer their customers. It costs a lot of budget to build facilities, whereas, resulting has been illustrated that annual sales in 2005 stood at 14,865 million pounds, continuing grow gradually almost 20,000 million pounds in 2009. Because of expanding retail stores there is a great performance sale in each year.
There is a challenging in increasing facilities which are a massive investment. Andy Clarke (2012) said that ASDA logistic network has been set out to build 3 distribution centres (£500 million). This investment enables ASDA is able to provide additional capacity and become more effective. Such investment can support its extension plan and also improve current retail stores too. These distribution centres will enhance ASDA stores to have a high responsiveness to respond to customer needed faster. Moreover, it is able to reduce transportation cost due to increasing the number of facilities. How transportation is reduced by increasing facilities? Regarding to Chopra and Meindl (2013), increasing the number of distribution centres position can reduce the average outbound distance to retail stores and customers a shorter distance. It is believed that the rout and direction can be combined and separated between distribution centers. Moreover, it will help ADSA to save energy and decrease carbon emissions. This point is also a major concern for company and people.
It has been made assumption that ASDA’s inbound side has been sent by full truckload
The group said that over the past five years, Asda’s distribution team had delivered almost 25 per cent more products, despite driving 19m fewer miles – these three new depots take an additional one million miles off the road
Restructure warehouse network, improving transportation and
These warehouse and transportation structure are very challenging job for ASDA. First at all, ASDA distribution centres have been changed to regional plan which are separate into seven regions. IGD (2012) has said that ASDA has executed this system for a while. AS a result, such structure has provided significant improvements to delivery products to stores on time and reliable. With regard to regional network, this network also allows ASDA to reduce transportation cost because rout and direction which delivery products to retailers can be combined and also can optimise resource to be more efficient. If this is done well, ASDA will be able to save more time, fuel costs and emission.
It has been made an assumption that ASDA has used all shipment via intermediate distribution centre with storage (Figure 1). All products from suppliers will be shipped to a distribution centre where it is stocked and then will be delivered to each retail stores by ASDA. There is reasonable that why ASDA has used this structure because inbound shipment from suppliers is large item, so it need to be held in distribution centres and then delivery to retailers. Secondly, it is impossible for suppliers to serve their products to each ASDA’s stores directly because of the location and massive cost. The advantage of this network is to achieve economies of scale for inbound transportation to a point close to final destination(419). However, ASDA has to hold a high inventory cost (Chopra and Meindl, 2013). Although such transportation network has a heavily inventory cost, ASDA has already addressed this situation by collaborative suppliers which mentioned earlier in distribution network and reducing inventory part.
Figure1.All products from suppliers via distribution centre
Run their own their fleet and wharehouse. High responsiveness
Suggestion- use smaller truck for local delivery
Information and collaborative with suppliers
Information is a significant key in supply chain because it will allow the other supply chain drivers to work together with the same direction (Chopra and Meindl, 2013). We cannot imagine that how we work without information because information will tell everything which you want to know. It is also easy to help a manager to make a decision to enhance the supply chain’s performance. According to ASDA using information driver in their supply chain, they used IT software in 2006 which called Red Sky IT. It helped ASDA to cut that time taken to transport a new item to market. It also helps ASDA and their suppliers to collaborate automatically in real time, decreasing the information movement between ASDA and their suppliers (Knights, 2006). Therefore, ASDA has worked with their suppliers by exchanging supply chain information. It has created an exchange centre which is likes a call centre to help suppliers to manage their organization and deal with problems (Elliott, 2012).
With regard to the previous paragraph, you can see that ASDA has focused on investing and sharing on information, such as, using IT software and Exchange centre. Firstly, IT software will help both ASDA and their supplier partners to work together more accurate. It will help them to know and receive information quicker. Secondly, Exchange centre, it is though that this program will bring a huge benefit to both ASDA and their supplier partners. Because of collaborating together will help them to learn each other and be able to see problems in their supply chain organization. So they can help each other and improve their efficiencies. This is one of the factors to contribute ASDA to maintain Everyday low price strategy.
Implementations
It is referred to Sainsbury’s new distribution centre (2012) which will complete by 2014. Such distribution centre location is located near main road and railway. Thus, such centres can support and delivery their products by both trucks and rails. It is a good example for ASDA Company that if ASDA will be looking to find a distribution centre they should take Sainsbury’s new distribution centre to be one of the ideas. As we know that rail has become importantly to the supply chain sector. With regard to Chopra and Meindl have written that intermodal transportation is used combination of transportation and the most common using is truck and rail. If this idea was taken to ASDA supply chain, their transportation would be more flexible and efficiency.
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