British Supermarket Supply Chain Examination - Case Study Example

ASDA’S Supply Chain and Operation Management Author’s Name Class Name Professor’s Name School City and State Date Introduction ASDA is one the largest supermarkets in the United Kingdom with its headquarters in Leeds Yorkshire. Its history dates back in 1920’s when Yorkshire dairy farmer formed Hindell’s Dairy Farmers Ltd to guard themselves against fluctuations in milk prices. The company went through a series of acquisition and in 1949 it changed its name to Associated Dairies & Farm Stores Ltd. The company merged with Asquith, which was a chain of Associated Dairies and three supermarkets in 1965 and adopted the name ASDA. ASDA abolished the retail prices to be able to capture a large market by selling their products at low prices in their supermarkets. ASDA was acquired by Wal-Mart stores in 1999 and operates as its subsidiary in Britain. The supply chain is the process it takes to obtain goods from supplier to the customer. It can also be defined as a system of people, information, resources, activities, and organization involved in moving goods or services from the supplier (s) to the customer (s). It includes activities such as conversion of raw materials, natural resources, and other components into finished products that are then delivered to the end consumer (Dam and Skjøtt-Larsen 2005). Operation management is the process that involves overseeing, controlling, and designing the redesigning and production of business operations during the transformation of goods and services into finished products and services. Operation management aims at maximizing efficiency in the production of goods and services that effectively meets the need of the customers (Kamauff 2010). Supply Chain and Operations Management Milk Despite having some connection with Yorkshire farmers during its early years, ASDA does not farm or source milk directly from suppliers. The company has since diversified from dealing with just milk and now sells a variety of products in its supermarkets (Ilbery and Maye 2005). ASDA, being a subsidiary of the largest store in the world, it maintains not only its own value, but also the value of its supply chain network partners. ASDA works with a vast range and of milk suppliers to ensure that it satisfies its customers. The policy of the company dictates that it has to maintain a healthy relationship with suppliers and work for mutual benefits. Choosing and Management of Milk Suppliers What ASDA Looks for in Milk Suppliers When choosing a milk supplier, ASDA looks at several major factors. The first factor is the quality of milk that the supplier can supply and the reliability. ASDA ensure that its suppliers provide the best milk for its customers. The company image is important and to ensure that it remains so or better the company has to maintain the quality of its products. The suppliers have to be reliable to ensure that there is a steady supply of milk. An ASDA supplier must have considerable speed and flexibility. Customers demand keeps on changing from time to time. At times, customers will consume large volumes of milk while they will suddenly lower their consumption in other times. To become an ASDA supplier, you must be able to give a competitive price while at the same maintaining the quality of milk you supply. Choosing Potential Suppliers ASDA uses a variety of methods to get suppliers. Most suppliers visit the company offices with their proposals to supply them with milk. The company officials take their details and contacts and keep them, and when the need for a new milk supplier arises, the company contacts the suppliers to and takes him through the relevant process to ensure that he qualifies. ASDA also gets the suppliers from exhibitions, trade press, business advisors, and their database. The company also advertises its tenders in a variety of channels. Once ASDA has a list of suppliers, it assesses how well each of them can deliver on their expectations. The company looks at their financial stability, how long they have been established, and their recommendations. The company also investigates whether the relevant bodies and trade associations as well as the government (Bourlakis and Weightman 2003) approve the suppliers. Negotiating the Terms According to ASDA suppliers’ website, once ASDA has identified the list of suppliers it wants to work with, the company and the suppliers agree to terms and conditions. ASDA explains the changes in price from time depending on the change in the market. ASDA is very sensitive to the prices it offers to its customers. The company also ensures that it is aware of the source of milk that the suppliers deliver to it. The company requires that the supplier have to compensate his providers of milk fairy and at the agreed time. ASDA recognizes the fact that if the dairy farmers are not compensated adequately and fairly, they will strike and fail to offer their milk to the suppliers. If suppliers fail to deliver the required volume of milk the company will be adversely affected, and this issue will be passed on to its customers hence its public image will be damaged. During the negotiation of terms, ASDA also tables its delivery, payment and quality terms to its new suppliers. Drawing of Service Level Agreement After negotiations, ASDA draws Service Level Agreements with its suppliers. These are usually contractual obligations that both ASDA and the suppliers should meet while working together. The SLA’s sets out the standards of service, delivery timetables, and responsibility for both ASDA and the suppliers, payment terms, dispute resolution, legal and regulatory compliance, and termination conditions among others (Bourlakis and Weightman 2003). Building Good Relationships with Suppliers According to ASDA website, ASDA maintains a good relationship with suppliers through several ways. The company has a good communication network with its suppliers to ensure that they both are up to date on the matters affecting their business relations. The company keeps good records of all its milk suppliers for clarity and long-term business relations. ASDA has integrated Information technology to control its milk stock. The suppliers are always updated on the milk delivery schedule on time that way they can prepare themselves on time. ASDA pays their suppliers on time to ensure that they are not they do not inconvenience them in their internal and external operations. ASDA has an online system that serves the suppliers without having to visit the company offices physically for information (Bourlakis and Weightman 2003). The production/transformation process and packaging. The management and distribution channels Most of the milk sold by ASDA is normally manufactured and packaged by them. Since the company has built an excellent relationship with its customers, the customers always trust products that have a brand name of ASDA. To ensure that the customers are satisfied, ASDA provides them with milk that is manufactured branded and packaged by the company. However, ASDA does not manufacture and package the milk themselves. ASDA has its identified manufacturers that manufacture and package milk for them (Ilbery and Maye 2005). Once this milk is manufactured and packaged, it is delivered to ASDA warehouses where it is distributed to all the ASDA supermarkets in the United Kingdom. However, ASDA guides their manufacturers how its milk should be manufactured and packed. ASDA milk is not sold in other shops except the supermarkets and shops authorized to sell ASDA products. ASDA has over 500 stores, which include ASDA supercenters, ASDA superstores, ASDA Living stores, and ASDA supermarkets. All these stores vary in size and location, but they provide the same prices for milk and other products sold by the company. The company has an efficient transport system that ensures the milk is delivered to all its stores on time and good quality. The vehicles used to transport milk are fitted with coolers that ensure the required milk temperatures are maintained. ASDA produces both short self-life milk and long shelf life milk. Both types of milk require different storage conditions and are treated so both in times of transportation and storage reliable (Sellitto, Burgess, and Hawking 2007). Distribution Channels, Storage, and Management of Milk ASDA The milk distribution channels start when ASDA passes information to its suppliers to supply milk to its manufacturers. The company communicates with different suppliers or gives them a schedule for milk delivery to different designated manufacturers. The company keeps an effective communication channels through which it communicates with both the suppliers and the manufacturer. Suppliers ASDA has two types of suppliers. It has the milk and packaging materials suppliers. The packaging materials suppliers’ suppliers according to the information received from ASDA Company. Once the ASDA milk supplier receives communication or a schedule for milk delivery from ASDA, they deliver milk to the assigned manufacturer. ASDA keeps updating the suppliers of the milk volume to supply from time to time as the markets demand. Manufacturers ASDA manufactures receive milk from ASDA suppliers only. The manufacturers are not allowed to source for any other milk to manufacture ASDA products. After receiving the milk, the manufacturers manufactures the milk according to the guidelines provided by ASDA and the packages the milk. Warehouses Once the milk is processed and packaged, ASDA vehicles transport the milk to the warehouses. The vehicles are fitted with coolers that maintain the milk at the required temperatures until the milk gets to the stores. In the stores, the milk is stored under the required conditions to ensure that its quality is not compromised. The stores are strategically located between the manufacturers and the stores to cut the transport costs. It is in the warehouses that milk is distributed to different ASDA stores. ASDA’s Store Inventory Management System is very efficient since the company uses RFID technology to manage and store inventory information and dealers’ information to help make the process reliable (Sellitto, Burgess, and Hawking 2007). ASDA stores According to ASDA (2011), ASDA operates a variety of retail centers in the United Kingdom. These retail centers are ASDA supermarkets, ASDA Living stores, ASDA supercenters, and ASDA superstores. These stores order milk from ASDA warehouses depending on the quantity they require. ASDA Customers Finally, the customers buy milk from ASDA supermarkets, ASDA superstores, ASDA Living stores or ASDA stores.ASDA manages the supply chain by maintaining effective communication. It ensures that there is a good flow of information through the channel thus any potential challenges are quickly identified and corrected. For example, when the customer demand for milk increases, the retail centers passes the information from each distribution channel until the information gets to the supplier. To ensure the efficiency of the chain, ASDA also communicates with each channel partner and communication through the channel acts as an alternative to what the company already knows. The importance of the end customer The end customer is everything in the supply chain. If any company lacks customers, it has nobody to consume its products and thus cannot exist. In this case, ASDA’s end customers are its milk consumers. The end customer is not only important to ASDA but also essential to every partner of the supply chain. Despite the fact that ASDA interacts with the end milk customer directly, ASDA is a customer to every other supply chain partner. If ASDA fails to sell milk to the end customer, the supply chain collapses. In addition, so do the businesses attached to it. Considering this, ASDA ensures that the customer gets quality milk at fair prices than all its rivals. ASDA ensures excellent customer relationships and acts on feedback from its customers to ensure milk is delivered to their expectations. Comparison between ASDA and ALDI Both ALDI and ASDA specialize in selling a variety of products in supermarkets and other retail centers. Although both supermarkets sell their products in Britain ASDA has specialized in selling its products in Britain while ALDI is a multinational company. According to ALDI website, ALDI is composed of several companies operating independently and in different regions. Each company handles sits supply chain separately while just like ASDA. ASDA is a subsidiary of Wal-Mart and follows the Wal-Mart’s guidelines in operation management. ALDI has its subsidiaries, and it is not a subsidiary of any company when compared to ASDA.ALDI and ASDA are entirely different on how they manage their operations because they mode of working is very different. While ASDA manages all its activities, ALDI manages some of it branches while others manage the source of the activities for instance sourcing of milk. Some of its subsidiaries are in other countries thus they handle such activities individually. References ALDI (n.d). ALDI Website. Retrieved from https://www.aldi.co.uk/ ASDA . 2011 November, 29. ASDA Retail Stores. Retrieved from http://your.asda.com/our-stores ASDA SUPPLIER. (n.d). ASDA supplier website. Retrieved from http://www.asdasupplier.com/ BOURLAKIS, M. A., & WEIGHTMAN, P. W. H. (2003). Food supply chain management. Ames, IA, Blackwell Pub. http://www.myilibrary.com?id=131207. DAM JESPERSEN, B., & SKJØTT-LARSEN, T. 2005. Supply chain management: in theory and practice. Copenhagen, Business School Press. KAMAUFF, J. W. 2010. Manager's guide to operations management. New York, McGraw-Hill. ILBERY, B., &MAYE, D. 2005. Food supply chains and sustainability: evidence from specialist food producers in the Scottish/English borders. Land Use Policy, 22(4), 331-344. SELLITTO, C., BURGESS, S., & HAWKING, P. 2007. Information quality attributes associated with RFID-derived benefits in the retail supply chain. International Journal of Retail & Distribution Management, 35(1), 69-87. Read More