Supply Chain for Carrefour Company - Case Study Example

Introduction

This is a multinational French retailer with its headquarters in Boulogne Billancourt in france. It is one of the biggest hypermarkets in the world with over 1500 hypermarkets, and rated the third retail group in terms of profits in the world, and the fourth in the world in terms of revenue. The organization carries its business in Argentina, Europe, China, Taiwan, Brazil, Jordan, Iran, United Arab Emirates, but also has some shops in parts of North Africa and Asia. Formerly the company’s headquarters was in Levallois-Perret in suburbs of Paris. The company has been listed in Euro Stoxx 50 stock market index

The company’s history is dated back to 1960 when it opened its first store within Annecy near crossroad. The group was founded in 1968 by Marcel Fournier, Jacques Defforey and Denis Defforey, who were influenced by several seminars they attended in US led by Bernardo Trujillo, the Pope of retail. The company was the first to open a hypermarket and a departmental under same roof in Europe. The first hypermarket was opened in 15th June 1963 in Sainte-Geneviève-des-Bois. A private label Produits libres was launched in 1964 withfifty line of foodstuffs being sold at lower prices. Carrefour operates under retail industry with its products being cash and carry/warehouse store, discount store, supermarket hypermarket/supercenter and convenience/forecourt store

One of the objectives of the company is to minimize the waste. Since one third of the food being produced and consumed in the world is dumped every year, the company has taken as its main objective to introduce a massive change in the way waste is being handled. Its aim is to sell inglorious fruits veggies as a solution to waste management. Another objective of the company is to create an online system where customers can shop anywhere anytime, from the laptops, tablet or smartphone.

Carrefour’s supply chain process

The company obtains its finished goods from the manufacture and distributes through it various being cash and carry/warehouse store, discount store, supermarket hypermarket/supercenter and convenience/forecourt to the final consumer

The figure above shows the supply chain process of Carrefour Company.

The strategies used by the Carrefour Company as part of its SCM

The company’s strategy is aimed at achieving sustained, organic and profitable growth that surpasses the competition in the market. The company bases its strategy on three elements in retail strategy as follows

Target market- Carrefour, being a global retailer, has adopted geographical segmentation as its strategy. France is the company’s home market and is also its main priority. The company is taking the initiative of recapturing its leadership in French market with the aim of generating more profits. This can be achieved by developing a multi-format model, enhancing convergence and offering discounts. The company’s second targeted market is Spain, Belgium and Italy, which together with France make up the company’s “4G” countries. The company’s market growth in these market segments is based on several formats with aim of increasing customer base

Market Penetration is another growth strategies being adopted by the company. This strategy supports the growth of the business by attracting more customers in the company’s current market. To achieve this strategy, Carrefour ensures that it offers products for each and every market segment. This type of growth strategy supports the company’s generic strategy by allowing the company to maximize sales leading to profits irrespective of low selling prices.

Product Development is the company’s secondary growth strategy and supports the growth by attracting new customers to the new product. Carrefour uses this strategy through continuous innovation. For instance, through Carrefour franchising, this strategy empowers the company to attract those customers whose major concern is the brand. This type of growth strategy supports the company’s general strategy of differentiation by coming up with innovative products that have unique features.

Market development-Carrefour is already established globally. Therefore, market development just supports the growth strategy for the business. The company through this strategy aims at entering into new markets as it also tries to maintain the current market. This growth strategy supports the company’s cost leadership generic strategy by utilizing the Carrefour’s global market presence.

How the Carrefour Company is creating value for its customer through Quality, Cost, Flexibility, Delivery, and Innovation

In order to create value for its customers, Carrefour has practiced the following model so as to win tomorrow’s competitive battles

Carrefour is under continuous cost pressure. As a result, supply chain functions such as production, logistics and supply management are regarded as cost centers. Globalization has encouraged the company’s operations by increasing factor mobility and access to market, which offers an alternative sourcing which has low-cost advantages.

Quality-it is normally regarded as conformance to the specifications. To a customer, quality is more or less than meeting the expectations of the customer. There are eight factors that customers use to assess quality i.e. performance, features, reliability, durability, serviceability, conformance, aesthetics and perceived quality. For the decision makers in Carrefour Company, quality has been one of the critical factors than the cost

Costs- the company has also established a lean production in their value chain to assess the costs and continuous improvement. Both the company and supplier work together to take full advantage of efficiency.

Delivery- lean and just-in-time operations has been a very critical source of differentiation. Carrefour operates mainly on minimal inventory sometimes as low as 2-4 hours of supply. Delivery is more than just doing things fast and also encompasses doing those things consistently

Flexibility- currently, change is inevitable in the business world. The ability to respond to change i.e. responding to customer special request and adapting to unexpected happenings is a clear indication of competitive advantage. A good example of responsiveness practiced by Carrefour Company is opening up store in various parts of the towns i.e. in the city center and in the suburbs to meet the needs of various customers

Carrefour has built its supply chain responsiveness where all the suppliers are required to locate near the production facilities of the company for fast, flexible and delivery. With the factories of the company, logistics and information systems synchronize materials flow to incoming orders allowing custom assembly. In addition, the company has opened a pilot convenience store, i.e. Carrefour City within the city center and outskirts or in the middle of small towns. In a country like Taiwan, for instance, Carrefour has opened a 24 hour store that is convenient to various market segments. If the company doesn’t clearly anticipate the market needs, it can adopt to them very fast (Vasher, 2009).

Innovation- in order to avoid one-hit-wonder status, organizations must be consistently innovative. Carrefour first invented the hypermarkets in 1963 and owned its first brand in 1976. As a result of this, the company’s innovativeness is dated back to its roots. The company is entering into an era of tailor-made services that suit the customer needs by coming up with hyper stores aimed at improving the customer’s experience. Currently, customers can visit various stores and Carrefour has introduced new store ideas. For instance, in France, the company has opened a pilot convenience store, i.e. Carrefour City within the city center and outskirts or in the middle of small towns. In a country like Taiwan, for instance, Carrefour has opened a 24 hour store that is convenient to various market segments. The company is also adopting an online system where the customers can access the store anywhere, anytime through their laptop computers, tabs and iPads

Supplier selection process of Carrefour’s

Carrefour is constantly looking for new suppliers that can offer industry leadership on quality, cost and technology. Nonetheless, the company will only choose those suppliers that can establish long-term relationships with the company and that have the capability to thrive in such relationships.

Carrefour has invested time and effort for more than three years in exploring relationships with several suppliers before signing contract with the aim of building a solid relationship and addressing some critical issues before awarding any contract.

In order to manage long supplier process, Carrefour arranges a cross-functional team that consists of representative from various departments such as manufacturing, engineering, purchasing and management. Even though these people work together closely to qualify a new supplier, everyone has a different role to play. Purchasing representative identifies new suppliers and have the responsibility of assessing the cost competitiveness of the supplier together with their quality assurance processes and procedures. On the other hand, members from the engineering team asses the technological capabilities of the suppliers and their ability to be innovative. Members from the manufacturing team asses the production capabilities of the suppliers and their ability to implement the company’s production system.

Members from the management team evaluate the strength and the commitment of the suppliers in two sections: the understanding of the senior management of an involvement in operational details, and the company’s philosophical fit with Carrefour

How Carrefour measures its sourcing, operations and logistics processes on Assets, Productivity, Costs and customer satisfaction

One of the ways Carrefour Company ensures customer satisfaction is through its reliability and predictability. Through the company’s Logistics and Transport division, Carrefour ensures that there is continuous supply of its products to its customers at the right time. Customers have ranging demands from those who place small orders to those who buy big. The organization ensures that it has kept its promises to all her customers so as to ensure continued business with them because they manage to keep the trust of the client.

On the other hand, the company is also committed to inspiring lives and aims to be consumers preferred choice by ensuring that its products are freshly produced therefore promoting healthy living. To realize superior products, the company invests heavily in quality based deliveries. The company, due to its retail operations, can secure its supply chain and also carefully sources from third parties to ensure that a high level of quality is maintained at all times.

Core competency of Carrefour Company

Core competencies are skills that allow an organization to deliver a fundamental benefit to its customers. It is what it causes customers the customers to prefer one product to the other. In this case, the core competency of Carrefour Company is its ability to build a strong culture and highly motivated employees within the company. Carrefour does not only aim at becoming a global retailer but also being the best employer. It has created a culture where there is employee advancement and career development. Employees are motivated through provisions of trainings, inductions, scholarships to study in prestigious university as a way of improving the sales skills and customer service skills. Another core competency of Carrefour is its ability to master the food retailing. The company has been in the retail industry for a long time and has mastered all the skills on how to handle customers of various social classes. As a result of this, Carrefour has been able to build a strong brand name that has positive perception form the customers. In addition, Carrefour has a standardized store format within different geographical locations. It has similar format allover therefore it creates convenience for all the consumers irrespective of the location of the store. No other retail company has done well as it does in the market. This distinctive competence has allowed Carrefour to be very competitive in the market and has created a sustainable brand name

Practices that Carrefour Company is adopting to maintain relationships with its supply chain members

Carrefour Company has adopted various practices with various supply chain members so as to ensure the success of the automobile company. For instance, in order for the company to motivate its suppliers in the reduction of the inventory costs and improve the quality, Carrefour requires constant supply of deliveries into its stores and also ensures that suppliers carryout the stock needed to support this. If at all there is a defect and rework becomes necessary, the rework of the supplier is equated to the inventory, therefore the supplier becomes motivated to maintain inventory at a minimum level. Also the rewards are associated with the anticipated behavior

In addition, the company has also established a lean production in their value chain to assess the costs and continuous improvement. Both the company and supplier work together to take full advantage of efficiency. The main point is supplier cost together plus profit, rather than market price minus discount. Additionally cost saving are mutually shared and respected.

When it comes to relationship with its customers, its network comprises of five channels i.e. Carrefour, Auto, Toyopet, Corolla and Vista with each channel selling part of the company’s product range. The company has established an annual training program where it offers training to marketing courses. On the other hand, Carrefour assigns suppliers with a mandate of collecting customer feedback on how to improve quality and performance. At the end of it all, supply chain members, ranging from the company to the assembler to the sales person respect one another and works for the good of the company (Bidgoli, 2010).

Conclusion

As part of its strategic supply chain management, Carrefour differentiates itself from other competitors in the market in various ways. Carrefour, being a global retailer, has adopted geographical segmentation as its strategy. France is the company’s home market and is also its main priority. The company is taking the initiative of recapturing its leadership in French market with the aim of generating more profits. This can be achieved by developing a multi-format model, enhancing convergence and offering discounts. The company’s second targeted market is Spain, Belgium and Italy, which together with France make up the company’s “4G” countries. The company’s market growth in these market segments is based on several formats with aim of increasing customer base

Recommendations

So as to reduce the costs, Carrefour Company has to pursue the following strategies

Enhancement of productivity- promoting learning by minimizing work rules and encouraging training so as to empower employees

Automation- automating the activities or relocating some activities to low-cost locations

Global network design- outsourcing some inventories from supply partners so as to enhance complementary value creation

Effective cost reduction can start a commanding cycle of competitiveness. As Carrefour expands its global market, it has to create economies of scale and increase profitability.

The management should also continue to establish a lean production in their value chain so as to assess the costs and continuous improvement of the entire supply chain of the company

In order to fulfill the customer needs, the management should continue producing vehicles of different prices ranging from low priced Carrefour Corolla to highly priced luxury vehicles. By doing this, it will have met the needs of customers with different social clusters. The company should also work continuously and tireless towards the establishment of its distinctive competence.