Analysis Of Sainsburys Supply Chain Management

Published Date: 02 Nov 2017

Sainsbury’s was established in 1869 by James Sainsbury and his wife and it holds 16.5% of the market share for UK’s supermarket, thereby placing it third in this sector. Its good performance has led to its listing in the London stock exchange and is in the FSTE 100 Share Index.

Sainsbury’s is a very operational based company and therefore analysing its supply chain with the help of a variety of strategic tools would be appropriate. Running such a wide supermarket chain requires proper design processes to ensure smooth flow throughout the supply chain. A business like Sainsbury’s therefore requires effective supply chain management to efficiently carry out its operations.

A supply chain in a wide sense refers to the activities, businesses or organizations that play a part in the presentation of certain goods or services to the consumer (Sinha 2009). Supply chain management on the other hand refers to the management of the activities, businesses or organizations involved in a supply chain to ensure that the consumer gets good value for money. Due to the need for efficient utilisation of its supply chain, Sainsbury’s has been able to put in place supply chain management methods based on certain aspects of its operations. Its supply chain management methods have been designed based on the aspects of Information Technology, procurement, logistics as well as storage or warehousing among others.

In this report, Sainsbury’s supermarket wing is analysed mainly using the Kraljic procurement matrix to identify operations involved in procurement, inbound logistics, outbound logistics, services and design. The type of inventory control systems employed by Sainsbury’s is also discussed. The analysis helps to provide an understanding of the reasons to which activities are designed and implemented and finally the inadequacies of these operations are identified and recommendations are made in conclusion.

Logistics and Inventory Systems

At Sainsbury’s, the nature of operations have been so diverse to the extent that each department has operations of its own. This has called for independence in areas such as procurement and also design. Analysing Sainsbury’s with the help of Kraljic procurement matrix it is evident that the procurement options are pivotal in helping to reduce cost while delivering and satisfying all areas of customer demands with a level of differentiation with respect to Porter’s generic strategy.

This supply method has been able to ensure that there is security of the supplies and a safe amount in the inventory without compromising on cost. Kraljic procurement matrix helps to make the procurement process at Sainsbury’s a strategic one. The first step is ensuring that there is a classification of the purchases which involves indexing the purchases on the basis of supply risk and profit impact of an item. This looks at factors in the issue of scarcity as well as supply quality. The second step is usually concerned with analysis of the market. It involves getting to know the company’s purchasing power together with the strength of the suppliers. The third step is usually the strategic positioning. This involves making sure that the high profit impact item is purchased while simultaneously mitigating the high risk of inventory supply shortage/excess. It requires the consideration of the purchasing power of both Sainsbury’s and the suppliers. Finally, this procurement model requires the fourth step which is usually concerned with action plans. This step requires that strategies which factor in the purchasing power as well as strategic positioning are applied in determining the best mix of items to purchase for Sainsbury’s operations. The various facets of Kraljic matrix including supply continuity, effective cooperation, successful leveraging of supply deals based on increasing buyer power and efficient utilisation of resources are critical in analysing Sainsbury’s operations and will be employed throughout this report.

To manage the Sainsbury's supply chain properly, logistics has to be properly planned. There have been very efficient contracts with players in the logistics sector in the supply chain, one of them being with iForce. The contract with this organization involves all the orders done online plus returns of all non-food items. This has been very successful especially during the Christmas periods with one successful aspect of the contract being a click and collect service. Sainsbury’s success in effective logistics management throughout the supply chain has been achieved through a proper rail linking its warehouse to flight terminals. The logistics of Sainsbury's has been made better by the setting up of convenient depots. Warehousing is another critical part of Sainsbury's supply chain. So that it may operate with efficiency and stamp authority in the supply chain, Sainsbury's has to create sufficiently large warehouses and depots for its products.

The issue of stock has been a major component of supply chain management methods. It is always important to know the location as well as amount of inventory of an organization within the supply chain. This ensures that the company's products do not reach unfavourable levels within the supply chain. It is important to ensure that the best supply chain management methods are put in place since an efficient supply chain boosts firm value by increasing sales of an organization’s goods and services.

Even though information about Sainsbury’s inventory control systems are not completely made public, it is evident that Sainsbury’s uses a complex system of Enterprise Resource Planning. ERP systems integrate transaction oriented data and business processes throughout an organization (Clegg et.al 2011). These software based systems employ a push, dependant demand system. This ensures that there is proper supply continuity and a bottle neck situation is avoided. The need for compilation of accurate data makes it a challenge for IT administrators and recent news have been evidence of mishaps caused due to errors used in data. The main challenge faced by managers here is their own tendency to revert to their original knowledge of plain MRP (Manufacturing Resource Planning) and employ these techniques based on the ERP system, thereby making significant errors in general data.

A significant move by Sainsbury’s to automate warehouse systems through a Global Data Synchronising (GDS) system (Meczes, 2011) has somewhat mitigated these switching problems faced by managers and has been instrumental in bringing the company back on a successful track by avoided man-made ERP errors. The agents of supply chain management at Sainsbury's have been active in ensuring that automation creates the desired results. To ensure that Sainsbury’s has a competitive advantage in the supply chain, there has been continuous utilization of information technology.

It is also important to ensure that the management seeks the services of experts in efficient operations with emphasis on procurement and supply chain management (Erridge et.al. 2001). According to Sinha (2009), it is also advisable that all companies do a continuous improvement of their respective procurement methods and systems. The people responsible for the management of the systems and processes involved are to be well trained and developed to ensure that they perform as per expectations. This will lead into a discovery and application of the best supply chain management method capable of producing optimal results for the company.

The most important information concerning estimates, forecasts, demand details, stock as well as logistics among others is shared at the right time. The supply chain management at Sainsbury’s has also been striving to ensure that the problem of cash flow is addressed. The cash flow problem at the Sainsbury’s supply chain has to be addressed to create space for making payments.

As a policy in the company's supply chain management, new technology has been well utilized to ensure that the best of it is utilized. This is evident in the aggressive use of the best point of sale systems, e-commerce and logistics operations. A wide range of innovative systems are implemented in areas such as trade, human resource, finance as well as procurement among others.  This has been supported by the application of the latest hardware as well as software by Sainsbury’s IT department.

Conclusion

The capability to efficiently handle information as it arrives and to effectively integrate it into the ERP systems has been the backbone of Sainsbury’s activities in Sainsbury’s supply chain management systems. The ability of the supply chain managers to synchronize all the processes as well as business in the supply chain so as to share commonly related information has been one of the company’s strong points. The Sainsbury’s supply chain management teams have been able to ensure that competitors do not encroach into their market share through competently utilising efficient Customer Relationship Management (CRM) which explains their good position in the sector's performance ranking. Distribution network and supply channel problems can be mitigated by developing better partnerships with various providers in the supply chain and from competently utilising their web platform. In conclusion it is mandatory that Sainsbury’s further enhances its brand image through effectively using technology to regulate its vast capabilities and resources to provide highly differentiated products and services to the customer at good prices and therefore maintain its customer-centric approach.