In response to the loss of its market leader status in a highly competitive market, Sainsburys began to investigate the root cause of the malaise. In 2000, a benchmarking study revealed a significant age difference in systems and warehousing infrastructure between Sainsburys and its best-in-class competitors. There was also a supply chain cost gap of £60 million. In late 2000, Sainsburys top management, under pressure to boost growth and improve efficiency, decided to launch the 7 in 3 supply chain management program, an overhaul of the retailers physical infrastructure, systems, processes and skill sets.
The guiding principles of this transformation were to replace current depots with automated fulfillment factories, manage transportation in an integrated fashion, and revamp old and inflexible core supply chain systems. Sainsburys also redesigned its information systems to enable it to track performance in the retail supply chain and build collaborative relationships with suppliers. As one senior executive pointed out, It was the biggest and most important business transformation ever seen at Sainsburys and perhaps in Europe. But was improving supply chain processes the answer? Would success in this area really solve Sainsburys problems?
By 2003 the transformation was well under way, almost £100 million had been saved, and product availability in stores had improved by 1%. A survey showed that cultural style and behaviour in the supply chain was also becoming more positive. To Sainsburys the 7 in 3 strategy was about developing the culture in our supply chain to ensure that it can be a flexible, responsive operation that, through cooperation and teamwork, is devoted to offering the best possible customer service standards. Yet competitors such as Tesco and Asda were still moving forward more swiftly in the marketplace. Sainsburys had not taken back market leadership. Had it over-committed to automation in its supply chain? Were web-based information systems and global scorecards with suppliers the way to boost performance? Had it done enough, or too much?
These two cases, Sainsburys (A): Transforming the Supply Chain, and Sainsburys (B): Supply Chain Performance Measurement, by Regine Slagmulder, Associate Professor of Accounting and Control, and Daniel Corsten, Associate Professor of Supply Chain Management and Technology at the University of St Gallen, examine the development of Sainsburys supply chain initiatives and performance measurement systems in a detailed look at a highly competitive industry.
INSEAD/University of St Gallen, 2003