Sainsbury's Shop Talk - (A): Transforming the Supply Chain, (B): Supply Chain Performance Measurement

The UK retail industry has changed beyond recognition over the last 10 years. Sainsbury’s, for so long the leading retailer, has been forced out of the top spot by rival Tesco and has been unable to reestablish its dominant position. Can Sainsbury’s redress the situation by taking direct action in its supply chain? Associate Professor Regine Slagmulder and Daniel Corsten explore Sainsbury’s attempt to fight back.

by Régine Slagmulder, Daniel Corsten
Last Updated: 23 Jul 2013

In response to the loss of its market leader status in a highly competitive market, Sainsbury’s 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 Sainsbury’s and its best-in-class competitors. There was also a supply chain cost gap of £60 million. In late 2000, Sainsbury’s 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 retailer’s 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. Sainsbury’s 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 Sainsbury’s and perhaps in Europe.” But was improving supply chain processes the answer? Would success in this area really solve Sainsbury’s 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 Sainsbury’s 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. Sainsbury’s 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, Sainsbury’s (A): Transforming the Supply Chain, and Sainsbury’s (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 Sainsbury’s supply chain initiatives and performance measurement systems in a detailed look at a highly competitive industry.

INSEAD/University of St Gallen, 2003

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