Sainsbury's Maximizes Supply Chain Efficiency - "Horizon"
Multiple Award Winner with Eqos
Sainsbury's Supermarkets wanted to be more proactive in managing its supply chain and in helping suppliers resolve problems before they became issues to the business, and ultimately, customers. By working with Eqos, the supermarket chain has built a Web-based alerts and resolution system that enables Sainsbury's to ensure that it is on top of any issues that may arise, enhance working relationships and maximise supply chain efficiency.
The Background
Communication is the key to supply chain efficiency. Through the years retailers have tried many ways to achieve this and reduce overheads, maximise sales and enhance supplier, and in turn, customer relationships.
Customer Relationship Management (CRM) has for a long time been the retail buzzword. But retailers are increasingly realising that to boost consumer satisfaction, drive sales, and manage customer loyalty by having the right products available at the right time, they need to enhance relationships with suppliers. This is known in the industry as Supplier Relationship Management (SRM).
Sainsbury's Supermarkets has been aware of the need of SRM since its inception, and has been actively working on SRM initiatives since 1998. Sainsbury's Supermarkets, part of J Sainsbury plc, was established in 1869 and strives to fulfil its original mission to be the first choice for food shopping for consumers by providing value for money, excellent service and quality that customers have come to expect. The company employs roughly 145,000 people, has 535 stores and serves over 11 million customers each week.
Diane Carter, Supply Chain Operations Director at Sainsbury's Supermarkets, says: "We have made a range of performance data available to suppliers since 1998 to help us jointly manage our business. Availability of product to the customer is a vital Key Performance Indicator (KPI) for us, and we see our suppliers as important partners in delivering excellence in this field. We need an important means of enabling suppliers to become even more proactive and productive supporters without the need to spend even more time analysing our data."
The company had previously created Sainsbury's Information Direct (SID) to collaborate with suppliers more effectively. This system had two elements. The first was a Performance Data Site (PDS), which made sales and availability data accessible to suppliers. The second was called the Collaborative Planning System (CPS), which managed the lifecycles of promotions. This system was created in 1998 and improves stock availability by better managing promotions.
Promotion management previously involved many staff and business processes, and took many weeks of planning. CPS provides a consistent view of promotional information to all involved in advance of the promotion. It was built using a Web-based collaborative solution, called Platform, from Eqos. Promotional sales represent roughly 30 per cent of Sainsbury's overall sales, and the use of CPS proved very successful. Around 600 suppliers are connected to CPS. It delivers millions of pounds savings by improving sales and reducing costs like wastage. Sales of promotional lines have increased by up to 10 per cent since CPS went live.
Why Eqos?
But the company wanted to build on this and extend the same service to all products, not just those on promotion. So, together with partner Eqos and an in-house team, Sainsbury's started looking for a solution that would enable it to complement and build on existing systems. It also wanted to equip the supermarket and its suppliers with the necessary tools to be more proactive.
The Alerts and Resolution Management System (ARM), was created by Eqos in collaboration with Sainsbury's. Eqos built ARM on top of PDS using the Eqos Platform. The project started in early 2002 and a pilot was conducted that summer. The system is now live and has been rolled out to circa 300 suppliers and over 2000 users. ARM is based on Eqos modular Workbenches, which are integrated solutions that manage the performance and progress of all products, creating an intelligent, proactive system that flags up problems via email alerts. A team of four developers worked on the project and they created ARM in just eight weeks using the Rapid Application Development (RAD) features of the Eqos Platform.
Benefits
Red, Amber, Green
ARM integrates product performance data with exception reports and alerts, which then manages the problems by sending either informational or collaborative alerts to Sainsbury's and its suppliers by email. Informational alerts contact individuals who have requested to be informed when certain things happen such as when stocks of a particular product fall below a certain level, for example. Collaborative alerts send joint prompts that create a resolution management cycle so that recipients can work together to solve problems. Suppliers can also download performance data such as sales, stock levels and more. Mike Quinn, CEO of Eqos, says: "If availability, for example, falls below a certain level, the Sainsbury's buyer and the Supplier are informed why there's a problem and where it stems from. So if there's a problem Sainsbury's can work through that problem with the supplier with all parties having the same base information."
Wide Audience
Around 300 suppliers and over 2000 users are already connected to the system, which will eventually be rolled out to Sainsbury's 2,000-strong supplier base. This equates to more than 5,000 users. It does not cost suppliers anything to join the system, and Carter says that suppliers are crying out to come on board. "ARM is a further contribution by Sainsbury's to suppliers' understanding of our data and systems. An intelligent alerting system, tuned by well-informed suppliers who are experts in their field, permits even greater collaboration with far less effort," says Carter.
Easy to Use
ARM is incredibly easy to use. In fact, all users are concerned with are the emails that they receive on their desktops. The system can easily be updated by business analysts who understand the underpinning business processes without a need for technical knowledge. New users can easily be added to ARM, or existing user information changed or updated by an administrator using the Web. Administrators can also easily remove user access when an employee leaves a supplier or Sainsbury's. This is important in the retail and manufacturing industries as people move on frequently to work for competitors.
Availability
Having disgruntled customers because their chosen product is not in stock or having too much of another product is retailers' kryptonite. But ARM gives Sainsbury's the confidence, the tools and the processes to ensure such scenarios are a distant memory.
Reduced Costs ARM is already delivering strong business benefits and is expected to deliver a significant Return On Investment (ROI) within 12 months. Sainsbury's has reduced costs by building on top of its existing Eqos-based CPS system, rather than ripping and replacing, which would have been costly, resource intensive and disruptive to the business. Ensuring product availability and reducing wastage equate to strong bottom line benefits.
"Working closely with suppliers is a business imperative. We believe this new investment will help us work with them more effectively, irrespective of their size. It will also enable us to be more responsive to customer demand through jointly identifying problems earlier and proactively managing issues through to resolution," says Carter. "Eqos is a long standing partner that has developed a strategic relationship with our IT provider, Accenture. Eqos was able to build ARM for us quickly and inexpensively."
Increased Sales Through Innovation
Sainsbury's and its suppliers now work together more closely and are proactive rather than reactive. This means the company can better serve customer needs and retain existing customers as well as attracting new ones. This is a powerful competitive advantage.
Neville Roberts, partner at the Accenture retail industry practice, says: "The breakdown in processes between retailers and suppliers may lead to up to 20 per cent of products being unavailable at point-of-sale, while more than $1trillion is held worldwide in surplus stock. "Sainsbury's is one of the few companies that has not only recognised this situation but is among the first retailers worldwide to include supplier collaboration as part of an overall business strategy."
Armed with Information for the Future
Sainsbury's already had a strong relationship with Eqos, thanks to previous projects and the way in which Eqos has worked to get to grips with the complex and ever-changing nature of the supermarket's business. As ARM has illustrated, the two will continue to work together to evolve the platform further and maximise benefits for all parties. Quinn says: "As the collaborative supply chain becomes the new battleground for competitive advantage, Sainsbury's has a distinct lead. We are pleased to help the company keep innovating by providing the tools and solutions to support continuously improving customer service, profitability and supplier relationships."
