Supply Chain Integration at Albertson's

Supply Chain Integration at Albertson's If you were the new CEO of the second largest supermarket chain, how could you use supply chain integration to be more efficient and profitable? Given the fact there are major unmet needs in supply chain integration at the warehouse, divisional or district, and store levels I would take a multi-phases approach to solving the many disconnects in Albertson's.

This paper lists the recommended strategies by level of organization beginning at the corporate level and working upward through divisions, to retail locations and finally to the customer. As one of the most critical aspects of supply chain integration across the entire Albertson's network of suppliers is item and price optimization, this will be a component of the supply chain planning process company-wide.

Having the right product, at the right price, and if perishable, Fresh Item Management (FIM) strategies in place, can increase average spent per store visit by customers, and also reduce operating costs by minimizing losses of perishable foods and lack of efficiencies in the supply chain overall according to Griswold, Suleski (3).

Recommendations at the Corporate Level What is first needed is an enterprise-wide supply chain planning and management platform that is agile enough to quickly respond to changing customer demands on the one hand, yet stable enough to gain cost and operating efficiencies on the other. For Albertson's this translates into the need to create a Demand Driven Supply Network (DDSN) that stresses tight integration with all suppliers, including support for the forecasting and replenishment processes that Albertson's needs supported to quickly respond to divisional and store requirements.

The underlying structure of the DDSN needs to also have pricing management and in the case of fast moving consumer goods (FMCG), support for automated replenishment and real-time inventory especially of FIM-based products. All of these specific applications and associated strategies need to be included in a DDSN framework that is highly collaborative, so each supplier that Albertson's buys from can participate.

Many of Albertson's competitors are moving beyond portals for electronically enabling these applications and creating Service Oriented Architecture (SOA) frameworks which provide for a suitable framework for managing the integration of suppliers, applications and internal processes within their companies. SOAs are clearly the future direction of collaborative supply chain integration and Albertson's needs to consider this foundational aspect of their it strategy as critical to supplier enablement and collaboration efforts.

What is also critical at the corporate level are a series of applications that can quickly gather, analyze and react to incoming sales data from stores. This is critical not only from the perspective of profitability, but also to ensure suppliers are as effectively managed as possible. In keeping with the corporate-wide direction of creating a DDSN-based company wide supplier strategy, analytics and metrics of performance are also essential for more effectively managing demand and reacting to it.

In conjunction with these corporate-wide analytics, there also needs to be pricing and inventory optimization applications. These two applications will serve to allocate the most profitable product in the divisions and ultimately retail locations that can command the highest price for them. Triangulating demand, supply and product requirements by region and ultimately by retail location is a major competitive advantage possible when Albertson's gets a DDSN framework in place first.

Also critical in these series of analytics applications are the development and refinement of brand-specific sales analysis to see if store-branded products are more price elastic than non-store brands, and also the tracking and use of Point of Sales (POS) data to see specifically the sales trending by division and retail location. All of these data elements in turn need to be included in a Master Data Management (MDM) repository so they can be used in the company-wide processes that need this level of data.

In summary, the need for a DDSN framework that includes the applications mentioned in addition to analytics that include both POS and supply chain performance data in an MDM repository is needed for Albertson's to execute more effective strategies throughout their supply chains according to Griswold, Sirkisoon (5). Recommendations at the Divisional Level Divisional warehouses, or as they are sometimes called, Distribution Centers (DC) act as the fulfillment centers for stores in their region and also receive and inspect products from suppliers.

DCs also manage the critical tasks of breaking down large shipments and allocating specific levels of inventory to each store. From a supply chain integration perspective, this is the most critical link in the entire chain between supplier and store. In the case of re-vamping Albertson's approach to DC supply chain integration the following tasks need to be completed.

First and foremost, there needs to be real-time item and lot coordination across all DCs so each can stock balance accordingly and also respond quickly to the needs of the specific stores they serve. Albertson's needs to consider a distributed order management application that provides for this level of real-time cross-DC visibility into their supply chain processes if they are to be more effective in fulfilling retail demand.

Second, Albertson's needs to look to suppliers and the suggested DDSN framework to create enough inventory visibility through forecasting on the front end, and Vendor Managed Inventory (VMI) approaches on the back end of fulfillment to DCs to ensure the highest level of efficiency possible. Third, the DCs must have space optimization plans by retail store in their inventory mix calculations to ensure that the DC does not prematurely run out of products being heavily promoted and featured in the store.

A major reason for this is that DCs need to act as the buffer between the retail location not running out of products and the suppliers who provide them. This tight level of coordination is critical, and accomplishable in the context of having a DDSN platform from which to work from. Fourth, DCs need to have real-time pricing and return information to gauge the value and turn levels of their inventory positions by product.

Finally, the DCs must have a highly focused approach to managing the pick, pack and ship functions through integration of their tracking systems with the company-wide analytics layer or.