Magazine article Management Today

Sainsbury's Star Act

Magazine article Management Today

Sainsbury's Star Act

Article excerpt

The logistics experts at Sainsbury use a lot of very sophisticated hi-tech equipment to ensure that goods zip down the supply chain from supplier to supermarket customer in double-quick time, but when it comes to describing the result they fall back on very low-tech metaphors. Bar-code scanning at the checkout has changed the whole supply-chain operation from a |push' system to a |pull' one, says Angus Clark, the Sainsbury director responsible for systems and distribution. Historically, requirements were forecast centrally, based on previous amounts issued to the branches, and the goods were then pushed down the supply chain towards the customer. Scanning, which allows Sainsbury to capture retail sales information the minute the customer buys commodity, has reversed the operation.

The supply chain has turned through 180 [degrees], says Clark. |The emphasis today is on pull rather than push. The customer activates the supply chain the minute he or she buys a particular product. Using scanning, you're able to identify what the customer is actually buying and from that you can orientate your whole supply chain to one that's catering for the real demand that the customer has.'

Clark and his colleague, director of corporate logistics Mike Powell, preside over one of the biggest retail-distribution systems in the country. Sainsbury's supply chain processes 17,000 commodities from more than 1,000 suppliers through 21 depots. Nearly 1,000 lorries are used to distribute 11 million cases of goods a week to 340 stores. The group's supermarkets provide more than 11% of the food consumed in the UK. The supply chain operates 24 hours a day, 364 days a year (it closes on Christmas day) and Clark claims that more than 90% of the products are delivered within 24 hours of a supermarket manager ordering them.

The fact that performance can be maintained day-in-day-out is largely due to information technology. Sainsbury was the first UK retailer to introduce computerised systems to support its distribution activities and the first to put bar-code scanning into all its supermarkets.

Every Sainsbury's supermarket has its own computer, linked to its checkout counters. The computer assembles and analyses information about the flow of products. Branch-based number crunching is the bedrock on which the whole logistics system rests.

The scanners not only tell checkout operators and customers how much individual goods cost, they tell the store's computer how many items have been sold. The computer tallies up the sales score for each item and matches it against stocks, so that by the end of the day the manager knows precisely what the demand for particular items has been and what is needed to replenish stocks. |Once you know the sales you can calculate the appropriate branch orders,' says Mike Powell, |and once you know the appropriate branch orders you can calculate back up to what has got to be ordered from the supplier.' Angus Clark describes it as a |star' structure: |We pull in all the information from the branches, through the network, and then it fans out back through the network to the appropriate distribution centres.'

The actual products reaching the supermarket do not come straight from the supplier but from one of Sainsbury's 21 regional depots. These hold what are in effect buffer stocks of most items. The organisation's IT network tells the appropriate depot which items the individual stores in its region need. It then tells the product manufacturer that the depot itself needs its stock replenished. The supplier, in fact, gets a bulk order broken down depot by depot. The network of 21 depots is organised by product type and, in general, an individual supplier will deliver to not more than seven or eight depots. Because the system is now so sophisticated the depots need to hold only very small stocks of any item, which, of course, cuts costs.

Although the systems that control the distribution network are Sainsbury's, a lot of the actual physical side of distribution is now contracted out to third parties - specialist companies such as Exel, Wincanton and Tibbett & Britten. …

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