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Supply Chain Integration and Supermarkets

Abstract: It didn't take long for Lawrence R. Johnston, then the chief executive of GE Appliances, to realize that Albertsons, the nation's second-largest grocery chain, was the opportunity he had been waiting for. The folksy, family-owned grocery chain that Joe Albertson started in Boise, Idaho, in 1939 had become a $35 billion dysfunctional mess. The company had botched the integration of its 1999 merger with American Stores Co. Johnston came to Albertsons in April, 2001, with an idea or 2 about how to tackle the company's problems. First, was to make it operate more efficiently. Johnston is cutting about $1 billion in costs while spending another billion to upgrade technology - from the supply and distribution system to self-checkout stands. He closed 500 unprofitable stores. And he has introduced a new managerial and financial discipline, including Six Sigma, to the 230,000 employees.

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?

Solution Preview

Supply chain management is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption (Wikipedia, 2006). This concept has become increasingly popular and those organizations who are recognizing the importance of effective supply chain management are gaining significant competitive advantage over their competitors because of way they are configuring and managing their supply chain.

It has got following three components:

(1) Demand Fulfillment?The objective of the demand fulfillment process is to provide fast, accurate, and reliable delivery-date responses to customer orders. Demand Fulfillment is mainly an execution-level sub-process that includes order capturing, customer verification, order promising, backlogs management, and order fulfillment.

(2) Demand Planning?The objective of the demand planning process is to understand customers' buying patterns and develop aggregate, collaborative forecasts. Demand planning is by definition a planning process, which feeds into the supply planning process, and subsequently the demand fulfillment process. Demand planning involve long-term, intermediate-term and short-term time horizons.

(3) Supply Planning?The objective of the Supply Planning process is to optimally position enterprise resources to meet demand. This is a planning-level sub-process that spans the strategic and tactical supply-planning processes. Long-term planning, inventory planning, distribution planning, collaborative procurement, transportation planning and supply allocation are all part of this sub-process.

One of the single biggest challenges for Albertson is to manage the supply chain across multiple facilities into a unified system to improve the operational efficiency and effectiveness. Thus we give following suggestions:
I Extranet to minimize the inventory maintainence costs and to improve the connectivity
Extranet connecting all stores as a ...

Solution Summary

This solution discusses how supply chain integration could be used to be efficient and profitable in a supermarket chain.