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Becoming Lean: One Retailer's Supply Chain Transformation
Holland's top food retailer overcomes an inefficient replenishment process and gains supply chain visibility with an event-driven pull process based on real-time POS data
"Lean" isn't just a buzzword in the supply chain world; it's a proven combination of philosophy, methods and tools that have quickly become a business necessity. Companies simply can no longer afford to invest in huge physical warehouses and carry massive amounts of stock in anticipation of customer demand. Neither can they wait days or weeks for data to be loaded into data warehouses in order to create demand forecasts that may be egregiously out of phase with customer activity by the time those analyses are produced.
Market forces are requiring businesses create ever-tighter connections between product delivery and customer needs and wants, and take the waste and latency out of the processes by which they fulfill those needs. They have to put the people, processes and technology in place to support this strategy. They must continuously pursue the goal of perfectly anticipating customer demand while juggling vagaries in the marketplace and environment as well as variance and inconsistency in the supply chain itself — and they have to continually get there faster.
Holland's top food retailer, Albert Heijn (AH), was experiencing the problems of an inefficient replenishment process firsthand. Lacking the visibility into its supply chain to effect replenishment driven by constantly changing customer demand and activity, the retailer was forced to rely on fixed replenishment schedules that were based on local demand forecasts because they lacked integrated supply chain visibility.
As a result, stores could be overstocked on some items while depleted on others, which negatively affected AH's commercial attractiveness to customers. Its brand reputation suffered as a result, and its market share was negatively influenced. Additionally, inefficiencies in both the fulfillment process and the technology platform that supported it created a drag on the company's bottom line. But in just 18 months, AH was able to turn its multibillion-dollar business around by creating an integrated logistics platform that automated the fulfillment process and empowered its staff with new visibility into its customers and supplier activity.
Industry Leader
AH is part of Royal Ahold, one of the world's leading food providers with more than 100 years in business. AH has 720 stores in the Netherlands, which vary from small convenience stores in railway stations to 20-aisle grocery stores. As the company grew into the 21st century, the store replenishment process that had served it well for much of its history began to show its limitations.
"We wanted to move toward greater responsiveness to customers," says Peter van Kralingen, AH's vice president of information management. "Instead of trying to predict what they will buy, we want to be responsive because today's customer is no longer predictable."
AH wanted to change its replenishment method from a batch process in which restocking decisions were made by each store and/or supplier-driven to a dynamic, event-driven "pull" process based on near real-time customer activity. AH had already implemented the process of centralized replenishment to a certain extent, with some level of integration between stores and head offices. However, the process was costly to maintain and the systems that supported replenishment were neither as integrated nor as reliable as AH needed.
Market forces are requiring businesses create ever-tighter connections between product delivery and customer needs and wants, and take the waste and latency out of the processes by which they fulfill those needs. They have to put the people, processes and technology in place to support this strategy. They must continuously pursue the goal of perfectly anticipating customer demand while juggling vagaries in the marketplace and environment as well as variance and inconsistency in the supply chain itself — and they have to continually get there faster.
Holland's top food retailer, Albert Heijn (AH), was experiencing the problems of an inefficient replenishment process firsthand. Lacking the visibility into its supply chain to effect replenishment driven by constantly changing customer demand and activity, the retailer was forced to rely on fixed replenishment schedules that were based on local demand forecasts because they lacked integrated supply chain visibility.
As a result, stores could be overstocked on some items while depleted on others, which negatively affected AH's commercial attractiveness to customers. Its brand reputation suffered as a result, and its market share was negatively influenced. Additionally, inefficiencies in both the fulfillment process and the technology platform that supported it created a drag on the company's bottom line. But in just 18 months, AH was able to turn its multibillion-dollar business around by creating an integrated logistics platform that automated the fulfillment process and empowered its staff with new visibility into its customers and supplier activity.
Industry Leader
AH is part of Royal Ahold, one of the world's leading food providers with more than 100 years in business. AH has 720 stores in the Netherlands, which vary from small convenience stores in railway stations to 20-aisle grocery stores. As the company grew into the 21st century, the store replenishment process that had served it well for much of its history began to show its limitations.
"We wanted to move toward greater responsiveness to customers," says Peter van Kralingen, AH's vice president of information management. "Instead of trying to predict what they will buy, we want to be responsive because today's customer is no longer predictable."
AH wanted to change its replenishment method from a batch process in which restocking decisions were made by each store and/or supplier-driven to a dynamic, event-driven "pull" process based on near real-time customer activity. AH had already implemented the process of centralized replenishment to a certain extent, with some level of integration between stores and head offices. However, the process was costly to maintain and the systems that supported replenishment were neither as integrated nor as reliable as AH needed.
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