Supply Chain Management in Sainsbury

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Table of Contents

Overview of the Sainsbury and its operations
The Procurement Strategy
Management of Supplier Relationship
Management of supplier development
The view from the suppliers
References

Overview of the Sainsbury and its operations

Sainsbury Ltd, which is alternatively referred to as Sainsbury, is one of the largest chains of supermarkets located in the UK (Gilpin 1994, p.9). It has a share of 16.5% for all the UK’s supermarket industry market share (Finch 2007, p.11).

Established by John James Sainsbury and his spouse, the company opened its first outlet in 1889 and developed immensely over the Victorian period. By 1922, Sainsbury was the leading UK grocery merchant. In the 1980s, the company became the first one to offer retailing self-service.

However, the company experienced an immense competition when Tesco (holds 31.5% of the total market share) overtook it to become the market leader in self-retailing service.

In 2003, the company faced yet another blow when Asda (holds 16.7% of the market share) took the second position in terms of size thus leaving J Sainsbury to assume the third position in the UK’s supermarket industry.

The company holds this position even now. Sainsbury employs an excess of 15,000 people within its more than 1000 outlets within the UK.

By May 2011, Lord Sainsbury of Turville was the “largest family shareholder with 4.99% while Judith Portrait, the trustee of various Sainsbury settlements and charitable trusts, held 3.92%” (Sainsbury 2011, Para.14).

Qatar savings power is the single leading general owner of the business since it assumes 25.999% of all the organisation’s shares. Sainsbury also offers financial service through a joint venture with Lloyds banking group. It also provides online purchase and delivery services.

The supply chains of the company operate within 13 regional centres of distribution. Two national supply chains for foods are frozen while two other national supply chains are meant for goods that move slowly (Sainsbury 2011, Para.4). All depots have depot codes, which identify them uniquely.

The Procurement Strategy

The today’s functions of procurement operate under tight demands because most organizations’ effort to come out of the recession costs control is an incredible strategy for success (Simchi, Kaminsky & Levi 2000, 111).

For this reason, Sainsbury has invested on a procurement strategy focusing on reducing costs that are associated with procurement such as administrative costs, improvement of the buying efficiency, and ensuring reduction of maverick buying while still ensuring a constant increase in the value of the shareholders.

Through the guide of these principles, the supply chain personnel of the company are obliged to work responsibly in the effort to ensure that goods and services offered to over 17 million customers who visit the Sainsbury supermarkets weekly are offered at the lowest prices in comparison to the competitors.

In fact, Sainsbury has been pursuing the low-cost selling strategy aggressively. The company’s policy demands that procurement personnel should support this strategy while the store development staff looks for alternative strategies for attracting and retaining customers.

The company maintains that procurement cannot deliver low buying costs if it does not operate efficiently. For this reason, in 2010, the CEO of the company, Justin King, went ahead to invest about 40 million Euros in the provision of IT resources to farmers.

These resources would facilitate efficiency in the supply chain through improvement of the buying infrastructure.

Through the cost-saving strategies for enhancing the efficiency and the effectiveness of the supply chain, Sainsbury believes that it can create an opportunity for streamlining the operations of the organisation.

According to Sainsbury (2011), this strategy in turn aids in improvement of “the customer shopping experience besides making things simpler for colleagues while also making significant cost savings” (Para.5).

As a way of minimising costs of supplies, which must be extended to customers through higher prices of goods and services, the organisation embarked on measures of reducing the amount of paper work. A good example of this attempt is the provision of self-scan checkouts across about 700 stores.

Furthermore, Sainsbury (2011) informs that the organisation has “reduced the amount of paper used for store receipts by two fifths, which is equivalent to over 350 tonnes annually, by using double-sided printing” (Para. 5).

Over the last three years, the company has also managed to save the amount of energy consumed in every store by about 16 percent.

The saved energy can power 90 stores. By capitalising on mechanisms of reducing the direct costs associated with supplies, it implies the organisation is able to distribute its products at much lower costs in comparison to its competitors.

Hence, the overall chain supply strategy for Sainsbury is driven by the principle of competitive advantage.

Management of Supplier Relationship

Suppliers form one of the crucial stakeholders of the Sainsbury. They supply both food and non-food products, which are sold at a profit in the Sainsbury outlets. Consequently, for maintained growth of business of the organisation, Sainsbury must ensure that it maintains positive relations with the large pool of suppliers.

In this endeavour, the organisation has strategically focused on suppliers’ engagements at all levels of procurement.

Consistent with such a move, Jacoby (2009) argues that, to maintain good relationships with suppliers, an organisation needs to “work with suppliers to improve sustainability performance through the supply chain and stimulate innovation” (p.36).

In this line of thought, Sainsbury has put in place parameters for ensuring that sustainability is measured as an integral element of the key suppliers coupled with other suppliers’ category management processes. Sustainability in supplies is critical to the organisation.

In 2010, as a way of building positive suppliers’ relationships, Sainsbury offered to give cash bonuses to farmers who adopted good practices of agriculture meaning sustainable and eco-friendly techniques of farming.

By doing this effort, the company lest assured that it would not encounter challenges in the supplies to its stores for agricultural products in the near future.

The concern above calls for incorporation of the means and processes of assessment of operational risks associated with poor maintenance of suppliers relationships (Shreekant & Amol 2012).

In this regard, Sainsbury has developed and initiated programs, which are structured to recognise the direct and indirect contributions of suppliers in sustainable growth and development of the organisation.

Where the organisation’s policies are found to impair the identified contributions, a consideration is made to review the policies in order to build strong suppliers confidence.

Such policies are also made in such a way that, in their heart, there rests mechanisms of driving efficiency, supplier risk management, innovation, and increased opportunities.

By maintaining positive customer relations, confidence is built in the suppliers of the Sainsbury such that they perceive doing business with the company as less risky. Consequently, the company is able to take advantage of economies of scale.

This case happens because a single supplier will be willing to supply large quantities of products and services. In this sense, the company is able to meet its procurement strategy of buying cheaply in order to sell at the lowest prices.

Sainsbury believes that maintaining good suppliers’ relationships implies conducting the sourcing activity with integrity. Indeed, integrity is crucial in the sourcing since it enables an organisation to offer great products at the most fair prices to consumers.

In the context of Sainsbury, sourcing with integrity means that the organisation works with all suppliers in the endeavour to ensure that sustainable supply chains are built by taking into perspectives environmental, economic, and even social impacts of the sourcing activities on suppliers.

In this regard, Sainsbury asserts that its supplier relationship management strategies aim at bringing value to “the communities we source our products from, as well as promoting high standards of animal welfare and responsible sourcing” (Sainsbury 2011, Para.4).

This measure is consistent with the organisation’s goal of becoming the world leader in sales of foods, which are certified and derived from sustainable resources.

Management of supplier development

No single approach can be cited as impeccable for enhancing supplier development. Rather, “purchasing and supply management professionals must select the most appropriate approach to suit their relationship with the supplier that they have selected for development” (Marko, Johnson & Choi 2013, p.9).

Different supply development approaches suit different markets and different industries. Irrespective of the type of supplier development approach deployed, the concept refers to “embracing supplier expertise and aligning it to the buying organisation’s business need” (Krause & Ellram 1997, p.21).

In the case of Sainsbury, the supplier development strategy is organised around the development of the business of the suppliers’ such as aiding them to evaluate coupled with redesigning of the suppliers’ corporate strategy.

Suppliers’ development is central to the future anticipated success of the Sainsbury. It is aimed at helping an organisation to reduce costs, enhance the performance of the supplies, resolving quality issues, and in the sourcing of new supply routes (Chopra & Meindel 2002: Gokhan & Needy 2010 ).

Although the organisation endeavours to build strong positive supplier relationships to ensure its stores do not fall short of both fresh and quality supplies, challenges are also encountered. The organisation sources supply from across the UK and in some instances in other places across the world.

In the long-term, although building positive customer relationships ensures that the organisation has plenty of supplies, the growing population across the world means that land is exposed to immense pressure. Consequently, the cost of supplies is likely to increase in the long-term.

However, by working with suppliers to build relationships with them via initiatives such as development groups, the organisation hopes to address such challenges. The anticipation is to make the company more efficient in managing environmental, social, and ethical issues, which may affect suppliers negatively.

Development groups are critical in helping Sainsbury to build good relations with suppliers in the chief supply chains of the agricultural products.

The company shares the outstanding practices with this group of suppliers by providing training on various new techniques of farming alongside aiding in the introduction of technology to boost production whenever appropriate.

In fact, Sainsbury committed more than 30 million Euros in enhancing these relationships in 2006.

This move was strategic in the development of suppliers since it can “lead to improvements in the total added value from the suppliers in question in terms of product or service offering, business processes, and performance” (Marko, Johnson & Choi 2013, p.10).

By 2011, the Sainsbury had more than 2000 farmers coupled with growers engaged in the suppliers’ development program through the suppliers’ development groups.

The development groups ensure much of the products sold via the organisations labels originate from various supply chains, which are principally dedicated to the organisation, are ethical, environmentally sustainable, and fit well with the future aims and objectives of Sainsbury.

The view from the suppliers

Any effective supply chain management strategy needs to win the confidence of the suppliers. Despite the values of suppliers’ development programs on the suppliers, “some suppliers may be resistant to being developed” (Krause & Ellram 1997, p.21).

Sainsbury encountered such a situation when it initially introduced the development program aimed at empowering its farm products producers. Faced with this challenge, the company embarked on deployment of the interpersonal skills of its supplies relations personnel to counter the reaction.

This move made suppliers immensely influenced so that they started seeing the positive aspect of not only the strategies of building supplies relationships but also the benefits accruing from engaging in the development groups.

Sainsbury efforts to build positive relationships with the organisation’s suppliers have been received well over the last two years. Through the efforts, Sainsbury’s suppliers have responded by availing more fresh products to the supply collection centres.

This strategy has culminated into success of the ‘great good initiatives’ and ‘tastes the difference’ campaigns for selling products tagged y the organisation as being offered in the fresh counters.

The fact that Sainsbury has managed to maintain a constant and adequate flow of fresh green products at low prices across its counters means that suppliers have welcomed its farming supplies development program. It is adding value to businesses of the suppliers.

References

Chopra, S & Meindel, P 2002, Supply Chain Management: Strategy, Planning, and Operation, Prentice Hall, New Jersey.

Finch, J 2007, ‘Sainsbury targeted for Europe’s biggest private equity buyout’, The Guardian, 3 Feb., p.11.

Gilpin, K 1994, ‘Sainsbury buys stake in the giant food’, The New York Times, 6 Oct., pp. 9-10.

Gokhan, R & Needy, N 2010, ‘Development of a Simultaneous Design for Supply Chain Process for the Optimization of the Product Design and Supply Chain Configuration Problem’, Engineering Management Journal, vol. 22 no.4, pp. 20–30.

Jacoby, D 2009, Guide to Supply Chain Management: How Getting it Right Boosts Corporate Performance, Bloomberg Press, London.

Krause, D & Ellram, L 1997, ‘Critical elements of supplier development – The buying-firm perspective’, European Journal of Purchasing and Supplies’, vol. 3 no.1, pp. 21-31.

Marko, B, Johnson, M, & Choi, T 2013, ‘Who’s Seeking Whom? Coalition Behaviour of a Weaker Player in Buyer–Supplier Relationships’, Journal Of Supply Chain Management, vol. 49 no. 1, pp. 8-28.

Sainsbury, J 2011, Annual report and financial statements 2011. Web.

Shreekant, W & Amol, P 2012, Supply Chain Analytics with SAP Netweaver Business Warehouse, McGraw-Hill Education, New York.

Simchi, D, Kaminsky, P, & Levi, E 2000, Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, McGraw-Hill, Irwin.

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