Case On Out Supply-Chaining The King of Supply Chainers PDF
Case On Out Supply-Chaining The King of Supply Chainers PDF
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It’s no secret that Walmart is the largest retailer (indeed, names—as one of the most important factors in the com-
the second-largest corporation) on the planet, with total pany’s marketing success. U.S. retailers, on the other
revenues in 2012 of $469 billion. It’s more than six times hand, have never been quite able to convince consumers
bigger than the number-two retailer in the United States, that private-label products are as good as their brand-
Home Depot (2012 revenue: $75 billion), and it’s bigger name counterparts. Walmart, for example, struggles to get
than Europe’s three largest retailers—France’s Carrefour, 35 percent of its sales from private-label goods. In many
Britain’s Tesco, and Germany’s Metro AG—combined. It countries, however, Tesco gets as much as 60 percent of its
is, according to the business-information service Hoover’s, revenue from private-label products.
“an irresistible (or at least unavoidable) retail force that has The difference? Tesco, explains New York retail con-
yet to meet any immovable objects.” One key to Walmart’s sultant Burt P. Flickinger III, knows which products to
success has been astute supply chain management. For develop, how to price them, and how to integrate them
example, Walmart was among the first to use point-of-sale into the product lines of its various stores. “[Our] range of
scanners to track product sales and reorder quickly to meet high-quality own-label products,” says CEO Terry Leahy,
shifting consumer buying patterns. And Walmart has also “… is an integral part of our offer in every market in which
been ruthless at forcing its suppliers to continuously lower we operate.” Tesco offers about 12,000 private-label and
their own costs. specialty brands at every price point. Some high-range
But some experts have recently noted that Walmart products, such as Tesco Finest Chocolates, even sell at
is actually getting beaten at its own game by one of its 50-percent premiums to established brands like Cadbury,
European rivals, Tesco. Food-retail analyst Kevin Coupe and all of them sell at significantly higher margins than
points out that “there isn’t a place in the world where Tesco national brands.
has gone one-on-one with Walmart and Tesco hasn’t won.” According to Flickinger, “Tesco is arguably the finest
In Britain, for example, U.K.-owned Tesco, the world’s food retailer in the world,” and he suggests that, armed with
third-largest retailer, commands a 34-percent market share— a unique set of competencies, the British grocer may well
double that of Walmart-owned Asda. be “Walmart’s worst nightmare.” But, like every business,
Tesco’s 4,000 stores in 13 countries utilize five basic Tesco isn’t perfect. In 2007, it rolled out a new chain of
formats, customized to match the needs of the local mar- food stores, called Fresh & Easy, in California, Arizona,
ket. Its ability to manage stores in multiple formats as and Nevada. Unfortunately its timing and location choice
well as multiple markets is one of the company’s greatest couldn’t have been worse. Tesco acquired its properties
strengths. The key to this core competence is technol- at the height of the U.S. property boom of the mid-2000s.
ogy—or more precisely, data management, which is criti- Unfortunately, California, Arizona, and Nevada were among
cal in any effort to optimize inventory selection, size, and the worst-hit areas when the bubble in the U.S. housing
distribution. Tesco, reports retail-industry analyst Scott market burst, dooming Fresh & Easy’s viability. Tesco is
Langdoc, “is ruthless in supply-chain management.” In now in the process of winding down the chain’s operations.
the United Kingdom, for instance, a wireless network con- Despite this setback, Walmart knows it cannot rest easy, for
necting all Tesco stores facilitates real-time management the U.S. market is too big for a skillful and aggressive rival
of distribution and transportation. Workers use handheld like Tesco to ignore.
PDAs for data entry and reporting, and radio frequency
identification (RFID) tags allow them to conduct crates Case Questions
and pallets to stores carrying anywhere from 3,500 to
60,000 different products in markets located anywhere 17-14. What is the basis of Tesco’s success?
from Sussex to Seoul. 17-15. How easy (or hard) would it be for rivals like
Tesco is good not only at applying data management Walmart or Carrefour to adopt Tesco’s data
to supply chain management, but it has also developed management techniques?
considerable skill in applying data management to the 17-16. The global recession slowed down Tesco’s plans
analysis of consumer preferences in different markets. for expansion. Why might Tesco have been more
Tesco relies on a data-mining firm called Dunnhumby harmed by the recession than Walmart?
(of which it has majority control) to manage everything Sources: “Fresh & Easy files for bankruptcy protection,” Los Angeles Times,
from targeting sales promotions to designing store formats September 30, 2013; “Walmart, Inc.,” Hoover’s website, www.hoovers
and, perhaps most importantly, developing private-label .com, accessed on May 16, 2013; “British grocery chain hits America with
products. Along with its ability to manage multiple store fresh ideas,” USA Today, April 11, 2010, pp. B1, B2; “Tesco: ‘Walmart’s
worst nightmare,’” Businessweek, December 29, 2009; “Walmart, Kroger,
formats, many analysts regard Tesco’s ability to provide Safeway better watch out: The British are coming!” CNNMoney.com,
a better and broader range of private brands—products accessed on June 5, 2011; “Sir Terry Leahy: Pilot of world-class enter-
manufactured for retailers who sell them under their own prise,” Private Label Magazine, March/April 2010.