Value chain transformation for a large mass merchandiser
Although known for its supply chain efficiencies in general merchandise and soft-line distribution, one of the largest mass merchandisers in the United States was struggling to meet its supply chain requirements for fresh produce.
The merchandiser wanted to improve in-stock and inventory turns, and reduce sourcing and logistics costs.
Challenge
A.T. Kearney was called in to evaluate the company’s produce supply chain and identify “step change” improvements in procurement, inventory management, and logistics.
The team was challenged because:
- The retailer operated under a co-managed supplier model, which created unique issues with its purchasing and sourcing processes, replenishment and forecasting practices, and buying organization
- Ambitious goals were already in place – to increase same store sales by 50 percent and reduce shrinkage by half in the next five years
Approach
The team’s approach included:
- Analyzing the farm-to-distribution-center supply chains for selected categories to identify alternative product-flow opportunities that would improve product quality and reduce cost
- Evaluating implications from supply chain findings across all categories in the Produce Division (for example, all fruit and vegetable categories)
- Prioritizing medium to long-term step-change opportunities and developing implementation roadmaps with required resources, dependencies, and timelines
- Detailing downstream supply chain implications
Results
The value chain transformation identified more than $200 million in savings through
- Increased produce freshness
- Reductions in sourcing costs throughout the supply chain
Additionally, the team prioritized four major initiatives:
- Get closer to the product – exploit supply chain knowledge
- Build capabilities and realign responsibilities
- Consolidate suppliers and create a pool of strategic suppliers
- Develop a leaner and more flexible produce supply chain
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