University Module: Supply Chain Challenge Analysis for Sainsbury's

This report provides a comprehensive analysis of Sainsbury's supply chain challenges, focusing on issues such as increasing costs, difficulties in meeting store and customer demands, and pressures from suppliers. The report begins with an introduction and background, providing context on Sainsbury's products, services, business model, key capabilities, strategy, and goals. The core of the analysis examines the specific supply chain problems, including the financial burden of the supply chain, the inability to fully meet store network demands, and the impact of supplier pressures due to currency fluctuations. The analysis is supported by academic literature and concludes with recommendations for addressing these challenges. The report highlights the importance of supply chain management in retail and offers insights into strategies for improving efficiency and sustainability in the face of operational and economic pressures.

Assignment A2- An analysis of The Supply Challenge

Table of Contents
Introduction......................................................................................................................................1
Background......................................................................................................................................1
Description, analysis and discussion of the supply challenge related issue....................................4
Conclusions......................................................................................................................................7
Recommendations............................................................................................................................7
References........................................................................................................................................9

Introduction
The Supply Chain Management (SCM) is the management of the flow of goods and
services which involves the storage of raw materials to achieve the competitive advantages
(Kraljic, 1983). In the context, the current report is based on the analysis of the supply challenge
and for this purpose, a retail organization Sainsbury has been selected to analyze the entire
supply chain. Furthermore, the issues related to the supply challenge has been critically
discussed and analyzed. At the end, suitable recommendations have also been provided to deal
with the supply chain issues.
Background
 Identification of the supply challenge- the existing supply chain of Sainsbury is no
longer able to deal with the demands of the store networks as well as increasing needs of
the customers by direct sales or consumer deliveries (Manhattan Associates, 2017).
Moreover, the unfulfillment of the demands of stores enhancing the overall cost for the
company because of the lack of functionalities increasing the cost of the entire supply
process. On the other hand, Sainsbury is using the batch system for the logistics which
shares the information after delivery that is not appropriate for the organizations because
it is too late to fix the problems that may have occurred at any point in the supply chain
(Ruddick, 2013). In this context, Wang, Li, Wang and Du (2015) argued that batch
system is suitable for the large organizations because it helps to reduce the overall cost of
the logistics in the supply chain by transporting the material in one batch. However,
Sainsbury supply chain was unable to take the full advantage of different available
opportunities and least realization of full distribution channels.
 Brief description of Sainsbury, products, services and locations- Sainsbury is the third
largest retail organization which is a chain of supermarkets and found by John James
Sainsbury. The company is located in London, UK and operating the business since 1869
and the organization become the largest retailer of groceries in 1922. Sainsbury was
serving the industry across the UK and generated the revenue of around £28.456 billion
in 2018. The company a large number of employees around 1,86,900 in the year of 2018
(Sainsbury Plc, 2019). Moreover, Sainsbury has excellent products and services which
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includes groceries, food products, Sainsbury bank, energy, property development and real
estate, Argos, Nectar etc.
 Furthermore, Sainsbury is the largest food retailer with 600 supermarkets, 800 physical
stores, received around 2,50,000 online orders per week which are contributing to the
economy of the company as well as a country (Sainsbury Plc, 2019). Moreover,
Sainsbury has around 15,000 own brand products which help to influence the customers
on broad basis. Apart from this, the company is emphasizing on the offering of smart
deals to attract the customers in the furniture, home accessories, kid products etc.
 Business model, key capabilities, strategy and goals
Business model- Sainsbury uses the direct sales business model for the operation of the
business activities because of the organization directly sales the products to distributors
and maintains the quality relations with customers by timely delivery in the market
(Sainsbury Plc, 2019). Here, in business model, Sainsbury focuses on the value
generation by offering the quality products which further helps to create loyalty in the
final consumers. On the other hand, Sainsbury emphasizes on the production as per the
customer segments such as innovative energy products, fresh food products by keeping in
mind health of customers, grocery items etc. (Sainsbury Plc, 2019). Apart from this, the
business model of Sainsbury is associated with cost leadership strategy to earn higher
profits and for this purpose, the firm uses the skilled and quality resources which helps to
produce the products with least waste and expenses.
Key capabilities- Capabilities relates to the availability of adequate resources, capacities
to work and fulfilment of the future expectations from the current availabilities. In this
context, based on SWOT analysis key capabilities of Sainsbury has been identified as
follows-
o The experienced leadership team and unique resources- Sainsbury has a
strong leadership team which guides the employees to work more efficiently so
that excessive training cost might be reduced for the firm. On the other hand, the
company possess unique resources which support to deliver the products on time
in the market.
o Excellent branding and advertising- Sainsbury itself a long-lasting brand which
is operating the business from a long time. Here, the organization uses the
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effective advertising strategy throughout the UK like printed ads, online
campaigns which create a unique identity among the competitors.
o Quality products with low cost and loyalty of customers- The major strength
of Sainsbury is the delivery of quality products with low cost which influences the
attractiveness of the customers towards the brand. Furthermore, the characteristics
of quality products developing loyalty among the consumers of Sainsbury because
they are getting branded products at low cost.
Business strategy- Sainsbury has a tag line to helps our customers live well for less and
accordingly the company shapes the business strategy to deliver the value to the
customers and stakeholders. In this context, the organization is keener towards the
customer's preferences and accordingly offering the products and services in the
competitive market. Here, Sainsbury is focusing on the making of difference from the
competitors and providing the products and services at relevant fair prices to grab the
entire consumer market of UK (Sainsbury Plc, 2019). In this context, Sainsbury is using
the cost leadership pricing to lead among the competitors by putting the low cost on the
products and services. Furthermore, low pricing is appropriate for the organizations to
stay in the competitive environment. However, Datta (2010) argued that to operate the
business with low pricing on a long-time basis is not profitable for the companies because
it leads to a reduction in revenue generation for the company. Owing to this, Sainsbury
got quick popularity in the market by offering quality products at low cost (Sainsbury
Plc, 2019). Here, the company enhances its profits by reducing the costs by keeping in
mind the industry average prices. The cost leadership strategy helps Sainsbury to improve
market share by charging lower prices with reasonable profits. In this manner, Sainsbury
is emphasizing on the sustainable business strategy by providing low-cost products than
the competitors like Tesco, Walmart, Debenhams, Asda etc. (Owler, lnc, 2019). Hence,
the organization is trying to be different and unique in a competitive environment to
achieve competitive advantages.
Goals- Sainsbury is a most trusted retailer in the UK which has the purpose of achieving
the business objectives and attaining customer satisfaction by putting the customers at
heart. Additionally, to offer the products and services as per the need and expectations of
the consumers to provide the quite possible shopping experience (Sainsbury Plc, 2019).
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Description, analysis and discussion of the supply challenge related issue
Sainsbury is dealing with several points in the existing supply chain because of an
extensive network in the country. The problems related to the supply chain of Sainsbury are as
follows-
 The increasing cost of the supply chain- Sainsbury has an extensive network with the
suppliers because of the largest retailer in the UK market. Here, Sainsbury is focusing on
the delivery of innovative products to the consumers on time to meet the expectations
which further helps to create a competitive position in the market place. However,
Sainsbury uses the latest technologies in the supply chain to reduce the time factor and
timely supply of the products to the distributors. For example, Sainsbury uses silver
bullet technologies to improve the supply chains and allow the company to operate the
business in different ways (Churchill, 2018). In this context, Shafiq, Johnson, Klassen
and Awaysheh (2017) argued that use of latest technologies in the supply chain supports
to reduce the delivery time but enhances the financial burden over the company which is
not affordable for the small companies.
 On the contrary, Cooper (2017) stated that the excessive cost of the supply chain by using
of technologies is covered by the earned profits of the quickly supplied products. Besides
this, supply chain technology of Sainsbury is entirely appropriate because it helps to offer
the same day delivery of the products, but it does not show that the company is
performing well in the supply chain (Churchill, 2018). Owing to this, the company is
operating with around 800 big supermarkets and for the same day delivery of products
increases the entire cost of the supply chain (Sainsbury Plc, 2019). In this context, Wang,
Chan and Pauleen (2010) stated that re-engineering of complete supply chain
management is helpful to reduce the overall cost of supplies because a central system
manages everything. However, as per the economies of scale approach, the changes in
infrastructure and re-engineering of the entire supply chain is challenging to manage and
enhances the extra cost.
 No longer able to deal with the demands of stores network- Sainsbury has a strong
network with the suppliers because the company's supply chain includes the 500
supermarkets and 300 convenience stores where the firm sales around 30,000 products.
Further, the company is focusing on the enhancement of the number of stores for the
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delivery of non-food products and services (Sainsbury Plc, 2019). Additionally, a large
number of stores are operating the business on internet-based home delivery shopping
service. However, an issue has been identified in the supply chain of Sainsbury that its
existing supply chain is no longer able to fulfil the demand of all store network.
Additionally, the firm is operating the business from many years and has an old supply
chain system which does not have support to complete the required functions of the
supply chain (Manhattan Associates, 2017).
 Additionally, it is increasing maintenance cost for the Sainsbury. In this context, Cousins
(2005) stated that use of old systems in the current competitive environment is not
beneficial because it looks like outdated and does not fulfil the need of today's supply
chain which breaches the contacts with suppliers. However, Richey, Tokman and Dalela
(2010) argued that old technological systems in the supply chain are helpful for the
nearby areas because it supports to maintain better relations by timely delivery of goods.
Owing to this, Sainsbury can use warehouse management for open systems and extended
enterprise management. Here, the firm is required to implement an advanced supply
chain system infrastructure where Sainsbury can select Manhattan's warehouse
management solutions for open systems and integrated systems for the management. In
this context, as per the transaction cost economics, the advanced supply chain demand for
the vast maintenance cost and hiring of skilled people to operate the systems.
Nonetheless, Cousins (2005) argued that sophisticated supply chain provides a shape to
the system which further helps to develop the business over time.
 The pressure of suppliers- Sainsbury has a large number of suppliers in the entire
supply chain because it widely spread over the business. Here, the issue has been arising
with the suppliers at the time of reduction in pound value because the suppliers do not
want to bear the losses on the supply of goods. In this context, Sainsbury was putting
pressures on the suppliers that they supply the products on the reduced prices because of
the falling value of the pound (Butler and Monaghan, 2016). Suppliers are supposed to
put the higher rates to cover the risen expenses to retailers and shoppers. Apart from this,
due to fall in pound price, Sainsbury got loss in profits by 10% first half year and are
supposed to cover the damages and mitigate the cost pressures, Sainsbury as a
supermarket decided to cut the interim dividend to 3.6p a shared form 4p a (Butler and
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Monaghan, 2016). In this context, Dunning and Lundan (2008) asserted that currency
fluctuations and commodity price differences make an impact on the economy of the firm
and make a diversified impact on the revenue generations. On the other hand, Cooper
(2017) notified that the losses of fluctuations managed by the importing the goods on the
lower prices and sell by putting higher rates in the country. In this context, Sainsbury
emphasizes on the importing of food products at the time of reduction in pound value to
cover the cost inflation related issues; however, the UK retail chain already sourced UK
products as in a possible manner.
The suppliers of Sainsbury are getting affected in negative aspect by the proposed merger of
Sainsbury and Asda because it does not get the approval from the Competition and Mergers
Authority (CMA) (Ridler, 2019). The supply chain and economic conditions of organizations are
affected because a disruption was arising there in the own-label suppliers. Furthermore,
Sainsbury was obliged to pay the small suppliers within 14 days in case of the merger with Asda
because it focuses on the green light or green initiatives in the supply chain. In this context,
Green, Zelbst, Meacham and Bhadauria (2012) examined that green supply chain is essential for
the reduction of carbon emissions and enhancement in environmental as well as economic
sustainability of the firm.
 Inventory management issues- Inventory management is vital for the organizations to
manage the availability of the stocks which improve the trust of the company among the
suppliers and customers (Krajewski, Ritzman and Malhotra, 2013). However, inventory
management deal with the technological issues in the entire supply chain due to falling in
the systems. In this context, Sainsbury has problems in the supply chain even the
company had invested more than £400m in the supply chain. Here, the customers
complained that the availability of products and supplied products are not similar and are
replaced with substitute products (Moore, 2004). Thus, the anonymity of replacement is
not entirely appropriate for branded companies because it breaches the customers' loyalty
as well as satisfaction. Here, the issues were occurred in the supply chain of Sainsbury
due to excessive automation in the supply chain and furthermore; the entire system was
getting affected by the computer problems. Owing to this, Cousins (2005) asserted that
technical faults are common issues for the companies because it arises due to server
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problems. On the contrary, Wang, Li, Wang and Du (2015) mentioned that the server
issues are managed by the capable technical team which helps to determine the technical
problems and use the latest applications for handling of the technical issues. Here,
Sainsbury got the technical question in the supermarket supply chain for the perishable
items.
 Additionally, the system was forcing the customers to move to the competitors as Tesco
and Asda which reduces the existing image of the Sainsbury; however, it was for the least
time (Moore, 2004). Apart from this, due to inventory management issues, Sainsbury was
dealing with the problem in fulfilment of emerging needs for direct consumer deliveries.
Here, the old warehouse system was not storing a considerable number of quantity of
goods to the suppliers were becoming rigid towards the firm. In this manner, based on
Resource-Based View (RBV) framework, Sainsbury can manage the available resources
such as capacities of the warehouse, existing technologies etc. (Kraaijenbrink, Spender
and Groen, 2010). Hence, RBV is a supportive approach for organizations to compile the
resources to achieve competitive advantages.
Conclusions and recommendations
Based on the report, it has been concluded that the organizations deal with the supply
chain issues due to disruptions in the technologies, availability of systems, resources etc. In this
context, it has been found that Sainsbury was unable to take the full advantages of different
available opportunities and least realization of full distribution channels. On the other hand, it
has been summarized that technological disruption is the major issue for the supply chain
because it delays the supplies time and enhances the overall cost for the supply chain. In the end,
it has also been concluded that outdated supply chain reduces the quality of inventory and makes
the adverse impact on the suppliers as well as customers.
Recommendations
 Opening of new grocery stores across the world- Sainsbury is dealing with the issue of
falling in the value of the pound. In this case, it has been recommended that Sainsbury
open the new grocery stores all over the world so that losses of one country of reduction
in currency can be recovered another country substantial value of the currency.
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 Use of adequate technologies in the supply chain- Based on the analysis, it has been
found that Sainsbury is dealing with the technical issues because of existing supply chain
systems. In which the company is not able to fulfil the emerging demand of the
customers' needs because of limited storage of products and material in the warehouse. In
this context, it has been recommended that Sainsbury should use the advanced
technology in the warehouse which helps to maintain the stock and delivers the order on
time or same day delivery of the materials.
 Re-engineering of the supply chain- Based on the report, it has been found that
Sainsbury needs to re-engineer the entire supply chain to reduce the overall cost of the
system. In re-engineering, the firm need changes the supply system which helps to
deliver the products to suppliers on time with minimum disruption of the process. In this
implementation, Sainsbury will be able to reduce the overall cost of the supply chain
because the re-engineered process reduces the waste and focuses on the central system to
manage the logistics efficiently.
 Application of green supply chain- Based on the analysis, it has been carbon emissions
and wastage are arising during the supply chain of Sainsbury because the company is
using the excessive trucks, a different mode of logistics which are occurring the pollution
in the environment. By considering the environmental issues, it has been suggested to
Sainsbury to use the green initiatives or green supply chain to reduce the carbon
emissions which further helps to improve environmental sustainability.
 Effective inventory management system- Based on the report, it has been analyzed that
Sainsbury is recommended to use the integrated inventory management system for the
effectiveness of the supply chain. However, it has been found that Sainsbury was dealt
with the computer issues which reduces the quality of inventory because it serves a
message in the consumer that to shifts to the rivalries which was the fault of a computer
system. Hence, the company has been suggested to use the integrated inventory system to
achieve efficiency.
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References
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Manhattan Associates, 2017. Sainsbury’s makes great strides in supply chain optimisation with
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