In this assignment I am going to evaluate the distribution systems in delivering goods and services for one of the well-known food sector business and that is ASDA. I am going to look at both the positive and the negative aspects of the distribution systems used and make recommendations for improvement with justified reasons
Asda gets its products straight from the manufacturers and then sells them directly to the customers they don’t need to involve a third party in this process and they always get stock direct. They reason that ASDA are able to get the products straight from the suppliers is because they are one of the largest supermarkets in the UK, and therefore can provide suppliers with a lot of business, ASDA also have suppliers who only work for them to create the own brand label i.e. George. This can work against the suppliers as if they begin to rely on the ASDA orders then it can be easy for ASDA to renegotiate the terms in their favour.
Asda has four key supplier areas:
1. Food, Household, Health & Beauty – This area covers off the key FMCG core of the business.
2. General Merchandise – non-food range
3. Clothing – ASDA George clothing business is one of the largest clothing retailers in the UK by volume this area is ASDAs own brand the George supply chain – the companies that manufacture garments on ASDA’s behalf – stretches across 19 countries, using around 600 primary, product making factories, with two thirds of our production coming from China, Bangladesh, Sri Lanka,
Turkey and India.
4. Central Buying – This is the team who makes purchasing decisions on goods not for resale (GNFR) – from capital expenditure on contracts for building, through to carrier bags and colleague uniforms. hwww.asdasupplier.com/about-us/how-we-work-with-suppliers
Local sourcing Asda define local products as those that are made locally, grown locally and reared locally; are a local taste or delicacy and recognised by customers as local and for which there is significant customer demand. They will source and stock several local businesses goods in their local stores the individual businesses will deliver the goods to the stores or depot.
Asda have over 400 stores and depots all around the UK including chilled distribution depots, Asda were one of the first retailers to switch to rail in our distribution network. Rail is a better option than road freight because it can be shared by several retailers or suppliers, helping to maximise each journey. They use 245 new double-deck trailers to save over 10 million road miles every year by doubling the amount they carry in each journey.
19 countries are used to source ASDA’s goods. They use aeroplanes and lorries for ships and trains where we can. For Ethical reasons they have a set of standards for these suppliers
ASDAS Suppliers standards
1. Employment is freely chosen
2. Freedom of association and the right to collective bargaining are respected
3. Working conditions are safe and hygienic
4. Child labour
6. Working hours are not excessive
7. No discrimination is practised
8. Regular employment is provided
9. No harsh or inhumane treatment is allowed
10. Immigration law and compliance
Asda international suppliers- Kenyan suppliers
Kenyan suppliers are asda’s international suppliers. They introduced Passion fruit to the UK in 19th Century. The Kenyan variety is larger, yellow in colour, with much sweeter seeds so it can be enjoyed straight from the fruit bowl or added to fruit salad, jellies or mousse.
“Our Kenyan smallholder suppliers are supported by the Department for International Development (DIFD) in a project which helps them to become long-term sustainable suppliers to the UK.”
● Responsiveness to consumer needs
Asda responses to its consumer needs in a very excellent way this is because Asda has lots of suppliers so they can have the latest stock in store straight away and they can attract their customers by giving them fresh food every time they shop. They also have a change of suppliers every year. Asda also has a trend that attracts customers that is “you save money everytime” this attracts the customers as they will get their shopping done at a lower price than the rival companies such as Tesco which is also very popular.
● The cost of the distribution system
At Asda the finance department is responsible for paying suppliers on time and ensuring that Asda receives prompt payment of goods that is due to them. Asda vehicles collect goods from the supplier and deliver to the relevant distribution centre and this saves Asda the time and money for hiring a third party to deliver the stock. Asda had now switched to rail for their distribution network. They use 245 new double-deck trailers to save over 10 million road miles every year by doubling the amount they carry in each
ASDA is reducing the cost of transporting goods by using advanced map-based transport optimisation software. The innovative routing and scheduling system from Paragon Software Systems allow ASDA’s logistics experts to model better routes and make more efficient use of its fleet and drivers. This is forecast to save ASDA between 5 and 10 per cent on the fleet costs of transporting goods to stores, which the company reinvests into the business to reduce costs to shoppers. http://www.paragonrouting.com/uploads/pdf/directions23.PDF
● Using international or domestic suppliers
Asda works in partnership with their suppliers to grow our business. The Trading Agenda is the need for a Responsible, Effective Supplier Base. This means that the company expects a lot from their suppliers. A healthy relationship with the supplier involves high levels of challenge as well as high levels of collaboration, effectively growing the business for both parties. As Asda has had a good relation with their international suppliers they are able to expand their business overseas and have lots of customers which leads to the company making a lot of profit as well.
● Using intermediaries
TUC acts as intermediary as Asda agrees to union demands and averts five-day strike at depots.
● Efficient use of transport methods and or cost effective transport arrangements, e.g. shipping and etc. Asda vehicles collect goods from the supplier and deliver to the relevant distribution centre. They are in partnership with a company called paragon as they are helping Asda reduce a lot of cost on transport delivery. “Asda is reducing the cost of transporting goods by using advanced map-based transport optimisation software. The innovative routing and scheduling system from Paragon Software. This System allows ASDA’s logistics experts to model better routes and makes more efficient use of its fleet and drivers.”
Responsiveness to consumer needs
Quick to respond on Food, Household, Health & Beauty and General Merchandise Slower to respond on clothing due to long lead times
Large contracts with 1000’s of suppliers which helps to keep cost to a minimum level ASDA might have a lot of wastage, bad clothing lines, out of date stock i.e. perishable, The use of international or domestic suppliers
19 countries are used to source ASDA’s goods
Hard to keep track and all suppliers happy when there are so many Use of intermediaries
TUC union reps to help sort disputes, Wincanton to do logistics around country Damaged stock going through of distribution
The shipping arrangements involved
Ships and Trains instead of vans and Planes to lower CO2 emissions Product damage thorough transit ASDA deal 19 countries so more of chance of this happening Conclusion
Make recommendations for improvement with justified reasons
I think overall Asda has a really good distribution process and they care for their customers’ needs and they have fresh stock delivered to them straight away. I have interviewed my local Asda distribution manager and he has said that his role is to direct and motivate a team of Department Managers – ensuring the smooth day to day running of our distribution network, managing driver hours and ensuring stores receive the goods on time. They also have to be role models of Asda’s beliefs, instilling the right behaviours in colleagues at every level, from drivers to managers. Asda has an extremely complex distribution system due to the nature of the business; it has to manage hundreds of suppliers some outside the UK.
The system is regularly reviewed and areas for improvement are implemented regularly for example the Asda was one of the first retailers to switch to rail and they use double-deck trailers to maximise stock amounts in each journey. ASDA has recently launched ASDA direct online and has announced it has enlisted global supply chain Manhattan Associates to support the growth of its e-commerce channel Asda Direct. This deployment of the solution provider’s services will help to make the ordering and delivering of goods from its site more efficient and cost effective. ASDA might have a lot of wastage, bad clothing lines, out of date stock i.e. perishable food by telling the suppliers to send small quantities more often. http://www.retailgazette.co.uk/articles/23343-asda-direct-signs-deal-to-improve-supply-chain