ASDA logistical operations

Executive Summary

Asda as a retail giant has been one of the leading retailers in the UK for many decades. After the acquisition of the company by Walmart, the company has seen more growth and steady development in its logistics strategy.

Introduction

Asda is a UK retailing company which has established itself as one of the leading in UK. The company has been in the market for forty years and has gone through many transformations in providing fresh and up to date ability to serve the demand from customers. The company was chosen for this discussion due to its interesting history and the success that is has achieved throughout the years to be the company that it is today.

Asda went through a hard time in the 1980s, however by the 1990s it has already seen growth, and witnessed a huge increase in the number of stores, with the distribution networks doubling from 130 to 230 by the end of the decade. In 1999, in this period of good financial performance, it was acquired by Wal-Mart, the retail giant from the United States. From this point onwards, the company has continued to be in the lead of retail chains in the UK with the backing of a leader in the retailing brand right across the Atlantic.

Discussions

The company chosen for this case study is the UK retail company, Asda. The logistics strategy of a company could be developed or analysed based on the following framework

Logistics strategy can be divided into four aspects as per the above diagram. The first, is logistics process design, which refers to how an organization would need to ensure that the business methods are organized and aligned so that they operate across the traditional company functions (Handbook). Examples of this would be order fulfilment, returns and spare parts provision (Handbook).

Asda has a large network of distribution centres in the UK, with 525 stores. The company has made efficient use of online sales platform and delivers to customers through efficient use of transport. “Dark stores” are stores that are not opened to the public but have layout arrangements that are similar to a normal Asda supermarket, where staff will move around and put items ordered by customers in trolleys before consolidating and delivering them.

In building a good logistics network design, which would be the second aspect of the logistics strategy,many considerations should be taken with regards to where the company should source products, the number of depots and distribution centres to be built and the number of inventory to be hold, among others. In line with the growth of Asda’s market, the number of distribution networks increased from 130 to 230 in a decade in the 1990s. At present they have a number of 23 depots.

Asda has four types of depots

1) Chilled

2) Ambient

3) General

4) Clothes

Figure above shows the categorization of products based on the demand and supply of products, and to help organizations put a sense of urgency for certain types of products that would require to be in store with a shorter lead time. One of the important criteria of being a market leader is to be able to respond to customer demands quickly, and Asda prioritizes on being agile. Products which fall in the category of continuous replenishment would include perishable items such as vegetables, milk, fruits, eggs and newspaper among others and their supply is predictable and needs to be monitored to have a short lead time meeting the demands.

The logistics information system design has to do with all the factors that are related to information. Asda uses many types of technology for its information management. Electronic Data Interchange (EDI) is the transfer of data between computers using an agreed standard format and is used by Asda, managed by their EDI team. Electronic points of sales (Epos) is a necessity.

Asda has partnered with Clipper Logistics Group to assist them in providing warehouse management system, including the addition of new conveyors and the construction of multi-level tier in the mezzanine floor of its warehouse, to increase space for stock items.

The final aspect of the strategy is the logistics organizational structure, where a good structure with clear defined roles plays a key factor in determining how smoothly the operations are managed. People have to work as a team and if divisions or departments work in isolation from the rest of the organization, then this would lead to problems in managing. This strategy then also looks into organizational culture.

In Asda, employee empowerment is a good practice. The lower level managers are given a sense of importance in their work by… and this could contribute to employee satisfaction and ultimately to better performance. One of the strategies of Asda is to try to develop trust from customers. This could only be done by fostering an organizational culture that prioritizes excellent customer services and displaying respect to customers.

For the logistics performance priorities of the companies, we can use the above diagram to see how Asda prioritises its logistics services. Products ordered via online will be delivered the next day and customers will be given the chance to decide what time would the products arrive. Time slots for each customer would be two hours which means products would arrive anytime during that two hour window. However, based on the many negative reviews by customers on products arriving later than the agreed time slot, it is deduced that on-time delivery performance needs more improving. Management of transports is likely needed.

In terms of accurate order, there have been indications that Asda would need to make improvements. According to an online survey by Which?, customers rated that 51% of Asda products are likely to be substituted when delivered. There could be many errors in the invoicing process, or there is a likelihood of the products being not available, or it could involve mistakes by staff.

Strategic

As mentioned, ASDA puts emphasis on customer service as part of its organizational culture. The company tries to be agile, which is being responsive to the demands and requirements of customers. Another of its strategy is to invest more in large stores and having a multi-supplier coalition. In order to have enough stock levels, there is a delivery of roughly 2 to 3 times a week to stores to help replenish stock from full trucks. One way of getting enough stocks to for the stores, is through employing the strategy of Quick Replenishment (QR). In QR, Asda agrees to provide their suppliers with sales data.

In meeting the online grocery demands, the company employs delivery seven days a week from morning 6am until midnight. Another strategy is establishing the Sustain and Save Exchange online community of suppliers. Through this platform, Asda intends for suppliers to its store to get together and share best practices and other knowledge to help improve their businesses. This is according to them, intended to share information pertaining to reduction in waste and efficient use of energy for the suppliers, thus reducing cost for ASDA.

Tactical

To meet the demands of customers, there should be proper planning on the number of times and number of trucks to be delivered to the various stores, which has different stock level requirements. At the moment, Asda operates 18,000 deliveries to the nationwide stores, by utilizing its fleet of 900 trucks.

A SWOT analysis of the company can be given as thus:

Strength

Strong support from Wal-Mart

Large presence across the UK

Strong label (George)

Weakness

Product recall

Product substitution

Opportunities

Possibility of expansion

Threats

Rising labour costs

Strong competition

Strength
In 1999, Wal-Mart acquired ASDA and this has helped the company grow further under the leadership of an already established a global leader in the retailing industry. At the moment, ASDA also has 525 stores all over the country and will continue growing, based on profit growth in the past decade. The company also sells quality non-food, clothing items under a strong brand, George. People recognize the brand and it a good image among consumers. Other everyday grocery items including milk, butter, meat and others are also quality items and even sold at low price.

Weakness

Asda has been subjected to several product recalls, although this is also the fate of many other giant retailers, especially when one are dealing with a big number of products that is being sold There is also the problem of product substitution, that has been raised by many customers throughout the years, as mentioned above, where products received from the house delivery, is not the same as the one that they intended to purchase.

Opportunities

Asda has potentials to venture out of the UK, to open up new stores in the EU countries. The store has already made a footing in the UK and could follow the steps of other giants like Lidl of Germany, which also sells products at a low price.

Threats

Competitors are always a threat. In the retail industry, there are many giant retailers like Sainsbury’s, Lidl, Tesco and others which also offers more or less the same line of products with low price. Customers have choices, and they could choose to go to other retailers if the price is deemed slightly cheaper at the competitors’ stores.

Order picking

Based on the reading of literatures and videos released by Asda on its warehouse operations, the company employs various common technologies at their warehouse for order picking. Operations involving this can be divided into two, either picker to goods, or goods to picker.

For the former, the pickers would need to go to the goods to retrieve the items. This can be done with the aid of a forklift, or by putting the items on pick carts. Asda employs the use of voice technology that guides them to pick the required items, which can cut warehouse costs at about 5%. The usage of voice recognition can be used in receiving, put away, picking, storage and replenishment.

Picking trucks are also used in the warehouse, and includes powered order picking trucks and free path high level picking trucks. The former is used to pick from lower level racks, while the latter for high-level shelving. Conveyors are used to transport items taken from the racks and taken away for further actions, like sending to customers.

For goods to picker, these includes the use of automated storage retrieval system (AS/RS), which Asda has installed with the assistance of companies such as Swisslog. It reduces unused space and maximizes storage capacities and also cost effectiveness. It is able to help utilize the floor space by putting the items in bins on top of each other and next to each other. Items can be taken by robots moving at a built mezzanine floor and transporting items to staff for handling. This is a big improvement compared to using pick trucks, which needs large spaces for aisle, for moving around and taking items.

Other technologies used include carousels. Carousels in warehouses are computer controlled and could be made to move products to meet the staff picking them, so that it would be ergonomic and staff need not strain themselves.

It is to be noted that Asda is one of the leading retailers to employ change in information technology to achieve progress. In a study of 22 UK retailers, Yu and Ramanathan (2008) states that Asda is at second place in terms of progress in IT implementation. Indeed in competing for market shares, being updated with the latest technology could be of assistance.

Building a network of distribution centres(DC) in organizations can be done by basing their classifications on several different elements (Handbook). This would include by:

1) Geographic locations: Warehouses could either serve a regional, national or local area.

2) Stage in the supply chain: Warehouses could serve different purposes, like handling products for work in progress (WIP) or finished goods.

3) Type: Seasonal or stock-holding sites

4) Function: Distribution, transhipment or storage of supplies.

5) Ownership: Whether it is owned by the user or a third-party company.

As mentioned, Asda maintains a network of 21 DCs, their location being (Femie et. al):

1) National distribution centres: Brackmills, Chepstow, Corby, Ince, Lutterworth, Newcastle, Wakefield, Whitwood.

2) Composite regional distribution centres (RDCs): Dartford, Grangemouth, Lutterworth, Washington and Wigan

3) Other RDCs: Bedford, Bristol, Chepstow, Didcot, Wakefield and Washington. 

Closing remark

The above is just a short discussion on the operations of Asda. References will soon be provided as well as the article being updated.