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Sainsbury’s Supermarkets recently launched a new supply chain initiative to provide tighter collaboration with suppliers, higher profits, and better customer service. The new Internet-based information-sharing and collaboration system, created with the help of Microsoft® Certified Solution Provider EQOS Systems, Ltd., can eventually allow all 4,000 of Sainsbury’s suppliers to work with buyers in planning, executing, and managing successful product promotions. The solution, the first retail system of its kind in the U.K. to be based on the Microsoft Value Chain Initiative, also has future potential for management and tracking of new product introductions, product returns, and product lifecycles.
The largest local government in the United States buys $650 million worth of goods and services each year from a list of 25,000 bidders—everything from hard drives to helicopters. Until recently, all of those purchases were made using paper forms. The time delays inherent in paperwork created chaos, waiting, and huge warehousing costs. With e-commerce heating up, L.A. County got online. Using a Web-based purchasing solution from solution provider Commerce One, the county now lets buyers shop, order and pay for goods over the NInternet. The benefits: big savings from easier comparison-shopping and lower inventory costs, faster order cycles, less paperwork, and more opportunities for small businesses.
Sainsbury’s, a leading United Kingdom grocery chain founded in 1869, opened its first store in Drury Lane, London, with the promise of “highest quality at keenest prices.” In 1998, with around 400 stores in the U.K., Ireland, and the United States, and total sales of 11.6 billion in pounds, Sainsbury’s is still bringing the best products and high service quality to an increasing number of consumers. In a market that is fiercely competitive, product promotions, customer loyalty, quality of produce, and availability all drive market share andposition.
Special promotions account for a whopping 2 billion in pounds—or about 10 percent—of all Sainsbury’s sales. Such promotions range from a “buy one, get one free,” offer, to a discounted price, to a product tie-in offer, for example, the customer gets a free bag of potato chips with every six-pack of cola. Sainsbury’s runs about 2,000 promotions at any one time, involving billions of pounds worth of products, thousands of players, and an incredible array of logistical coordination. Despite this, the company had to manage the promotional planning process using a series of paper-driven systems that meant poor coordination, planning, and evaluation of promotions. “Promotions account for a large percentage of our sales, but we were running them without sufficient information,” explains John Rowe, Sainsbury’s Director of Logistics.
With the help of Microsoft Certified Solutions Provider EQOS Systems, Ltd., Sainsbury’s began streamlining this critical process. The chain built a Web-based supply chain planning and collaboration system that allows suppliers and buyers to work through every detail of a product promotion in advance and to track its success in real time. The solution was created in a matter of weeks using Microsoft electronic commerce technologies, such as Microsoft Site Server 3.0 Commerce Edition, Microsoft WindowsNT® Server 4.0, and Microsoft SQLServer™ 6.5. As a result of this new application, Sainsbury’s is reducing the time spent in planning promotions and is eliminating the chance of running out of inventory. Sainsbury’s and its suppliers can deploy stock where needed, and increase promotion-related revenues.
Tripping Over a Complex Process
Sainsbury’s has worked diligently to satisfy customers, using criteria established by an initiative called Efficient Consumer Response (ECR) (http://www.ecr-europe.com/). ECR aims to provide the retail consumer with the highest quality service through integrated partner collaboration, information-sharing, and efficient supply chain operations. In the area of product promotions, ECR estimates that $4 billion can be saved across Europe by linking stores and suppliers more efficiently.
Consider the complexity of the average supermarket promotion. Sainsbury’s might decide to offer a promotion on Nestlé coffees: buy one jar, get another jar free. Sounds simple. But, how does Sainsbury’s calculate how much extra coffee to have on hand? If everything goes right and the promotion is a big success, the chains sell more coffee and boost profits. However, if the promotion is a big success and Sainsbury’s orders too little coffee, then inventory runs out, customers are frustrated, and profits are limited. Conversely, if Sainsbury’s orders too much coffee and the promotion bombs, the chain is left with unsold merchandise. In the case of perishable items like bananas or yogurt, Sainsbury’s and the supplier takes a huge loss, because they can’t sell those items later.
Multiply this scenario by the thousands of promotions going on simultaneously with thousands of suppliers, and you have the makings of a colossal logistical nightmare. “We were barreling into the next promotion without understanding the impact of the last one,” Rowe says. “There are hundreds of people at Sainsbury’s and thousands of people in our supplier base involved in promotions—brand managers, product managers, line managers, event managers, advertising managers, and the list goes on. The time for planning a promotion can be very short—anywhere from a week for perishable items like fish or fruit to several months for other products. We needed a way to synchronize people and information to correctly estimate stock levels, keep customers happy, and reduce productwaste.”
The Answer: Constant Communication with Suppliers
Rowe realized that Sainsbury’s needed far better, far more continuous communication with its suppliers. The company had moved from paper catalogs to electronic catalogs to a Web-based information service for suppliers. Now they needed to move to true online collaboration. Rowe says, “We saw the need for continuous information-sharing and joint decision-making.”
Sainsbury’s evaluated several off-the-shelf collaboration applications and chose one called EQOS Collaborator from Microsoft Certified Solutions Provider EQOS Systems. Co-founder and managing director at EQOS Systems, Mike Quinn, says, “We decided to develop EQOS Collaborator using Microsoft technologies, because this enabled us to deliver a high degree of collaborative functionality very quickly. The wide range of Microsoft tools and available skills in the market was also an important factor. In addition, EQOS’s vision of providing a unique collaborative software tool to enable supply chain integration is entirely consistent with the Value Chain Initiative. Working with Microsoft on VCI is enabling us to reach a wide base of companies who are looking toward innovative software solutions for their supply chain needs.”
EQOS Collaborator is a Web forms-based collaborative application development toolkit that Sainsbury’s has used to build a Collaborative Planning System (CPS). Sainsbury’s first application on CPS tackles the complex area of promotions planning, measurement, and evaluation. The system prompts individuals for information such as promotion type, promotion date, product being promoted, promotion pricing, promotion objectives, and so on. Some of this information is pulled automatically from legacy databases (such as product and forecasting), and some is entered in real time. For example, the Sainsbury’s buyer enters the product code, and Collaborator drops in the product name, the usual price, the usual sales forecast for that item, and the quantity of stock in that store and in Sainsbury’s warehouses.
After the basics are established, Collaborator arbitrates and manages a flow of planning information among Sainsbury’s and its suppliers. Sainsbury’s might prefer the promotion to be a three-for-one offer, while the supplier would rather offer a two-for-one offer. Collaborator acts as process manager so nothing is forgotten, and prompts for next steps throughe-mail.
Once planning is complete, the system taps both Sainsbury’s and the supplier’s forecasting databases to see how they match up for that particular product promotion. Sometimes they’re miles apart. Collaborator doesn’t create a forecast but allows the two sides to share their forecasts and move them closer together. Sainsbury’s might send its coffee promotion forecast to Nestlé, and Nestlé might ask why they are forecasting such a big uplift. Sainsbury’s can tell them they are offering a chocolate promotion at the same time.
Collaborator also lets Sainsbury’s and suppliers look at actual inventories and decide what product to move where. For example, they may concur that they need to move 10,000 cases of cola from northern to southern England during a promotion, due to increased demand in that particular region.
Once the promotion is underway, EQOS Collaborator lets Sainsbury’s and its suppliers track its progress, in near-real time. “Most promotions last one to four weeks, but you can usually tell within 48 hours how a promotion is doing,” Rowe says. “That 48-hour sales information wasn’t usually available until months later. EQOS allows us to capture sales data and share it with suppliers as it’s coming in. This is a tremendous help to us in adjusting or discontinuing promotions. And it has huge ramifications for customer satisfaction.”
Effortless Links with Legacy Systems
The system is built on a Microsoft Windows NT Server platform, hosted by Microsoft Windows NT Server’s Internet Information Server and browsed by Microsoft Internet Explorer. Information is stored in a Microsoft SQL Server database, and can be easily integrated into other legacy databases. Importantly, the EQOS system can be hosted on many servers, giving suppliers the ability to upload and download information to and from the system. EQOS Administrator, which is the main program for building and deploying applications, has been developed using Microsoft Visual Basic® development system. EQOS also has a Web-based version of Administrator that allows users to build and deploy their own collaborative applications. And the electronic commerce functionality, utilizing the dynamic data collected, is provided by Microsoft Site Server 3.0 Commerce Edition.
In the future, EQOS may build the Microsoft Commerce Interchange Pipeline (CIP) technology into the solution. The CIP, a significant feature of Site Server 3.0, Commerce Edition, is a simple system for enabling application-to-application interchange of structured business information using the Internet, e-mail, or third-party EDI Virtual Added Networks (VANs). The CIP provides a standard method of sharing any type of business-critical data over any network among businesses.
EQOS Managing Director Mike Quinn says, “We’re employing very clever technology between trading partners, which doesn’t require either company to change their core systems. Rather, it pulls information from legacy databases. EQOS gives Sainsbury’s the opportunity to do new things without going back and recoding their old systems.”
Good News for Suppliers and Consumers
Sainsbury’s first rolled out EQOS Collaborator to its major suppliers and is working to offer it to all 4,000 suppliers. Nestlé embraced the collaboration system immediately. Tom McGuffog, Planning and Logistics Director at Nestlé UK, says, “Nestlé invests millions of pounds ensuring that our information systems are optimized to provide our customers, the retailers, with the best possible service. Internet-based systems like EQOS Collaborator gives us the opportunity to synchronize dynamic supply chain information with that of our customer. This helps to ensure that we both deliver the best possible service to our common customer: the consumer.”
He continues, “We believe this project with Sainsbury’s will deliver some very tangible benefits —improved communications leading to better on-shelf stock availability, and therefore to more cost-effective promotions. That is good news for our customers and consumers.”
Other leading suppliers using Sainsbury’s Collaborator include Proctor and Gamble, Heinz, Unilever, Kimberly-Clark, Kelloggs, and Coca-Cola.
Britvic, the U.K. distributor for Pepsi and other leading soft drink brands, found within 48 hours that a Pepsi promotion was substantially outstripping forecast. Using Collaborator, the Sainsbury’s buyer and Britvic representative were able to track sales daily and increase production to meet demand. As a result, Sainsbury’s rescued the promotion from a potential stock-out catastrophe and had plenty of Pepsis on hand for thirsty customers.
In another situation, Oscar Meyer—in the U.K., a supplier of Sainsbury’s brand of ready-made meals such as lasagne and curries—used Collaborator to spot a looming shortage of its meals in Sainsbury’s stores during a promotion, and to also spot a huge supply languishing in a nearby warehouse. The Oscar Meyer supply chain team could direct warehoused meals immediately to Sainsbury’s stores, where customers devoured them. Collaborator’s intervention meant 300 cases of perishable meals were sold rather than left to spoil.
Rowe says, “With the EQOS system, we can circulate information and knowledge very quickly. Now that several of our suppliers have started to use it, there seems to be an increasing thirst for data that can improve decision-making. The good news for consumers is that they will get the product they want.”
Sainsbury’s can also place new lines of goods, as well as product promotions, in stores in a much shorter time. Quantities can be predicted and managed much more accurately, whereas before, there was difficulty in matching correct stock-to-demand ratios. Rowe says “Now we can co-manage forecasts with our suppliers, whereas previously we worked in isolation. Branded suppliers will have a far better idea about the impact of advertising, promotions they are running, and so on, so we can update our forecasts of their products on a continuous basis.”
Another hidden benefit that the customer may not see is the ability to pass on consumer comment to suppliers in a quick and efficient manner. Rowe says, “We will be able to pass on consumer dislikes, comments, and desire much more efficiently. Previously, the paperwork was a bit of a nightmare, and the feedback loop was complex. With Collaborator, we can now focus on responding to customers quickly.”
Give It Away—And Watch Use Grow
Significantly, Sainsbury’s is making the EQOS system available to suppliers free of charge, reiterating the company’s commitment to improving customer service and to the Value Chain Initiative. Rowe says, “Our supply chain is increasingly being organized in a virtual way. This brings huge benefits but relies on information support systems that are integrated across company boundaries. We see Microsoft’s vision of VCI as the motorway, a road on which we need to drive to get information moving around between companies.”
Sainsbury’s has given its top 25 suppliers licenses to EQOS Collaborator and will soon have its top 1,000 suppliers online. These suppliers are so happy with the system that many are recommending that their other customers use it as well.
And EQOS Collaborator is useful for far more than promotions. EQOS Systems has tailored versions of the solution for managing product introductions, product returns, delivery slot bookings, product lifecycles, and forecasting. Virtually any function that deals with coordination across a supply chain is fair game. Non-retail applications EQOS Systems is targeting include public administration, transportation, even finance.