Supply Chain Excellence in the Retail Industry METRO AG – a Case Study
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Supply Chain Excellence in the Retail Industry METRO AG – A Case Study by Manuela Schranz-Whitaker B.B.A. in International Business Golden Gate University, CA 2002 Submitted to the Zaragoza Logistics Center, a Research Institute associated with the University of Zaragoza, in Partial Fulfillment of the Requirements for the Degree of Master of Engineering in Logistics and Supply Chain Management in the MIT-Zaragoza International Logistics Program May 2005 © Manuela Schranz-Whitaker. All rights reserved The author hereby grants to the Massachusetts Institute of Technology (MIT) and the Zaragoza Logistics Center permission to reproduce and to distribute publicly paper and electronic copies of this thesis in whole or in part. Signature of Author ______________________________________________ MIT-Zaragoza International Logistics Program May 20, 2005 Certified by ____________________________________________________ Dr. Jarrod Goentzel, Executive Director MIT-Zaragoza International Logistics Program and ____________________________________________________ Dr. Paul Thompson, Professor MIT-Zaragoza International Logistics Program Accepted by ____________________________________________________ Dr. María Jesús Sáenz, Academic Director MIT-Zaragoza International Logistics Program _____________________________________________________________________ 2 _____________________________________________________________________ 3 Supply Chain Excellence in the Retail Industry METRO AG – A Case Study by Manuela Schranz-Whitaker B.B.A. in International Business Golden Gate University, CA 2002 Submitted to the Zaragoza Logistics Center, a Research Institute associated with the University of Zaragoza, in Partial Fulfillment of the Requirements for the Degree of Master of Engineering in Logistics and Supply Chain Management in the MIT-Zaragoza International Logistics Program Abstract The retail industry has seen tremendous change over the past two decades. Especially in the grocery sector, the rules of the game have changed. While it still is a rather fragmented industry, it is dominated by a few giants at the top, which squeeze out costs and fight for every tenth of a percentage point of very slim margins. One of these giants is METRO AG. Like its competitors, it has to cope with changing consumer behavior and taste, increased pressure from deep discount formats and saturation in its home market, Germany. With its strategy of freshness and product variety, it does not follow the Wal-Mart slogan of “everyday low prices”, but carves out a market for itself. Local knowledge, operational flexibility and customer focus is what sets METRO Cash & Carry apart from the rest and makes its supply chain a model for excellence. _____________________________________________________________________ 4 _____________________________________________________________________ 5 Acknowledgements METRO AG I would like thank especially Axel Hopp, Division Manager of METRO Group Buying, for his involvement in the SC2020 Project and in this thesis. He has contributed a wealth of knowledge; without his contribution, this thesis would not have been possible. Additionally, I thank Ales Malucha, Division Manager, Logistics, METRO Cash & Carry, Mauro Manacchini, Division Manager, Corporate Information Management, METRO Cash & Carry, and Sven Herrmann, Head of Strategy Logistics, METRO Group Logistics, for their insights into METRO AG and METRO Cash & Carry. Their knowledge about METRO Cash & Carry’s business and supply chain was vital in the development of the framework of this thesis. Industry Experts I want to express my gratitude for the input from two industry experts Christian Koch from SAP and Gurdip Singh from i2 Technologies, who added tremendous insights and put industry trends into perspective. Faculty Last but not least, I am grateful for the support the faculty has provided me with throughout the writing process. A special thanks to Larry Lapide, Research Director of Supply Chain 2020 Project, Massachusetts Institute of Technology, for getting me involved in this project. My thanks also go to my advisors Jarrod Goentzel, Executive Director, MIT-Zaragoza International Logistics Program, and Paul Thompson, Professor, MIT-Zaragoza International Logistics Program, for their feedback and support throughout my studies. Gracias también a las personas del Zaragoza Logistics Center que me han ayudado durante mi estancia en España. _____________________________________________________________________ 6 _____________________________________________________________________ 7 Table of Contents Supply Chain Excellence in the Retail Industry ............................................................1 METRO AG – A Case Study................................................................................1 Supply Chain Excellence in the Retail Industry ............................................................4 METRO AG – A Case Study................................................................................4 Abstract..........................................................................................................................4 Acknowledgements........................................................................................................6 METRO AG..........................................................................................................6 Industry Experts....................................................................................................6 Faculty...................................................................................................................6 Table of Contents..................................................................................................8 List of Figures..............................................................................................................11 1 Introduction..........................................................................................................13 2 Literature Review.................................................................................................17 2.1 Business Strategy Review........................................................................17 2.2 Industry Review.......................................................................................18 2.3 Company Review.....................................................................................19 3 Industry Overview ...................................................................................21 3.1 Industry Background................................................................................21 3.2 Key Statistics ...........................................................................................21 3.3 Overall Trends and Industry Drivers .......................................................23 3.4 Supply Chain Challenges and Opportunities ...........................................28 3.5 Evaluation of Top Competitors................................................................32 4 Industry Position of METRO AG........................................................................39 4.1 Historical and Current Data .....................................................................39 4.2 Business Units..........................................................................................41 4.3 Products and Services ..............................................................................46 4.4 Sales Channels and Customer Segmentation...........................................48 4.5 Innovation ................................................................................................48 4.6 Top Competitors ......................................................................................50 5 Specific Supply Chain of METRO Cash & Carry...............................................53 5.1 Background..............................................................................................53 5.2 Operating Model and Supply Chain Network .........................................55 5.3 Organizational Structure ..........................................................................62 5.4 Supply Side Business Processes ..............................................................63 5.5 Inside Business Processes........................................................................67 5.6 Customer Side Business Processes ..........................................................69 6 Framework of METRO Cash & Carry.................................................................75 6.1 Business Strategy.....................................................................................75 6.2 Complementary Operating Model ...........................................................77 6.3 Operational Objectives.............................................................................78 6.4 Tailored Business Processes ....................................................................80 6.4.1 Market Development ...............................................................................81 6.4.2 Centralized vs. Local Purchasing.............................................................83 6.4.3 Distribution ..............................................................................................85 6.4.4 Technology and Process Innovation ........................................................86 7 Conclusion ...........................................................................................................89 Bibliography