in collaboration with Albert Heijn Improves Product Availability through Centralized Replenishment Capgemini helps supermarket chain improve supply chain through responsiveness to customer behavior, high level of automation and cost control The Situation Rising incomes, rising expectations Albert Heijn is the market leader in and greater individualism have the grocery business in the combined to create a customer base Netherlands. With 752 stores, over that expects differentiation. But that 60,000 employees, more than 25,000 translates into greater complexity and product SKUs, over 11 million higher costs for the retailer. It means customer transactions per week and that each store must be fine-tuned to 10 million possible SKU-store reflect the wants of specific customers, combinations, Albert Heijn needed to which could mean new store formats, find the most efficient and effective deliveries to home or office, ad-hoc way to balance customer demand and promotion or even time-of-day unpredictability with logistics costs in pricing. the supply chain. Using a collaborative approach, Albert Heijn The increasingly unpredictable nature and Capgemini found an impressive of customer behavior makes planning state-of-the-art solution for this even more difficult. More and more challenge. time is spent on planning, but the Henry Ford’s dictum that he would results are less valuable. Planning give his car customers “any color as involves making assumptions about long as it’s black” doesn’t work with what will happen, rather than today’s more demanding and reacting to what customers are unpredictable consumers. Providing actually doing. customers with the goods they want, at the time, the place and the price that is right for them, is the only way to keep them satisfied. Replenishment is base“d on a customer- driven supply chain. A true collaborative partner, Capgemini supported the replenishment project with excellent people in important roles. Capgemini brought in the right IT and retail knowledge, but even more importantly, the right skills and attitude. This determined the actual success. Tony Vend”rig, VP Supply Chain, Albert Heijn Manufacturing Retail and Distribution the way we do it The Solution The Result How Albert Heijn and The team set up by Albert Heijn and By instituting an automated system that Capgemini Worked Together Capgemini to come up with a solution can provide a sales ordering report per Albert Heijn and Capgemini worked determined that the only way to be store, per item, per date, and per hour, together on this project from pilot phase responsive to customer demands was to Albert Heijn has reduced out-of-stocks by to national rollout. Process, organization build processes and define rules that did 50%. It has also realized a 7% increase in and IT systems were developed jointly as not demand as much planning. They the commercial attraction rating for its was the transformation strategy for 744 developed a highly automated stores and the amount of time employees stores and the Head Office. replenishment process with a single point spend on store processing has shown a of customer demand forecasting and significant decline . Improved availability The multi-disciplinary project team centralized control management. of goods, fewer leftovers, less time spent transformed Albert Heijn's logistics, on ordering has translated into more time merchandise and stores into a state-of-the- Decisions about store planning and for employees to work directly with art supply chain operation. The result of forecast models needed to be much more customers. Supplier investigation into combining all these elements into a reactive, which required the availability of Albert Heijn's products proved that centrally-controlled, highly automated, continuous, near real-time information. availability increased by 14% during real-time and event-driven system is that Traditional processes are typically built promotions. Albert Heijn can guarantee with a high around batch processing cycles, usually level of certainty that on any given day it one per day. Moving from a batch to flow will be able to satisfy its customers. system (continuous operation and continuous decision making) facilitates individualized delivery schedules based on geography, transport costs, type of merchandise, etc. Naturally, some batching still occurs in the process, such as About Capgemini and the deliveries to the distribution center from Collaborative Business Experience® suppliers or the start of a new promotion, but the emphasis is on continuous flow of Capgemini, one of the and through a global delivery model information, with no artificial barriers to world’s foremost providers called Rightshore®, which aims to offer impede the reaction time. of consulting, technology and the right resources in the right location at outsourcing services, enables its clients competitive cost. Present in 36 countries, To determine how much of a particular to transform and perform through Capgemini reported 2007 global product to send to a particular store technologies. revenues of EUR 8.7 billion and employs requires knowledge of the present and over 83,000 people worldwide. historic service levels as well as constraints Capgemini provides its clients with of both the product and the store. Each insights and capabilities that boost their More information about our services, item/store combination has a unique set of freedom to achieve superior results offices and research is available at parameters. For some products, such as through a unique way of working - the www.capgemini.com/tme dry groceries, the parameter is simple — Collaborative Business Experience® - when one full case is sold, one new case is ordered. But for items like fresh produce, factors like the desire for freshness, an attractive presentation and the cost of Capgemini Netherlands Approved by: shrinkage must all be taken into account Consulting Services Tony Vendrig, VP Supply Chain, Albert before deciding on an order schedule. Supply Chain Heijn Predictive forecasting is only used for Logistics & Fulfillment Mark van der Drift, Engagement Manager, special situations, such as promotions and Capgemini events. Once the promotion is started, however, ordering is quickly adjusted to reflect actual customer behavior in the In collaboration with store (e.g., real-time POS data). stores in a number of formats: the everyday supermarket, the larger Albert Local stores have responsibility for their Heijn XL for the weekly groceries own sales opportunities but they (4000 square meters), the convenience constantly feed information to the central stores Ah to go and the Internet repository about changes to their Albert Heijn pioneered the delivery service Albert.nl. Almost 200 planograms, new items, promotions, development of the supermarket in The of the Albert Heijn are run by r e branding and customer behavior. The b Netherlands. The company operates franchisees. m u central system synthesizes the data and N e c n offers the stores ongoing planning e r e f e information and updates. The result is an R - r Copyright ©2008 Capgemini. No part of this document may be modified, deleted or e v optimal balance between local o expanded by any process or means without prior written permission from Capgemini. C entrepreneurship and central synergies..