Introduction
Carrefour is a 53-year-old French international hypermarket chain headquartered in Levallois-Perret, France (Carrefour 2). “It is the third most profitable hypermarket chain in the world, second largest in terms of revenue and the largest in the world in terms of size” (Carrefour 2). Since it is headquartered in France, its operations are mainly in Europe but it also has a heavy presence in other parts of the world such as North Africa and Asian countries. The business opened its first shop back in 1957 in Annecy, France. It grew its outlets from here and established a presence in every part of France. A merger with Promodes in 1999, its biggest competitor at the time, allowed it grow its market share further in the region. The group later on pioneered the concept of hypermarket and opened their first in 1963.
Since then, Carrefour has grown globally to almost every major city in the world. Europe remains its biggest market with over 3,000 hypermarkets, supermarkets, hard discounters, cash and carry, and convenience stores. The business takes advantage of advanced technology to manage its wide spread supply chain. Among its most outstanding technologies in supply chain management is the Electronic Data Interchange, which links its shops and warehouses, making it easier to take stocks and avail products when they are needed. The other investment in their technology is the Integrated Composite Application Network (ICAN), which integrates its stores and allows it customize its operations.
The United Arabs Emirates is an attractive region to do business. The region has a reputable business environment and since it is a new market, it presents investors with an opportunity to establish a market share with less competition. Keeping in line with its global presence initiative, Carrefour in the past has ventured into as many markets as they can including UAE. The region is ranked 30th for the Corruption Perception Index, making it a very reputable place to do business. Its economical jurisdiction is among the most reputable in the world. The number of immigrants and tourists the region attracts today makes it a big enough market to sustain a big retail shop such as Carrefour. The UEA tax systems is quite conducive for foreign investors and employees. It does not impose personal income, value added and capital gains taxes, making it one of the most friendly regions in terms of tax.
Strengths and weaknesses
Carrefour’s presence in the UAE has enjoyed a good market share since the business opened its first shop in the region. The business’s motive is to make itself the most preferred retail shop in every region it establishes a presence in. Being a market leader in the region gives it an advantage over other stores in markets decision making processes. It also gives it influence over trends and prices in the market. The company’s discounting formulas have been very appealing to customers in times of crisis. The business’ profits in the region remained high even in 2008-2009 period when many business’ suffered slashed profits due to an economic crisis. Its hyper-markets have continued to perform well in food and non-food ranges. Carrefour has a business model which allows it adapt to new markets easily. By learning a region’s culture, purchasing products from local suppliers and respecting religious practices, the shop has gained favor and loyalty from many residents in UAE.
Investing in the latest technologies to manage logistics and inventories gives the business an advantage over its competitors. A well established logistics management system allows the business to ensure that products are readily available for shoppers. Reduced costs of middlemen and management also gives the company a cost advantage, helping them offer products at affordable rates in the market. The business has registered an impressive clothing sales in the UAE region, especially sales to the many immigrants who have come to work from other parts of the world. Its global presence allows it access products from all over the world easily and at affordable prices.
The business has had its fair share of trouble in the UAE region. Its labor relations have been problematic for a long time now. The business has been accused of overworking employees and underpaying them (IBS Center for Management Research 3). Since UAE is a new market, the business lacks a strategy which would survive it if other big players such as Wal-Mart decided to venture in the market. In an attempt to stay competitive through pricing, the business has many times lost sight of quality, giving customers low quality products which can easily sell for minimized prices. Many of its stores in the UAE lack private label offers, making it hard for it to customize its packaging to what would suit its customers. With only eleven hyper-markets in the UAE, its openings have been considered very few compared to the market it enjoys in the region.
Supply chain management
Carrefour has eleven hypermarkets and two supermarkets in the United Arabs Emirates today. The France based store’s operation in the United Arabs Emirates and contributed to 9.6% of its income in 2009 (Carrefour 2). Supply chain management for the largest retailer business in the world is not an easy task. It includes logistics, procurements, warehouse management, transportation, IT and many other procedures put in place to ensure that consumers reach the goods when needed. The business puts a lot of emphasize on the need to reduce its purchasing costs, enhance availability of products and offer products at the best prices in the market.
Procurement and distribution
Being in the business for a long time has allowed Carrefour time to learn and understand costing and the markets as a whole. In most countries, Carrefour shops purchase their products directly from manufacturers. In some special cases such as Japan, the business relies on wholesalers to supply them with products. By-passing wholesalers and other distributors minimizes the purchase cost and allows the business to offer their products at subsidized prices.
The business encourages transparent processes amongst distributors to ensure that they insert enough pressure on them to give the best prices. Manufacturers willing to partner with Carrefour stores have had to show willingness and reveal their initiatives towards giving the best prices to the consumer. In 2007 for example, the shop is said to have threatened to end its partnership with Unilever if it did not work on giving consumers better prices in their cosmetic lines. Such a trend has become common in the retailing industry, evident by the number of tussles which arise between manufacturers and retailers over price issues. Another shop which has been involved in such debates is Wal-Mart, which is known to push manufacturers to the limits to get the best prices.
Carrefour has over 3,000 stores distributed all over the world. Thousands of products and brands are stocked in their shops. To sustain adequate and efficient supply of such a large number of products, the business has warehouses located in every region they have a presence in. Their warehouses supply more than 80% of the company’s inventories compared to about 60% for its competitors. Shipping and storage costs are minimized by transporting and dispatching inventories in bulk. Its procurement and distribution system is so effective that it would be able to provide replenishment within an average of three days 0compared to the five day period considered average and normal.
The company’s distribution centers are divided into different sections to suit quantities required in those regions. They are also divided according to the type of products they supply. Perishable goods for example have to be distributed in a way that ensures they are on the shelves at the right time and are sold by the indicated date. Their distribution centers therefore, have to be near the shops and have to be well installed with preservation measures. The centers have to ensure a consistent flow of products and ensure that the supply function is kept in operation. Each shop is supposed to have real-time information regarding its inventory levels and be able to place orders on time to ensure punctual re-stocking (IBS Center for Management Research 3). Its shops’ computer systems allow employees to feed the purchasing and procurement managers with real-time information regarding what needs to be re-stocked and what needs to be removed from the shelves.
Inventory management
Carrefour has used technology to develop a way in which to cater to individual needs of each of its stores. “In the late 1990s, the business invested more than $170 million to standardize its business systems and processes across the world” (IBS Center for Management Research 3). Shared Service Centers in every country is one way for Carrefour to manage its supply chain and since it was introduced, it has been very instrumental in improving the efficiency of the the business’ supply chain. Using Electronic Data Interchange is another important investment for the business, which has allowed it link its suppliers, warehouses and shops. Receiving orders, managing stock and dispatches is therefore an easier task for the shop.
“In the late 1990s, the company embarked upon an exercise to have its procurement and distribution activities globally centralized” (Carrefour 2). The initiative has enabled the business save a lot of money through reduced costs and an effective distribution system. An enhanced distribution system allowed the company reduce the time products take from manufacturers, warehouses to the retail shops. It also ensures that goods are available when needed by the customers. In some countries such as China, Carrefour has outsourced its logistics management to allow better and more professional global operations. As a result of using reputed logistic management firms, the company has been named as one of the leading retailing stores in the world (Carrefour 2).
In more recent times, the business invested in an Integrated Composite Application Network (ICAN) technology in 2003 to run its global operations more effectively. The technology has also allowed the business customize its store formats and operations. By implementing the technology, the business has also been able to integrate its stores and distribution centers.
Carrefour has for a long time followed the direct procurement strategy where a retailer gets their goods directly from the manufacturer. In some countries such as Japan, the company relies on wholesalers for more than 40% of its purchases. By so doing, middle men are avoided in the equation and costs are reduced. As a way of connecting and benefiting the local communities in regions they operate from, 90% of the company’s purchases are local. This is also done to adapt to the local communities’ cultures and provide what the market is more familiar with.
Logistics management
One of the most important factors in managing logistics is transport management. The business uses radio frequency equipment to manage transportation and warehousing. The technology is also largely used in managing products and stocks at the retail shops. Carrefour has over the years developed one of the best logistics management systems in the retail industry. Its logistic management plan includes owning its own trucks which service different distribution centers. Carrefour owns a fleet of both big and small trucks to allow the shops receive inventories as soon as they are needed. The fleet of vehicles makes it easy for the company to distribute products in different warehouses and shops once they arrive at the port. Those shops near distribution center are able to be replenished even on a daily basis while those far from the distribution centers get replenished even twice a week.
Carrefour drivers are required to go through aggressive training and learning to minimize accidents and delays. As a result, its drivers have been able to drive miles without causing major traffic incidents. In France, the business’ department of transport was awarded by the department of road safety as having caused or being involved in the least road accidents in 2008 (IBS Center for Management Research 3). Each distribution center manages its own fleet of vehicles and is responsible for their schedules. The arrangement makes it easier to manage transport concerns since each distribution center manages less number of vehicles.
Every distribution center has a coordinator who is responsible for the tracks’ schedules, delivery and dispatches schedules. The drivers are required to report to the coordinator when leaving and arriving to make it easy to plan driving time. Drivers are also responsible for attending to the trucks and the load until it is offloaded at the shops or distribution centers. Even though this method of managing logistics and movement of goods has been effective for the business for many years, it costs the business a lot of money to purchase and service the cars. As a result, in some regions, especially the Asian countries, the company has now started outsourcing most of its transport needs.
Investing in technology such as tracking, makes it possible for the transport managers to keep track of vehicles and manage transport time better. Other techniques such as cross-docking has also allowed the business have a more efficient distribution process. This technique allows the business to pick up products directly from the manufacturer, sort them out there and send them directly to the consumers in the shops (Branch 67). Distribution centers, warehouses and any other intermediary is eliminated in the process, minimizing time taken to transfer goods and the cost. Carrefour has made this technique possible by getting most of its products locally. In cases where the manufacturer has promised to deliver the products, they may be asked to package them in certain ways in different trucks so that only the required quantities are delivered in different shops. Decisions regarding pricing, merchandising and promotions are made at the each shop’s level to make the cross-docking technique more possible. The manager at every shop is able to make appropriate decisions about quantities and deliveries.
Challenges in supply chain management
Even in well established businesses with adequate experience in supply chain management, challenges do occur from time to time. For a global company such as Carrefour, the biggest challenge arises from managing information needs involved in global based value chains. Today’s businesses depend so heavily on information and how it is managed. Evaluating markets, predicting pricing and understanding competition, all which are important aspects of doing a successful business, are very dependent on data and information.
Carrefour keeps on establishing a new presence in different regions such its new shops in the UAE. As a result, their data keeps on exploding year after year. Economics of data storage get more complex every time the business expands its presence. It becomes more difficult to maintain accuracy, and efficiency may reduce. Data interpretation has a major influence on how the supply chain of any business is managed. For a manager who is unable to convert data into information, availability of data may not be very helpful to them.
The other challenge in supply chain management is intelligence and decision making. For global businesses or those which trade in tens of thousands of items, one decision could positively impact a certain range of products and negatively impact the others. The real challenge in supply chain management today is finding ways to fully reap the benefits of intelligent information and decisions.
Another major challenge facing supply chain management today, is finding a real-time sensory network which can manage supply chain concerns everywhere at the same time. Global businesses with a central management and decision making organ have a hard time synchronizing information and using it positively to arrive at useful decisions. Identifying external and internal challenges in the business and inter-relating them is a challenge, making it hard for a business to identify exactly what they need to run their supply chain effectively.
Challenges facing Carrefour and solutions
One major problem facing Carrefour is making intelligent decisions which will have a positive impact on most of their products. For managers to make appropriate and efficient decisions, they need real time information which may not be possible to access for each of the product. This challenge can be solved by the IT community through programming and computing. Software applications have made it easy to manage even the biggest decisions in a business. Real decisions can only be based on what just happened, what is happening or what is about to (Branch 13). Sometimes the managers will need to expand their decisions to take care of future challenges, which can only be possible if a business has enough information to make accurate predictions. Like many other retailers, Carrefour is dependent on volumes rather than huge profit margins. A slight mistake in buying prices and pricing could therefore cost the business a lot. The ability make reasonable predictions about prices and markets also plays an important role in making right and intelligent decisions.
Another challenge facing the business’ supply chain management is data management. Data management today is not just about its availability but is also about being able to convert it to valuable knowledge. Carrefour in UAE will many times need to make decisions based on the outcomes or business processes of other Carrefour shops in other parts of the globe. Managing data from a global market or even a big region such as UAE may not be easy. This challenge can only be solved by increasing day-to-day data accuracy. Carrefour must be able to identify, collect and present data information in ways which will allow sorting and usefulness. “The business also needs to move past the stage of storing data to that of storing information” (Carrefour 2).
Another challenge facing Carrefour’s supply chain management is lack of a system that synchronizes information and decisions in real time. Ubiquity of real-time networks and communications has potential to solve this problem in its entirety and help supply management become more efficient in many businesses today (Branch 45). Identifying more portable technologies will help decentralize many processes such as transport management so that all the relevant people can access the information even when on transit.
Conclusion
Carrefour chain of hypermarkets has established a name for itself as a global retailer. For a business that has a presence in almost every major city in the world, managing its fleet of trucks, inventories and logistics is a challenge. Carrefour UAE has slowly expanded to establish eleven hypermarkets and two supermarkets in the region. UAE accounts for almost 10% of the business’ revenue, making it a significant region for the company. Supply management for the business includes managing its transportation, inventories and logistics.
Carrefour UAE has invested in advanced technology to manage its supply chain in an efficient manner, one that allows it to be synchronized with the rest of the shops all over the globe. Electronic Data Interchange links its shops and warehouses all over the world and helps the business in pricing and other processes. Other technological investments in the business include the Integrated Composite Application Network (ICAN), which integrates its stores and allows it customize its operations. By using the latest technology and de-centralizing some of its operations, the company is today one of the most successful businesses in supply chain management.
Works cited
Branch, Alan. Global Supply Chain Management and International Logistics. New York: Routledge, 2009. Print.
Carrefour. Strategic Orientations, 2010.
IBS Center for Management Research. Carrefour: Managing the Global Supply Chain, 2010.