Beruflich Dokumente
Kultur Dokumente
ALDI Einkauf GmbH & Co, which is abbreviated as ALDI (also an acronym for Albrecht
Discounts) is a Germany based retail giant with operations around the world. ALDI is also
Germanys biggest retailer and is divided in terms of operations as ALDI Nord and ALDI Sd
(ALDI North and South). Although incepted in 1913 by the mother of Karl and Theo Albretch,
it was by the late 30s when the brothers ventured into the family business, the organization
started growing. After the war ended in 1945, the brothers expanded the business rapidly. In
1948, soon after the German currency reform, the Albrechts incorporated their grocery business
as the Albrecht Discount Company. At this time, the company had 13 stores in the Ruhr Area of
Germany. Karl and the late Theo are the richest Germans owing to ALDIs shares still being
held mostly by them. ALDI maneuvers predominantly as a hard discount; value for money
retailer concentrating on cost leadership.
Moreover, the organization concentrates within the realm of essential items like low-priced,
limited variety of fast moving domestic products. They follow an efficient process, combined
with minimal variation of product has resulted competitive advantage for the organization.
Typically, ALDI stores carried only around 700 different products, compared to around 25,000
products carried by a traditional retailer and almost 150,000 carried by a Wal-Mart Supercenter.
In addition to being low cost, a major factor with ALDI is that, it has a no frills policy which
means that there is minimal filling of shelves and minimal customer service.
In terms of the strategy, ALDI has a strategy of minimizing costs in such a way that the
customer would be persuaded to repeat-purchase behavior. On further analysis shows, the
organization prefers to differentiate itself from other major retailers including the likes of Tesco,
ASDA, Walmart, and Woolworths and thereby showing a differentiating strategy. For example,
ALDI illustrates of a scenario wherein the organization has and supplies products which are
rather inexpensive, non-branded German and European quality product with competitive
pric,e which is in contrast to Woolworths and Tesco. This pointed that the organization has
characteristics of both a cost leadership strategy and that of a differentiation strategy.
Answer to Question no 1:
This is
an
area
of
opportunity for the Retail
sector
where
smart
retailers can attract and
retain more
customers,
thereby
increasing
revenues, while at the
same time reducing their
costs and improving the
customers
buying
experience.
Lean
is
a
systematic
approach
of
eliminating waste
so every step adds
those elements of the product or service that the customer believes they legitimately should be
paying forwithout paying for unnecessary process waste. Further, this value should be
provided at the rate that the customer requires it, when the customer requires it, where the
customer wants it, in a smooth, uninterrupted flow.
For example, if a customer wants to buy a carton of juice, and he/she is an equal distance from
a local supermarket and from a local convenience store, with the only difference being that the
juice at the supermarket, like ALDI, is cheaper. Where the customer will go to make their
purchase?
Or for second instance, If customer is in a rush, its very
possible that he/she will choose the convenience store, and
pay a premium, because at that moment, time is more
valuable (as well as the juice), and theres a high chance
that he/she may encounter a long queue in the
supermarket. So obviously, value isnt always just about
the lowest price.
Anything that is a
part of the retail
process and isnt
offering a value is
by
definition,
a
waste.
To reduce this regular occurrence of long queue, supermarkets started introducing specific
checkout isles labelled 10 items or more, then 5 items or more, then self-services etc. This is
an example of focusing on what the customers value, and then going about giving it to them by
improving the flowa key concept in Lean Thinking.
Does Lean thinking makes any sense to Retail system?
Lean Thinking isnt some complex mysterious set of philosophies and practices its a simple
method that creates a lot of sense, and delivers the aptitude of a better way with better results.
The lean bit originally referred to trimming the fat from processes during product
manufacture. Its actually about doing things rationally to free up time, remove various forms of
waste, and provide a better experience for the customer and employees, and to become more
economical as a business. Waste is any activity that consumes time, resources, or space but does
not add any value to the product or service. The point is, Lean Thinking is about a continuous
perfection to achieve business excellence.
For example, these days, all the banks is known to have a single queue, and when you get to the
front of it, you simply wait for the next teller to indicate (often via a light or bell) to let you
know that theyre ready for you. In Lean Thinking, this is a pull system where the bottleneck
is ready for the following piece of work.
However, another continuous improvement approach, very popular in retail sectors known as
Six Sigma, which simply means a measure of quality that strives for near perfection. Six Sigma
is a disciplined, data-driven approach and methodology for eliminating defects (driving toward
six standard deviations between the mean and the nearest specification limit) in any process
from manufacturing to transactional and from product to service. These days, the Six Sigma
approach has fallen toward the Lean approach to the extent that theres now Lean-Six Sigma,
in an attempt to diminish the drawbacks of the pure Six Sigma approach.
Poor or misguided application leads to poor results!
True lean is based on respect for people, and growing your people as well as your business. The
Lean tools are only 10% of the story. It is by leveraging your employees brain-power and
readiness to be proactively involved in continuous improvement, doing the right things, in the
right place, at the right time, which delivers sustainable perfection in business consequences.
One may see lean as a way of reducing number of employees in the short term to reduce costs,
believing that employees will not see through this and wont resist it. If it happened, then the
momentum for real continuous improvement will be short lived, and net beneficial results will
be compromised.
The successful application of Lean as a business tactic is dependent on leaderships approach.
The way, the leadership team of a business answers the above question will give a hint as to the
likely success of a Lean implementation. There is no short-term fixing.
Answer to question no 2
For any retailers, products need to be transported to a location where the end user are via a
third-party logistics provider (abbreviated 3PL, or sometimes TPL) or by their own fleet of
vehicles. A company (retailer) takes a decision to have an in-house vehicle fleet based on the
needs of the company to get goods to customers as quickly as possible. However the ease of
having a vehicle fleet to transport stuffs comes at a considerable price. The cost of having an inhouse vehicle fleet is often compared to using a 3PL service, but the choice to have an in-house
fleet is not always based on cost.
The idea of Outsourced transportation has
retailers
taken over own private fleet is a myth, that Sometimes
generally exaggerated as a trend. It is true that 75- prefer to have their
80% companies use outscored transport system, but own
private
fleet
at the same time mainstream of them are also because
of
the
having their own private fleet. One of the reason is
performance level of
the performance level of these 3PLs service
3PLs
service
providers often not reaching to an acceptable level. the
often
not
And that can create a larger expenses to providers
synchronize it with the operation. For instance, if a reaching
to
an
company has a reducing inventory policies that acceptable level.
means transportation has less scope of delivery
which triggers the higher transportation cost. One can have either less inventories resulting
higher transportation cost or more inventories resulting lesser transportation cost. Because of
that, it makes little sense for some retail companies to focus on cost of transportation.
On the other hand, despite potential advantages, creating a private fleet can be a scary intention
for any business, large or small. However, due to increasing competition for common carriers or
3PLs, own private fleets are once again hot. More rigorous hours-of-service rules, rising fuel
costs, and other factors have combined to squeeze the availability of 3PLs carrier capacity,
inspiring more retailer companieslarge and smallto consider assembling their own fleets.
Beth Enslow, a supply chain analyst at Aberdeen Group at Boston says "Many companies find it
more cost-effective to run fleet operations themselves". For example, some retailers (like
ALDI), who operated nationally and internationally, have resisted the temptation to outsource
carrier operations to 3PL provider like Eddie Stobart Transport and NFT and opting to operate
their own fleets. Though, for these companies, the lure of improved customer service, better
scheduling flexibility, and guaranteed capacity is a hard battle.
The expenses of owning a fleet is sometime more than the company is aware of and the unseen
costs at times can result the difference between owning fleet of vehicles and hiring a third party
transportation service. These includes:
Vehicle Costs Buying or leasing a vehicle is very expensive. New one cost more than
used one, but need less maintenance and will typically offer a greater mile/gallon will
drop the overall cost of the own fleet of vehicle
Fuel cost At the same time if retailers consider an alternative fuel vehicles such as
CNG driven vehicle, which may also have government tax relief (if available), dropping
the overall cost of running the own fleet of vehicle. At the same time, as fuel prices vary,
it is challenging to budget each month for the fleet operation.
Insurance Coverage Vehicles used in a retail company need to have a business
insurance coverage for vehicles. It is important to have a full coverage otherwise any
accident could lead to a severe damages and loss against the companies operating profit.
Vehicle Repair & Maintenance Owning a fleet of vehicles means that those Trucks
and Lorries need to be maintained regularly, including fuel changes, emergency tire
replacement, air filters, brake pads, and transmission fluid and lots more. Apart from the
regular maintenance stuffs, there are always sudden maintenance and repairs and
accident repairs that may be required.
Transportation Employees Maintaining a privately owned fleet means that the
company must either employ drivers or use contracted drivers. Employing a fleet of
drivers not only have a payroll obligation to the company, but there are other costs for
employees such as workers compensation insurance, taxes, and health insurance.
Contracted drivers can provide a similar service at a lower cost, but that contracted
drivers can lead to jeopardy if they do not have the necessary insurance.
Employee Training New drivers may need to be trained and that is an added cost to
the company. The cost of either purchasing training or developing the courses in house
are again additional hidden expenses.
Unexpected Problems The cost of a missed delivery or sickness of diver can impact
on total cost of production and hence on customer satisfaction. A company can hire
back-up drivers or temporary contract drivers in case of illness and employee vacation.
Because of shrinking carrier capacity of 3PLs, many retailers like Walmart, and ALDI are using
own private fleets as a way to regain control of distribution of products. Before taking any
decision, they need to carefully evaluate the potential benefits and drawbacks involved with
operating your own fleet. Below are some of the advantages and disadvantages of a privately
owned fleet shown by Inbound Logistics Magazine:
ADVANTAGES:
1. Guaranteed capacity.
2. Enhanced customer service.
3. Scheduling flexibility.
4. Can design fleet to meet specific needs.
5. Free advertising.
DISADVANTAGES:
1. Capital expenses.
2. Recruiting/retaining drivers.
3. Ongoing maintenance.
4. Scheduling/routing responsibilities.
Although, the convenience of being able to make backup distributions and having control of the
transportation of your finished goods can outweigh the cost of maintaining the fleet, companies
like ALDI is still preferred to have their own private fleet eyeing to gain some economies of
scale. Managers can decrease logistics expenses by exercising larger control over
transportation by directly monitoring the routing and scheduling of their own fleets, they can
decrease the length and variability of in-transit lead times. Less lead times produces more
reliable demand forecasts and require less safety stock to achieve the higher service levels.
Decreases in safety stock provide a permanent saving in inventory levels and free up working
capital for other requirements.
Retailers like ALDI depends on private fleets to continuously replenish perishable products,
confirming a high revenue and more product freshness. A private fleet enables management to
exert the control required for a high-velocity supply chain and to optimize their network (Cooke
2002).
Private fleets often serve as moving billboards. The advertising may provide significant value to
the firm, especially if the truck has a clean appearance and is operated safely (Morgan 1970).
Advertising on the sides of the truck represents a unique image of the company with an
exposure to millions of potential customers. Retailers confer a significant value to this
advertising.
Finally, for the retailer like ALDI, a privately own fleet increases the potential exposure of the
firm to organized labor. The Teamsters frequently attempt to represent drivers, as well as other
non-driver employees (Coyle, Bardi, and Novack 2006). Firms with unionized drivers usually
have restrictive work rules that negatively affect output and flexibility. So, the decision to use a
private fleet first must be a strategic decision as there are many countless elements that effect
the decision.
Answer to the Question no 3
ALDI was one of the pioneers of the hard discount style of retailing in Germany. The Aldi
Group (which comprised of two companies - Aldi Nord and Aldi Sud), was known for its low
prices and no-frills business model. Targeting a specific segment of customer is the ongoing
process. To establish the position, companies need to analyze their external and internal
environment and choose one or more strategies to create a value for the targeted customers.
ALDI is featured with high efficiency of operation and management based on the costreduction principle to offer and attract a particular segment of customer who are cost sensitive.
All ALDIs stores in the world are characterized by simple design and decoration thus to
minimize the cost. Hard-discount is the most important feature of ALDI stores, but the low
price is not based on the sacrifice of products quality. ALDIs cost-saving method is reflected
through the followings:
1. Lean production
2. Limited number of good-quality products for selling in the stores to save the expenses
of shelves.
3. Reducing costs by eliminating waste
4. Lesser number of employees like four or five employee for one store compared 15
employees at a standard supermarket.
5. Never does advertising or public relations. In view of saving the cost for benefiting the
customers, all the expenses related to the PR or marketing are eliminated.
The problem for the big retailer is that both technological and economic forces have restricted
the buyer to become far more price sensitive than in the past. More and more customers are
changing their shopping trends and accepting this whole discounting phenomenon because of
reduced consumer spending power and this trend is not likely to change in the foreseeable
future.
Technological knowledge has enabled the consumer to obtain much stronger visibility of prices
across the marketplace. Social media has allowed consumers to interchange information,
specifically and in general, resulting in price-conscious customers being able to shop around far
more efficiently. As a result, a retailer like ALDI, with a convincing price message been able to
gain a considerable market share. Poundland, Primark and others also have similarly benefitted.
However, ALDIs success, to attract a specific segment of customer, is due to their price
positioning will be misguided. What is certain is that these economic recession has propelled
many customers out of their normal shopping patterns to experiment with alternatives hard
discounter like ALDIs. Due to the prolonged length of the recession and recovery, more and
more customers are testing out the hard discounters and repeat shopping is getting them used to
a different experience. This factor is significant because the very different shopping experience
has traditionally been a barrier to ALDIs progress to date.
The external environment is changing rapidly and in these circumstances, it is vital that
companies understand their newer business models. ALDI does and is therefore succeeding by
not chasing every trend or every segment of the market, instead focusing on executing its value
proposition comprehensibly. ALDI understands its value is offering high quality products at low
prices to the weekly shopper. There are sufficient value-conscious customers who wish to visit a
store to touch and feel the product before purchasing and ALDI is targeting this segment. ALDI
is not the most vigorous of retailers in its style to the market and it doesnt need to be.
However, ALDI is demonstrating some flexibility, and is testing new concepts such as a c-store
proposition at their Kilburn store in London, located on a busy high street where there is no car
parking and it has been intended to cater for the daily convenience customer. The compromises
to the existing operating model are clear as one walks the store the high number of staff, the
tightly packed shelves, more impulse lines to name a few. As with every experiment it is clearly
a work in progress. The store is benefitting from very high footfall and this should be seen as a
trial for the retailer. Another innovation is the wines and spirits e-Commerce offering being
trialed in Australia. The offer is only available to customers in Victoria, New South Wales and
South Queensland as the retailer cautiously experiments through a new channel.
With a constraint growth, there is increasing evidence coming out of the behavioral economics
field that customers can be put off by ever increasing choice. The psychologist Daniel
Kahneman, says Thinking, Fast and Slow, has discussed the fact that humans find rational
thinking effortful. He argues there are two systems in the brain: one in which most decisions
made are fast, automatic and intuitive (system 1), and one in which decisions are slow,
deliberate and effortful (rational thinking - system 2).
The brain has limited capacity for system 2. With multiplying options accessible to customers it
can be comforting to visit a retailer where they trust that the limited range on offer is of the
highest quality with a competitive price. The relative lack of choice can essentially be a selling
point to customers who are overloaded by promotional cues every night and day. And thus,
ALDIs proposition is likely to be even more convincing to many more customers in the future.
ALDI package is primarily aimed at low-income working class, no fixed income residents and
retired old people. In Europe at present the proportion of the ageing population has reached to
20%. In Germany already close to 25%. Therefore, in order to adapt to these people's need,
most of ALDI store are located in downtown residential areas and the small towns. As the low
income earners, the elderly and housewives mainly live in urban areas and small towns. In
addition, ALDI paid precise attention to college students, the demand of foreign workers.
Almost every city has more than 10% of the foreign workers, and each has University City and
there are many foreign students, ALDI give priority to these people, so that they can have
dinner in convenient food at convenient price.
Answer to the question no 4
The entrance of ALDI as a heard discounter firms has sharpened the rivalry of an already
aggressively competitive market. Competitive Equilibrium is a term used to describe the
relationship between firms in an industry. In the FMCG industry the competitive equilibrium is
very unstable and characterized by continuous battle, often in the form of competitive price
confrontations. These happen because firms are trying to charm the same type of consumer by
offering a very comparable product range, frequently in very close proximity to one another.
The challenge faced is to show differentiation from their competitors in the mind of consumers.
The development through possesses of continuous improvement can be obtain through
performances like:
1. Differentiation
Differentiation is the process of adding a set of meaningful and valued differences that
distinguish a company's offering from those of its competitors. Differentiation is strongest when
it satisfies all of the following criteria:
Much of its success in 2011 can be attributed to its TV campaign: ALDI. Like brands only
cheaper, which has the core message that ALDIs private label is just as good as major brands
but is significantly cheaper.
Its a message that has stuck home in these tougher times and as long as the price stays low and
the quality high, its a success story thats set to run and run.
Personal Point of View:
While ALDI was one of the biggest and most successful retailers in Germany, some analysts
expressed concerns that the company's growth might slow down as the German market became
saturated. Reportedly, by 2005, more than 80 percent of the Germans lived within 20 minutes of
an ALDI store. Analysts said that this would limit the company's expansion in Germany.
Besides, in Germany, shopping at discount retailers was not restricted to the lower income
groups...
Imagine an ALDI stick of rock with the words low cost embedded through its length. ALDI
consistently delivers products at the lowest prices via a business model, designed and built to
operate at the lowest cost. The ALDI story is interesting because it is a great example of a
business that thoroughly gets its proposition to the marketplace and follows it through in every
aspect of its operation. This proposition has a sustainable customer following in the
marketplace which is likely to remain and grow in spite of a changing technological landscape
and improving economic conditions. By maintaining a consistent market offering it has a loyal
customer base hat is growing as it extends its reach through steadily building its reputation,
store footprint and channels.
The lessons to be learned from ALDI are not about cost. The lessons are about clarity,
consistency, value to the customer and a focus on execution precisely. Our advice to the major
grocers and to all businesses would to invest similarly in developing a sustainable and
inimitable proposition to the marketplace, by understanding the customer, plan the operation
consequently and emphasis all the organizations energy on accomplishment.