Overview Whole Foods’ began with one small store back in 1980 with a commitment to providing natural and organic foods. With less than a dozen stores in the grocery industry providing a service of this nature, its success was immediate. Since its inception, Whole Foods has grown to more than 350 stores in North America and the United Kingdom. Today, the industry has become saturated with markets wishing to provide the same type services. And, it is for this reason, that Whole Foods is maintaining the stance of providing high quality natural and organic foods. Our goal, specifically, is to kick at current Supply
Chain methodologies and practices in the seafood department and determine how best to enhance our processes to maintain the most competitive edge in the industry. Industry and Customer Value Whole Foods goal in the seafood industry is to work with the passion of customers, the commitment of skilled seafood buyers and the dedication of seafood supplier to aid in the restoration of marine and coastal ecosystems and build a more sustainTABLE seafood market Issue #1 – Conformance to requirements: Seafood is considered a high- variability industry; the nature of demand can create large costs due to lost ales or excess inventory.
High-variability products require responsive supply chains, which stress short lead-times, flexibility and speed over cost efficiencies. Issue #2 – Product selection: Offering customers a large variety of products for a one-stop shopping experience; too many options can overwhelm and confuse customers, and can also lead to supply chain issues. Issue #3 – price and Brand: Rarer products and local competition leave little price flexibility. Issue #4 – Measure customer value: Recommended Strategy: Whole Foods Market prides themselves on fresh, natural products, including heir seafood.
Communication must remain open in terms of tracking product sales in real time to see what sells, what doesn’t and how long product sits unparsed. Also, there must be consistency across the supply chain. In order to have a quick and responsive supply chain, additional funds must remain allocated to the budget. Limit products to a fixed set of options that cover most customer requirements, thereby preventing loss Of inventory and customer confusion. Achieve cost advantages through innovation in supply chains.
The perceived higher quality brand of Whole Foods Market will quire a focus on service levels and a need for the supply chain to be more responsive. An increase in supply chain costs can be offset by the higher margins of the seafood’s’ product prices. Network Design The network design which Whole Foods Seafood division employs is critical to its operation and there are a number of factors to consider. Point #1 – Suppliers: Finding suppliers who can meet the immediate needs that are associated with freshness and the quality needs that their customers expect are just a few of the criteria that Whole Foods enforces.
The true challenge is meeting these criteria at the high volume level of a national grocer. The criteria a company in the industry may use to select suppliers might be: Sourcing location. Socially responsible sourcing. Capacity of the suppliers operation. Lead time strategy. Industry demand and forecasting capability. Packaging costs, strategy and location. Point #2 – PL Firms: service capabilities will need to be analyzed. The criteria a company in the industry may use to select PL firms might be: Distance to customers/retail stores; expressed in mileage.
Cost benefit between common carrier and internal transportation. Desired delivery speed. Special transportation requirement capabilities I. E. Refrigerated trailer. Transportation rates. Warehousing services. Integration capabilities with inventory systems of Whole Foods. Point #3 ? Distribution Centers: The ability for the distribution centers to orchestrate the handling of perishTABLE items in a timely manner is critical. The criteria a company in the industry may use to select distribution centers Location of distribution center in relation to retail stores. Product specific handling capabilities.
Capacity of warehouse facility. Warehousing costs, including labor, inventory holding, fixed and operational costs. Safety stock, which is determined by the level of service they hope to obtain. Economic Order Quantity for individual products for each retail store. Alignment to retail store order time/reorder points. Point #4 ? Retail Stores: The criteria a company in the industry may use to select retail stores might be: Compliance with Company standards and food safety standards. Promotion ability for company products. Location in relation to target market Accessibility of the store.
Ability to link inventory information with suppliers, PL Arms and Distribution Centers. Whole Foods would benefits from Suppliers, PL Firms, Distribution Center, and Retailers who understand the perishTABLE aspects of the seafood division and the freshness Of the product. If Whole foods aligns themselves with firms that understand these needs, they will maintain their competitive advantage. Pricing Management Pricing management for the seafood market at Whole Foods should consist of selling quality, MS certified seafood, determined by the demand required, competitive price offers and seafood categories.
Issue #1 – Revenue Management can often be difficulty when selling perishTABLE goods due to fluctuating demand and fixed capacity. Issue #2 – Differential Pricing is based the availability Of products in certain regions. Issue #3 – Dynamic pricing is consistent with seasonality demand patterns. Seasonal products in the seafood market create demand uncertainty. Whole Foods Market customers are sensitive to quality, freshness and availability. Market segmentation can play a vital role. At specific times, different products can be purchased for different prices (I. E. Ales on certain rodents at certain times of the week. ) This will increase sales and keep products from spoiling. It will also keep inventory levels low, demand will remain constant, lead times will be minimal, and the bullwhip effect will be reduced. Regional pricing; allows the practice of exploiting different price sensitivities at different locations. Products that are shipped further to customers outside the products original region can be sold for higher costs than those stores where the product originated in order to recover costs associated with shipping and supply chain expenses.
The use of dynamic rising can benefit increases as the level of demand seasonality increases. Because profit margins are low, using dynamic pricing in this circumstance helps increase profit margins significantly. Inventory Management Whole Foods sells both seasonal and non-seasonal products. In an effort to combat stock-outs, Whole Foods offers some generic products which must meet the standards established for all products sold. Issue #1 – Locating fresh farmed products to maintain stock levels. Ability to locate farmers to maintain the standards established by Whole Foods Farming vs..
Manufacturer Issue #2 – Maintaining a secure level Of fresh seafood to meet customer demands. Problems identifying when and how much to order Issue #3 – Possibility of spoilage due over-stocking Identifying best methods to prevent left over product causing a loss in profits Preventing stock-outs and delays in delivery can be overcome through the use of both a centralized and decentralized distribution strategy allowing for seafood to be shipped from the decentralized distribution centers to centralized distributions center.
These centralized centers can distribute to local retailers. This strategy may also prevent over-stocking because reorders an be based on the specific retail store as opposed to regional re-order. Finally, to prevent spoilage, seafood can to be sold to other local retailers such as restaurants. Distribution Strategy Whole Foods’ current focus is to maintain a high quality of standards in the distribution and monitoring of seafood. It is for this reason that Whole F-odds owns and operates distributing facilities.
Issue #1 – Decentralized distribution centers can lead to increase transportation cost due to the nature of the business which requires frequent deliveries. Issue #2 – Distribution centers are located in the areas that provide the most eaTABLE locations for purveying specific types of seafood. Issue #3 – Centralized distribution centers alone can increase delivery times. Issue #4 – Dependent upon the type of seafood required, delivery times can be excessive even with a decentralized distribution system. Whole Foods could best benefit from the use of both centralized and decentralized distribution systems.
Through the use of both, seafood could be inspected for quality at the centralized distribution center prior to reaching the retail store. Additionally, other services for seafood could be provided such as filleting, and packaging if required. Also, transportation costs could be reduced through the use of contractual agreements with transportation carriers. These agreements would provide a reduction in delivery prices due to the frequent use of their services and aid in the reduction of the bullwhip effect.
Product Supply Contracts The product supply contracts that Whole Foods employs in the seafood division of the business are rather ambiguous. Regardless the factors important to Whole Foods and what the supply chain management should consider when drawing up a contract are speed, flexibility and quantities are the main concerns. Issue #1 – The contract must be more flexible due to the perishTABLE nature of the product. Contracts should contain a set of parameters for high and low quantities.
With reduced flexibility, the adaptability of Whole Foods is reduced. Reduced adaptability can lead to stock-outs or the lack of availability of fresh seafood at the stores. Issue #2 – The contract should promote good quality and freshness. A capacity reservation contract with its supplier would allow for Whole Foods to design a set quantity meeting a set standard to prevent it from purchasing and spending the money to transport inferior product. With reduced quality, the company cannot live up to its goals and therefore loses its great image of quality.
A contract like this can ensure capacity is availTABLE for Whole Foods and reduce the chances of stock-outs. A capacity reservation contract could be designed in such a way as to prevent Whole Foods from wasting inventory space on safety stock because there will always be a guaranteed level of capacity reserved for Whole Foods. This will reduce inventory holding costs (freezer usage) in the individual stores. Whole Foods would benefit from a capacity reservation contract. This would dress all the core characteristics that are important to a properly managed seafood division supply chain.
Reserving capacity with suppliers would ensure that Whole Foods is guaranteed product in a timely fashion. This is extremely critical when dealing with such a perishTABLE item as seafood. Additionally, by reserving capacity there can be less variability in lead times, thus allowing Whole Foods to reduce safety stock in each store and significantly reducing holding costs. 1 Performance Measurement and Executive Summary Group G, a strategic sourcing team, was assigned the task of identifying areas f improvement to aid in the success of Whole Foods seafood department.
The group identified several areas and focused on enhancing them to maintain the quality and freshness Whole Foods requires to maintain its’ current customer base and add newcomers to gain more profits from its seafood department. The areas we were assigned to focus on were industry and customer value, network design, pricing management, inventory management, distribution strategy, product supply contracts and performance measurement within the supply chain evolved Food’s Market Seafood Industry. Specific quantifying metrics will be utilized to determine the effectiveness of the suggested recommendations.
Reduced delivery times, customer satisfaction, order fulfillment and supply chain responsiveness will be enhanced by use of aforementioned recommendations. The company seems to use their core values as a means of operating their supply chain; by using greener methods the company, as a whole, operates their fleet trucks, water vessels, and other modes of transportation in an environmentally safe way. Consequently, the store seems to also save money this way as they find teeter ways to be both economical and Earth-friendly while providing healthy and organic foods.