Logistic and Maintenance Strategies Employed by Carrefour - Case Study Example

RRЕFОUR LOGISTIC AND MАINTАNАNСЕ by Student’s Name Code + Course Name Professor’s Name University Name City, State Date Introduction Logistics is made up of a planning orientation and framework that aims at coming up with a single plan that would enable the flow of products and information in businesses or organizations. Over many years, logistics has played an important role in the provision of products at the right time, place and condition. The importance that logistics play in ensuring the success of organizations cannot go unnoticed. It is important to note that it is not a recent phenomenon and that it deals with how people and material are organized, moved and stored. It mainly involves the planning and control of how materials and information related to it flows of within and between various organizations. Its main aim is to facilitate the flow of the right materials to the right place and at the right time. This is usually done while ensuring that the total operational costs of the whole process is optimized. This paper seeks to analyze the logistic and maintenance strategies employed by one of the World’s major retailer, Carrefour. Carrefour has over the past few years grown to be a global operation, registering a turnover of € 91.5 billion in 2011. Its operation has been expanded to cover over 33 countries around the globe. Logistics and maintenance therefore form an important part of this organization. Logistic planning as well as maintenance activities have made Carrefour become the largest retailer in Europe and the second largest globally, only behind Wal-Mart. Over the past few years, Carrefour has been focusing on expanding into new as well as emerging markets. It is a hypermarket that deals in various products that include groceries, textile, household items as well as food items. The retail businesses that Carrefour deals in include discount stores, online stores as well as convenience stores. The wide extent of businesses the company deals in means that it has a great number of competitors that range from other convenient stores to hypermarkets such as Tesco and Wal-Mart. Company information and history Carrefour has grown to become a global brand over the past few years. This growth has seen the company rise to become Europe’s top distributing entity and second on the global scale. The total number of stores operating under Carrefour is well over 11,000 and the stores are located in over 33 countries. Over 2 billion consumers are served by Carrefour around the world. In addition to that, the company employs well over 400,000 workers (Carrefour, 2014). The company was founded in 1959, shortly after the Second World War. The post-world war period saw the food retailing industry in France grow in bounds, giving two businessmen, Louis Defforey and Marcel Fournier an opportunity to venture and establish themselves in the industry. The small family owned business rapidly grew into big retail shops which led to the formation of the Carrefour Company. Two years after the company’s formation, the first supermarket was opened in Annecy. The good prices as well as location made it a favorite purchasing destination for most consumers (Techbusiness 2009, p.2). In 1963, the two co-founders decided to incorporate a new idea into Carrefour Company. Instead of dealing in retailing of food as well as household products, it was decided that the business should venture into other activities such as shopping center, gas services, parking services as well as food retailing, all within one location. The area covered by the shopping complex was to be 2500 M2. It is this idea that gave rise to the modern hypermarkets. The company continued to grow with the 60s and 70s seeing addition of new convenience services as well as expansion of the company’s capacity. The continued expansion of the business made it impossible for other small retailers to compete with the hypermarkets. To protect the small retailers, the government had to set growth limits for hypermarkets. This forced the large retailers to re-look their strategies with most of them, Carrefour included, opting to look for new opportunities outside the country (Techbusiness 2009, p.5). The first hypermarket opened by Carrefour outside France was in Belgium and this was in 1969. Other hypermarkets followed in Spain, Brazil as well as Argentina. Expansion into the Asian market started in 1989 with the company opening its first store in Taiwan. Entry into the US market in the 1990s proved quite challenging as the firm failed to establish its presence (Techbusiness 2009, p.5) 1997 saw the entry of Wal-Mart into the European market. Wal-Mart entered this market through the acquisition of 21 warehouses belong to German’s Wertkauf GmbH. The retailer further acquired 74 warehouses belonging to Spar Handel AG. Major players in France became wary of the threat posed by Wal-Mart when the company started approaching both Carrefour and Promodes. The companies had to re-look their strategies. Carrefour and Pomodes decided to come together in a merger which went on to strengthen Carrefour’s European position. The company’s position was also enhanced in the Latin American and Asian markets too (Carrefuor, 2014) Carrefour logistics All retail needs of customers are offered by Carrefour stores. The company has 498 hypermarkets, 2198 supermarkets, 503 frozen food stores as well as 2143 convenience stores. Coordination of operations in these retail outlets requires an elaborate logistics strategy. This makes it possible for the company to offer customers the best quality of products. In addition to that, an elaborate logistics systems makes it possible to offer products at the lowest prices while at the same time ensure the highest-grade service.7 core aspects guide the company’s values, freedom, responsibility, sharing and respect. In addition to that, integrity, solidarity and progress are also valued. Store operations take the central position of the company’s logistics. The different stores are under the control of a store manager. Advertising as well as decorating policies are under their control. Product mix for each store is also decided by the managers in conjunction with the department heads. Heads of department decide the type of commodities that they want to buy and the suppliers of the same. Carrefour’s central purchasing system makes it possible for purchases to be made centrally, but this is only done if mass purchasing offers more benefits than local purchasing. It thus follows that products may vary from one store to another since they come from different supplier. In addition to that, most suppliers initially have to get into negotiations with all the stores in a country or a region in order to be guaranteed that their products would be available in the stores. To strengthen its purchasing power, central negotiations with some suppliers is usually conducted at the company’s headquarters. Local purchasing is also done for many products. This is mainly done for perishable goods that require fast transfer from the sources to destinations. The increasing number of stores around the globe means that the company has to deliver a very large amount of products to stores around the globe. The Carrefour Le Rheu logistic center operates for 24 hours every other day and makes it possible for the logistical activities to be conducted in an organized way. The delivery of huge quantities of products to billions of people around the globe calls for optimization of logistics as well as transport. Management of material flow in efficient and environment conscious ways forms the core element of Carrefour logistics. To ensure reduced emission of carbon gases during the transportation of goods to and from destinations and sources, the company has focused on reducing transportation by roads over long distances. Logistic networks have been developed in nations where large volumes of goods are constantly flowing. To optimize transportation, the company has undertaken a number of steps that include utilizing alternative means transportation, backhauling as well as consolidation warehousing. The company prefers transportation modes that make it possible for large volumes to be delivered. Ship and rail transportation offers this advantage. It is important to note that Carrefour France was able to achieve its set goal of transporting 40% of its goods by river and rail. Carrefour has also enhanced its logistics by engaging its key suppliers in inventory management. This approach has made it possible for about 60% of the company’s inventory to be co-managed and controlled by important suppliers up to the point when the goods reach the company’s stores. This has not only ensured that logistics costs are kept at low levels, but it has also ensured that goods are delivered at the right time and in the right condition. The important suppliers also have to deliver the products to the company’s stores when they are ready to be sold. This approach has resulted to reduction in time needed to prepare the products for sell in the retail stores. The flow of finished products to customers has to be managed by the company. This is an important process as it ensures the availability of products in the company’s stores. The distribution channels utilized by the company be placed in three broad networks; those for the delivery of grocery and perishable products, delivery of same products to various stores as well as for delivery of products that take long in the warehouses. Distribution warehouses also form an important part of the company’s logistic system. The company has a good number of warehouses that makes it possible for goods from different suppliers to be collected at one point and later on be distributed to various stores. The logistic system utilized by the company also takes into consideration information flow. The system is able to adapt to the changing delivery plans as well as changing order volumes. This has made it possible for time taken for deliveries to be made to be reduced and has also resulted to reduced logistical costs. The flow of information between the stores and the warehouses is also important as it makes it possible for the required goods to be delivered at the right time and in the required quantities. Importance of logistics and supply chain Supply chain management and logistics are two terms that are usually utilized in the same context, it is however important to note that logistics is less broad than supply chain management. Logistics forms part of supply chain management. Logistics and supply chain has played an important role in the success of Carrefour. Apart from ensuring the timely delivery of services, it has also ensured that goods are available in the right quantities when required. Effective supply chain has ensured that the costs involved in supply chain management are minimized and these has resulted to lower prices of goods and services offered by the company. Activities such as warehousing purchasing, handling of materials, protective packaging and information maintenance form part of the supply chain. Warehousing has been of great significance to the company’s success and involves activities such as determination of the space required by merchandise, storage layout as well as configuration of the firm’s stocks. The roles played by warehousing include material handling, storage, order management, information management (Ross 2004, p. 538). Under supply chain, logistics is taken as the continuation of a firm’s marketing strategy. The supply chain has an impact on various aspects of the organization including corporate profit, customer satisfaction as well as integrated efforts. In Carrefour’s case, the supply chain has ensured that the customer needs are meet by making sure that the constant flour of products between the suppliers and the company is maintained. An effective supply chain ensures that material and information flow between different entities in a transaction is maintained at sustainable levels. This in turn ensures that a good relation is maintained between the suppliers and the firm as well as the firm and the final consumers. Good customer relations are not only important for corporate profits, but it also ensures that the organization maintains its customers and remains in the business. Providing quality and exemplary services to customers is a good way through which an organization can build its reputation and advertise itself since it involves no extra costs. Effective supply chain management makes it possible for firms to maintain a competitive edge over its rivals. The success Carrefour can be attributed to the effective supply chain management and logistics system in place. The needs of most customers can be effectively and efficiently met through well laid out logistic systems. Supply chain management makes it possible for activities such as tracking of the inventory, transportation of stocks and storage of the stocks to be analyzed and evaluated. Conclusion This paper discussed Carrefour’s logistic approach and analyzed the logistical factors that have led to the success of the company. The paper pointed out that effective supply chain management has played an important role in ensuring the success of the company, which has grown to the largest product distributor in Europe. It mentioned how the company ensures that its logistical operations are environmental friendly and how a system has been developed to ensure that information flow between the stores and the company’s warehouses is maintained. Apart from ensuring high levels of customer’s satisfaction, the company’s logistics approach has ensured that the business remains profitable and competitive. Reference list Ross, David Frederick .2004. Distribution. Boston: Kluwer Academic Publishers. Print. Carrefour >. 2014. [Online] Carrefour.com. Available at: [Accessed 19 Apr. 2014]. Techbusiness, 2009. 1 Carrefour vs. Wal-mart: The Battle for Global Retail DominancE. 1st ed. [pdf] AGSM, pp.1-33. Available at: [Accessed 19 Apr. 2014]. Read More