H.E. Butt Grocery Company Jae-Young Chung Ian Kwan Doris Lim WonShik Woo
Company Overview n 12th largest grocery retailers n Over 7 billion in sales n 260+ supermarkets, mostly in Texas n Gas 'N Go outlets. n Operates facilities for processing milk, meat, ice cream, and baked goods.
Industry Overview n A wave of Consolidation - Through acquisition to increase efficiencies and strengthen market positions - Some small & localized stores – bankrupt n Online grocery - customer segment - save time and the trouble involved in going to the store.
Total Electronic Grocery Spending n Percentage of industry total
Suggested Services by HEB n Online Service - Provide info services: recipes, food safety info. - Kiosks in the stores for web site access - Provide value added services & retain customers n Transactional Pharmacy Web Site - Order online and receive delivery via direct mail - Leverage existing assets, build e-commerce expertise n Pick Up Service - Pick up from the stores or convenient location
Efficient Consumer Response (ECR) n Industry cost-reduction initiative n Responsive, consumer-driven systems – combine manufacturers, brokers and distributors – maximize consumer value & minimize the supply chain cost. n Example: use of paperless system between retail checkout & the manufacturing line.
Structure of new supply chain n Store Replenishment System - Use POS data to produce a perpetual inventory - SRS – judges stock-outs at the shelf level, not warehouse level. n Fast – Slow Warehousing - To manage fast & slow-moving items from different distribution centers & delivery systems n Intranet & B2B infrastructure - Use of Extranet – collaborate with suppliers - Use of Intranet for info exchange within HEB
Differences of its approach n Avoid last mile delivery by having depots n Kiosks inside the stores to provide access to their web site n Launch transactional pharmacy web site n Use Internet to accompany its retail store business n Focus on improvements in its retail store
Comparison between HEB and others
Benefits created by its approach n Reduce shipping cost by avoiding last mile delivery n Depots could be used as cross-docks to enable home delivery model in the future n Tap into new market n Deepen relationship with customers n Increase data volume for internal marketing analysis n Give options to customers
Challenges of the approach: n Process Engineering n Huge Investment (8 digit) n Increase in fixed costs
Electronic Tagging Currently no electronic tagging due to expensive price and ethical concerns Should implement in the future n Price decreases n Customers are willing to allow HEB to check down on their behaviors
Conclusion n HEB’s approach (establish online presence and improvements in operations and supply chain) will work given the benefits outweigh the costs n Implement electronic tagging and loyalty card program in the future