Bite-size Case Study

Strategic alignment: Aldi

Published on February 25, 2021 Originally recorded 2011   3 min
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One of the best examples, I think in strategic alignment is actually the retailer Aldi. Aldi have what I would perceive to be a segmented supply chain strategy too. The vast majority of Aldi products are sold with a very, very low price proposition. What they've aligned brilliantly is their supply chain to actually deliver the vast majority of their goods at a very low cost. They've also designed their store and their service offering to support that. Heaven forbid if you go into an Aldi checkout looking for help with your bag-packing, you're more likely to have your stuff put very quickly into a trolley and you're pushed away to load up elsewhere. But then how do Aldi responds to the retailer requirement to generate footfall? How do they create consumer interest? More importantly, how do they do this without doing promotions, which actually undermine that all important base level demand that an everyday low price proposition creates. They do this quite cleverly through their campaigns. Every Thursday and Sunday, Aldi have a sale. The items in the sale are quite desirable items sold at low cost, it could be a computer this week, or it could be camping items another. These campaigns are planned way, way in advance. They're perhaps ordered from the Far East at low cost. Bought shipment-loads in terms of containers. Actually there's limited supply of these products in the shop. When it's gone, it's gone proposition. Aldi shoppers know that if they want to buy this item, they have to race into the store on a Thursday or a Sunday and buy the item before they're gone. This way, it creates consumer interest, it gets people into the store, but doesn't undermine their underlying supply chain, which can still operate in an everyday low-price way. This is quite a clever way of having essentially two different value propositions for the consumer, and then having two different supply chain strategies that support them. Once strategic alignment is placed, then we can actually look at developing supply chain alignments. What we're looking here is to ensure that the supply chain strategy is supported by the right infrastructure. This is the physical supply chain and its assets, and also by the right operating model. This is the way that we physically manage the supply chain. Really, this is what we call supply chain management. The key elements of the operating model or the way in which we setup our processes, the way we look at governance and decision rights, the organizational design, and the performance measures, and the way we use those in terms of performance management.