Missing office supplies slows down business. Tom Stemberg grew so tired of business supplies delays that in 1985 he left his career as a supermarket chain executive and turned entrepreneur. Stemberg struck upon the idea when his typewriter ribbon broke on Independence Day weekend as he was preparing a business plan and he was unable to find a store that stocked the ribbon. From his vantage point in the supermarket business, Stemberg also noticed that ballpoint pens were selling for $2 retail despite selling for 30 cents at wholesale establishments. Opening its first store in 1986 and its first Canadian store in 1991, Staples led the office superstore market explosion throughout the 1980s and 1990s. Staples' approximately 50,000 employees have served individual customers and businesses ranging from home-based entities to Fortune®500 companies in 27 countries. The company operates more than 2,000 office superstores and also serves its customers through mail order catalog, e-commerce, and contract businesses. Its strategy of making it easy for customers to buy the products they need has fueled Staples’ highly successful expansion around the globe. But for this high-performance business, market leadership was not guaranteed.
Past supply chain capabilities
As competition intensified in the retail office supplies market, Staples looked for ways to sustain is leadership position. Through its Staples Advantage program, the company publishes white papers and blog entries on topics like supplier performance analysis and supplier consolidation negotiations. Much of this knowledge publication and sharing was achieved by third-party market trend analysis. For example, in discussing supplier consolidation programs, the company cited research by The Hackett Group that world-class companies relied on 55% fewer vendors than less successful companies; and findings by AMR Research that organizations spend as much as $585 to $760 annually per supplier. Retail Systems Research reported that multi-channel supply chain visibility and network optimization would be key supply chain management challenges going forward. Staples hoped these trends would favor them, but competition was putting pressure on both the top and bottom lines. For instance corporate customers recognized that supplier consolidation meant additional bargaining leverage - in terms of additional volume discount opportunities and more strategic-level attention and relationship management. Retail consumers were also electing to shop at competitor establishments, and increasingly looking to the Internet for their shopping experiences.
Seeing these trends, Staples recognized that improvements in service levels and profitability in general required improvements in their supply chain management in particular. Delivering on their “Yeah, we’ve got that" promise profitably was becoming more challenging. Staples CEO Ron Sargent acknowledged, "We were far from world-class in managing the supply chain so we did something about it…"
Yeah, we got that
In 2002, Staples kicked off a supply chain transformation effort and brought in an international consulting organization to spearhead the analysis. Processes across the value chain would be redesigned - from circular advertising, to in-store promotion, to store space management, to replenishment merchandise flow, and to in-store inventory management. The goals of this transformation effort were to increase supply chain visibility, improve supply chain reliability and costs, and improve effectiveness across the value chain. In terms of visibility, analysis showed that a disconnect existed between the inventory that Staples' systems showed as out-of-stock and what was actually available in stores. Through extensive internal research, the company learned that what it thought was a 98% in-stock level was, in fact, only 94.5%. A big opportunity for Staples was in ensuring that inventory was…