SUPPLY CHAIN MANAGEMENT

Term V, Section A

Solution of Case: Aldi

Group 20

Pulkit Garg (PGP/20/168) - 7875692906

Shashank Kaushik (PGP/20/180) - 8886932678
Shubham Srivastava (PGP/20/182) 9620052552

INDIAN INSTITUTE OF MANAGEMENT, KOZHIKODE

Que. 1 What are the core elements of Aldis business strategy?
The core elements of Aldis business strategy are as following:
1. Decentralization, Cell Structure with hub and spoke model
2. Less complexity: simpler operations, modularity in pallets
3. Lower costs across the supply chain
4. Doing only the most necessary things which add to the customer experience
5. Ensuring strong relations with vendors able to provide high quality products
consistently
6. Keeping most of the items on display instead of in store room, less inventory
7. Less use of technology, relying on expert manpower combined with simple operating
structure
8. No expenses on marketing or strategy offices, no expenditure on management
consultants, expensive certifications
9. Keeping an arms length from the press
10. Cash business, no acceptance of credit cards
11. Less number of multi-skilled employees with higher salary
12. Keeping less variety to avoid complex calculations of SKU availability optimization
13. No expenditure on market surveys or demand forecasting or on publicity
14. No acceptance of favors from vendors
15. Very high inventory turnover: 50 times a year

Que. 2 How has Aldi outshone other players (including Walmart) in Germany?
Aldi outshone other players in Germany by taking the following measures:
1. Appealing to the zeitgeist of Stinginess of Germans
2. Keeping less number of non-intrusive store associates, which was liked by the Germans
3. Always providing the high quality products at low cost
4. Striving to earn customers trust
5. Despite being successful, staying thrifty and frugal
6. Flexibility: Asset heavy model preferred but some stores based out of asset-light models
(Rentals)
7. No debt-financed expansion leading to healthier income statements (No interest)
8. Small-store (Cell based) model leading to tax-benefits (unlike Walmarts attempt to
replicate supercenter in Germany).
9. Controlled decentralization: 13 cells with each cell administering 60-80 stores leading to
ease of operations (13 consolidated income statements)
10. Forging long-term relationship with suppliers (helping supplier survive and grow)
11. The small-store format will reduce the retailer's overhead costs
12. No-frills approach means customers will bag their own groceries and there's reduced
labor costs
13. There's also a focus on private label brands, which tends to be higher margin and
provide more opportunities for deep discount pricing
14. Aldi, has a simple strategy to win more customers: everyday low pricing