Supply chain report - Case Study Decathlon PDF

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Download Supply chain report - Case Study Decathlon PDF

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Operations & supply chain - Decathlon

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Julie FERRERE Marguerite FLOURENS Geoffroy GARDEY de SOOS Charlotte GARREAU Matthieu GAUTARD Julie GAVET Marie GERENTET de SALUNEAUX

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MT15 - Operations & supply chain management - Yacine REKIK - 03/21/2018

Table of contents

Introduction

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General presentation of Decathlon

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Modeling of operations and supply chain Local strategy, production, transportation and corporate social responsibility Production Transportation Local strategy Corporate social responsibility Global view of the supply chain

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In depth study : New technological tools Radio Frequency Identification (RFID) How is it implemented in the supply chain ? What are the benefits of using the RFID technology ? Other new technological tools E-Reservation or “Click & Remove” Connected stores project

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Conclusion

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Bibliographic references

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Vidéo “ who we are” et “be where we are needed”

Introduction On the 7th of February 2018, our team visited the Decathlon store of Ecully, where M. Laurent gently accepted to host us and tell us more about the company, its organization and its supply chain.

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We focused on the supply chain process of Decathlon in France. France is a huge market for Decathlon. As shown on the graph, France represented 3.3 Billions euros of Decathlon’s turnover in 2016, which represents 33% of the worldwide turnover of the brand. The brand attracted more than 89 Millions of customers in its stores and on its website. The digital turnover is on the rise and represent 4.1% of the turnover of France for a total of 1.7 millions of clients. (source: sportbuzzbusiness)

I.

General presentation of Decathlon

Michel Leclercq started to sell sport goods in his garage in Lille. He then opened a store in 1976. The store knew a huge success and its supplier Peugeot could not meet the demand. Michel Leclerc did not want to produce under the Peugeot brand, therefore he decided to find another supplier which would agree to produce under the Decathlon brand. The Decathlon brands were born.

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Today, Decathlon produces, sells and distributes in 100 countries, is specialized in 70 sports and counts 1 Billion users worldwide. The firm continues its development around the world each year. For its development, Decathlon uses its knowledge of the different local cultures. In India for example, Decathlon sells lots of products dedicated to play cricket, because this sport is very popular there. Decathlon aims to have a societal impact in each place where it is present, by encouraging people to play sports.

Decathlon's main mission is to make sport accessible to as many people as they can. They perform this mission by organizing lots of sport activities at a local level and by being a lot cheaper than each local market (25 to 30% cheaper in Israel). The firm also aims to introduce diverse sports to its customers. Decathlon increases 4

therefore its offer : It proposed 10 sports in 1976, 70 in 2018, and will propose 90 sports in 2020. The mission of the firm goes with its values : responsibility, development and family. In France, the company counts 350 stores of different types : ● the classic Decathlon store which can be from 1500m2 to 12 000m2 even if the average is between 3000 to 6000m2 ● the Decathlon essentiel where only the Decathlon brand is represented and the target are beginners. ● The Decathlon city (700- 800m2), located in city center and which presents a urban offer. The store we visited in Ecully measures 2000m2. How is the supply chain of Decathlon organised? Which technology is used? What are the deadlines?

II.

Modeling of operations and supply chain a) Local strategy, responsibility -

production,

transportation

and

corporate

social

Production

Location of the production As already said, Decathlon is present in more than 100 countries. As for the stores, Decathlon has production sites everywhere in the world : - Asia - Maghreb - Europe (especially Portugal and Romania) Of course, a big part of the production is located in southeast Asia, for reasons that everyone can guess : it lowers the cost of the workforce, and allows Decathlon to offer the lowest prices of the market. But there is a trend to move a part of the production back to Europe for two main reasons : - it lowers a lot the costs of transportation

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even if the workforce costs are way lower in Asia, the plants are saturated. In order to increase its production capacities, Decathlon needs to build new factories, and took the decision to build them in Europe.

A part of the production of the bikes is even located in Lille, in France.

Production forecasts Moreover, quantities of products that the plants will have to produce are forecasted 3 years in advance. All the data come from all the stores all around the world. Each department manager of each store has to make forecasts of the quantities he will sell. He can also make choices of ranges : for example, the store manager of Decathlon Ecully decided to have a big golf department, because he thinks that there are big opportunities near Ecully : lots of golf fields, high purchasing power… On the other hand, the urban department of Decathlon Lyon Part-Dieu (located in the Part-Dieu commercial center, downtown Lyon) is way bigger than the urban department of Decathlon Ecully. Indeed, child’s scooters, skateboards or roller-skates are products that are emblematic of the life of a city. All these data collected in the stores helps the headquarters located in Lille to refine the production forecasts.

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Quality standards Of course, Decathlon has quality standards that have to be respected. They have an audit service, with a team of 15 external auditors that visit production sites of each country every week, in order to check if the quality standards are respected. This also applies to all legal, ethical and ecological aspects, such as the ecological impact of a plant, or the working conditions of its employees. -

Transportation

As stated by the CEO of Decathlon, François Dewitte, no more products will be transported by air by the end of 2018, in order to reduce the costs of transportation but also to limit the ecological impact. The majority of transport is made by boats (only 4% by plane in 2017). It takes about 6 weeks to transport the goods from Asian production sites to continental warehouses (CAR) located in Europe. In 2017, Decathlon experienced the train, managing to carry 630 000 products from Wuham (China) to the multimodal platform in Dourges (north of France, near Lille), only by railway line. It took only 4 weeks, 10 800km and allows Decathlon to win 3 to 4 days of delivery time, which is huge.1 Decathlon is willing to charter one train a month in 2018, and 1 train per week from 2019. The other advantage of the use of the train is the reduction of the CO2 emission by 36% in comparison the the CO2 emissions made by boats. -

Local strategy

As already said, Decathlon adapts its strategy in terms of choice of sports articles offered to its customers. The sports available in a store are not the same in Versailles, a city located near lots of golf fields, than in Biarritz, where water sports such as surfing have a prominent place. It is the same when Decathlon tries to establish itself in another country. For example, Kwasy Tabury, an ex Fc Nantes player, is leading the establishment of Decathlon in Ghana. Born in a modest family of this country, and former product manager at Decathlon, he managed to adapt its strategy to the market. The same example can be seen in Senegal, where a test store has been opened in a container,

1 Les Echos, “Decathlon lance sa Rail-volution”, 20/11/2017, consulté le 14/03/2018 : https://www.lesechos.fr/20/11/2017/lesechos.fr/030901764653_logistique---decathlon-lance-sa---rail-volution--.ht m

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which allows Decathlon to better understand the market, and to now open a real store based on the practice of football, which is very popular in this country.2 -

Corporate social responsibility

Decathlon is looking for the most efficient corporate social responsibility. Through the means of transport of course, but also the company has the willingness to recycle its products and waste: cardboards, coat-hangers (they are compacted and crushed) and everything else that is used in the supply chain and sales surface. Decathlon has a very high conception of ecology and sustainability. For instance, the shoe box has a cost, even more important because of its recycling need. The company managed to have brands like Nike to buy their shoes without a box which was difficult because the box is a very important part of Nike’s communication. Decathlon has to work and develop on new shipment process to avoid the shoes to be crushed in the containers. Decathlon also invest in new HQE stores (High Environmental Quality), in solar panels and tries to protect water; b) Global view of the supply chain To understand the Decathlon supply chain, we must start with the aisle managers. Indeed, in the Decathlon’s culture, the people in touch with the customers are considered to know best the customers needs. In this spirit, between 80% and 90% of employees at the corporate office have started by working at the store. Even the French director was a trainee for his master’s degree 22 years ago. Aisle managers are above all, sportspeople, and they can choose what they want to do to support the Decathlon effort to make sport more accessible and convert people to sport. A lot of decisions and innovations come from local associate initiative. They know if, in their neighborhood, there is a lot of beginner or some competitive sports clubs and what they want to find in their local store. Thanks to the recommendations and suggestions of local manager, people at the corporate office can decide of the next product range for the coming years.

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Jeune Afrique, “Kwasi Tabury, l’ex joueur du FC Nantes derrière l’arrivée de Decathlon au Ghana”, 14/04/2017, consulté le 14/03/2018 : http://www.jeuneafrique.com/430078/economie/kwasi-tabury-lex-joueur-fc-nantes-derriere-larrivee-de-decathlonghana/

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Usually, there is 3 product range: ● « Gamme 1 » essential equipment, beginner ● « Gamme 2 », for experienced sportspeople ● « Gamme 3 », more sophisticated, more choice, more colors Then, in stores, there is 3 levels to organize the aisles: by sport, by product category (shoes, sportswear…) and gender. As an example, for running: ● « Gamme 1 » is jogging ● « Gamme 2 » is running ● « Gamme 3 » is trail ● « Gamme 4 » is orienteering Finally, in the aisle the customer can find anything in his product range on 10 meters straight. In the perspective of the global supply chain: There is many steps from the producer to the store and Decathlon have developed business at all of them. The Decathlon supply chain is made of: ● Factories in the entire world which lead to transportation delay from 4 to 6 weeks ● Continental supplies centre or « Centre d’Approvisionnement Continental » (CAC) In France, there is 6 CAC located in Dourges, Dechy, Rouvignies, Satolas, Chaponnay and St Martin de Crau. In these centres, you can find voluminous products or products with a low stock rotation. These warehouses supply regional supplies centre daily. In fact, closed boxes come from the producer and go to a sorter made of a conveyor belt and spindles which assigns each box to its destination. The system can detect in which tray are going the packages thanks to the commands made by the stores. ● Regional supplies center or “Centre d’approvisionnement régional » (CAR)

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There is 10 CAR in France, they are located close to stores because there can be several deliveries each day. The number of delivery depends on the size of the store. As an example, the Ecullys’ store is supplied once or twice a day and deliveries are regroup with the Limonests’ store to reduce the transportation cost. Their CAR is in Saint Quentin Fallavier and this CAR supplies also approximately 50 other stores. For some very big store as in Bron, there is 2 deliveries per day and in the summer the store in Toulon is supplied by 3 trucks every day. ● Stores This supply chain allows stores to get any items in less than 48 hours. The delay is more about 24h if the order is made before 1:00 pm but it is better to say 48 hours to keep the customer confidence. In the store, we consider that the warehouse has send the right amount of product. It takes 30 minutes to unload a delivery in Ecully. 3 employees split the boxes in 3 small trains with bins identified by a letter and a number corresponding to aisles in the store. Then the trains go directly to right aisles and leave the bin that will be unload by the aisle manager.

Replenishment Today, replenishment is automated for a majority of products. Every time a product is bought and checked out, a specific software is adjusting inventory in real time. Every ten minutes, a calculation is made by the software to know exactly the 10

inventory level. When this level is lower than a fixed limit, an order is sent to the nearest CAR. The software will take into account specific parameters to adjust ordering limits, like a given period of increasing sales or total sales for the previous year and previous week. On the other hand, it does neither take into account changes in vacations times from one year to another, nor radical changes in weather forecasts. This software remains to be improved, as these changes are greatly impacting sales, especially for seasonal products. For instance, snowing days and sale of skis are closely related. Employees can also change manually replenishment parameters. Manual changes are frequently done if employees are reorganizing space for one sport and allocating larger shelf space to a specific product. Then, they can ask for bigger quantities of this product. However, manual changes are often sources of mistakes and employees must adjust parameters again when they will implement a new change in shelf space. With this replenishment system, product availability rate is integer from 95 to 98%. For now, inventory turnover is around 70%, which means there is between 1 and 2 order for each product every week. Some products are seldom sold and have a longer storage life: they can stay in the inventory for 40 days. For next years, one of Decathlon’s goals would be to decrease the time during which a product is stored in the shop, while keeping the same availability rate. Indeed, products storage is cheaper in CAR because these warehouses are located in brownfield sites whereas for stores in urban areas, space is more expensive. If we consider costs linked to overstocks, they would enable to pay one store opening per day. This example underlines the fact that inventory management policy is a critical point in operations management. Decathlon aim to implement a “just-in-time” policy with zero overstocks, because as Mr Laurent exactly said it: “if we do not have overstocks, it means that the product is in the right place”. Direct orders Sometimes, orders are not following the standard path we described so far. Sometimes, experimented customers are looking for products coming from one specific supplier, and these products are not part of the usual offer in store. In order to satisfy the customer’s demand, employees can make direct orders. They can also 11

be made when there are some shortages. The main objective is to develop brands offered by Decathlon, to answer every customer’s need. These orders remain an exceptional process, because they are coming with many drawbacks compare to the classical replenishment way. First, the process is not automated and the order must be registered and followed manually by employees. Then, ordering prices are bargained locally and not at national level, so costs are higher and margins are reduced. Finally, product quality can be lower than the current requirements for Decathlon’s products, but even with a lower quality, service provided to customer must be identical to preserve the brand reputation. Customer services To propose the same offer than on the website decathlon.fr, a store must have at least a 6000 m2 surface area. With its 2000m2 Ecully’s store can only propose ⅓ of the total offer immediately to its clients. However, the replenishment system and the direct orders system allow the store to obtain any product in 48h. (The delivery time is usually lower, around 24h for a current product, and can vary until 3 days for voluminous products). All Decathlon’s stores are working together, and if a product needed in one store is available in another one, it can be send to the right place to satisfy the demand. When an order is passed from the store, Decathlon offers free-shipping for every customer, even for at-home deliveries. Customer’s satisfaction is a priority. All Decathlon products are guaranteed for life. They can be returned in stores even without receipt, and without time limitations. If a returned product turns out to be defective, employees will mention it in the software of the company. All informations concerning products from France or Europe are accumulated in the software. Then, the product can be returned to warehouses (CAR) and quality department will analyze if there is really a default or not, and implement the necessary modifications in production lines. When the default is concerning an entire serie of products, customers are informed by emails and a dedicated communication on the website. Employees’ first task must be to help the customer, give him advice so that he can find what he need. That’s why an efficiency policy has been implemented for 4 years in Ecully’s store. Every tasks which are not concerning the employees’ relationship with customers must be done before the arrival of the product in the store. Moreover, these tasks are more comfortably done if they are realized in big warehouses than in a limited space. For example, putting a jacket on a hanger is now done in the

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warehouses instead of in the store by salesman. They win time to spend counselling there clients.

III.

In depth study : New technological tools

Decathlon is really involved in implementing innovations for both customers and employees satisfaction. These new tools are impacting the supply chain. a) Radio Frequency Identification (RFID) RFID system is based on electromagnetic fields and uses a unique tag for each product. This system allows to automatically identify and tracks tags attach to each product. Decathlon has implemented RFID technology 3 years ago, as a retailer, the firm is in advance compared to other stores in France, using item level tagging. -

How is it implemented in the supply chain ?

1) At the production factory, every product is RFID tagged. 2) At the exit of the warehouse, an RFID portal activates the taggs of the truck. The taggs will only ring on the store concerned by this delivery. 3) In the store, the tagg is deactivated by the payment of the attached product : there is a kill tagg at the cash desk.

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Today, 95% of Decathlon’s products have a RFID tag, but there are still some problems on products such as bottles of water which block the wave. The objective is to tag 100% of the products. -

What are the benefits of using the RFID technology ?

At the beginning, RFID system has been launched for inventory control, which is made easier, faster and more precise using a simple reader tag. It allows to do more frequent inventories and control the high turnov...