Businesses need to consider what innovation is appropriate to their business model ©PA Images
Businesses need to consider what innovation is appropriate to their business model ©PA Images

Sainsbury’s on the Amazon challenge

29 June 2018

Businesses should think carefully before chasing “silver bullet” technologies to improve their supply chains, Sainsbury’s head of logistics has said.

Darren Jones, head of logistics strategy and development at Sainsbury’s, warned against blindly following emerging technology companies because their financial or business model might be structured differently, allowing them to operate in different ways.

As a publicly limited company Sainsbury’s could not forego profits for innovation, he said, without being held accountable by shareholders, and it was up to each individual businesses to work out “what it is you can do within your model”.

Speaking at the SCALA Annual Supply Chain Debate in Warwickshire yesterday, Jones said: “If somebody comes along and says, ‘We could do X that’s like Amazon,’ you just don’t chase the silver bullet.

“What are the consequences of that? Those consequences are: you’ve now got a business or a part of the company that doesn’t make any money and you’re a PLC and, guess what, you’re the next one against the wall.”

Jones said that Sainsbury’s has experience of both leading and following trends. As one of the “big four” in the supermarket space, the firm was dictating the market alongside Tesco, Asda and Morrisons. However it was a much smaller player online. “You’re suddenly a small player in a big market and the market dictates what you should do, that’s quite a step change when you walk into that,” he said.

“You’re moving to an environment where you’re not even the top 20 suppliers of online clothing and the Zaras of this world dictates how it works. You have to make a conscious decision, ‘Are you going to do that? Is that the offering? Our unit price is less than £10? Do we really want to do delivery same day?’ Probably not,” he said.

Jones said with the available technology it was “absolutely” possible for Sainsbury’s to offer same-day delivery, but that didn’t necessarily mean it made good business sense. “You have to work out what the consequences are particularly in a fast moving environment.”

Businesses need to change progressively over time and be flexible, said Jones. “We supplied to 800 great big supermarkets, that’s all we did 10 years ago. There was an infrastructure designed over 140 years to do that. Re-engineering that and coming out of that, whilst not impossible, is very difficult.

“The issue is you have to be flexible. There will be decisions that you get wrong, there will be strategic things that you choose to do from a retail perspective or a customer’s perspective that is either proven wrong over time, or was right in the short term but runs out of legs.”

He gave the example of hypermarkets, which all the major supermarkets were pursuing 20 years ago because of their success on the continent. “Nobody’s got hypermarkets anymore.

“In a world where people are buying online, a hypermarket? Really? But that was 20 years ago. Without the internet, it was the right thing to do.”

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