The objective of this study is to analyse Sam’s club and their current inefficiencies and provide suggestions to Mr.Jim who heads the reengineering team that can help his team formulate appropriate supply chain strategies in order to achieve lowest possible cost and attain greater competitive advantage. The paper provides a background of the current situation faced by club where the current inefficiencies are discussed and possible recommendations are then suggested.

1. 2015
By SachinMathews
8/19/2015
STRATEGIC SUPPLY CHAIN MANAGEMENT TRIMESTER 2A
THE CLUB WAR CASE STUDY REPORT

2. The Club War – Case Study
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Table of Contents
Sl No. Title Page No
1. Introduction 2
2. Objective 2
3. Background 2
4. Current Inefficiencies 3
5. Recommendations 4
6. Conclusion 6
7. References 7

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1. Introduction
The given case “The Club War” is about a company called Sam’s club which is “price club” a
retail phenomenon that began in 1976 where the club operates stores and warehouses and offers
distinctive advantages to its members by selling their merchandise lowest possible price and
giving customers a better buying experience. Many clubs sprang up in the later part of the 20th
century leading to intense completion in this warehouse retailing market. The focus of these
companies were to achieve greater operational efficiency, at lowest possible overall supply
chain cost, and pass on these saving achieved to its valuable members in the form of low
warehouse prices, better deals on merchandise and improved customer experience.
2. Objective
The main objective of this study is to analyse Sam’s club and their current inefficiencies and
provide suggestions to Mr.Jim who heads the reengineering team that can help his team
formulate appropriate supply chain strategies in order to achieve lowest possible cost and attain
greater competitive advantage. The paper provides a background of the current situation faced
by club where the current inefficiencies are discussed and possible recommendations are then
suggested.
3. Background
Sam’s club is one of the leading price clubs in the US but faces stiff competition from Costco
another price club based in US who share the similar philosophy of cutting down costs by an
efficient supply chain and passing on savings to their esteemed members. But as presented in
the case they achieve tremendous buying power due to their large membership base. Sam’s
club notable differentiators mentioned are their low profit margins and offering bigger deals
on merchandise and services. The product line ranges from apparel, appliances, automotive,
books, consumer packaged goods, electronics, fresh and frozen foods, home furnishing and
office supplies. The firm recognizes that not all items needed to be available round the year
and have seasonal items, unique special buy items which are available only once that creates
an atmosphere of “impulse buying” for end customers. This is proven marketing strategy but
requires an efficient supply chain or else could lead to stock out, lost sales, inventory holding

4. The Club War – Case Study
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costs and various other variable costs resulting in poor business performance and loss of
competitive advantage.
4. Current Inefficiencies
Jim’s re-engineering team on conducting an “as-is” analysis that aims at understanding the
current dynamics of supply chain its current strengths, weaknesses, opportunities and threats
found 10 sources of inefficiency which are discussed below.
There was significant amount of freight moving in LTL quantities," though freight cost analysis
revealed TL to be the low-cost option. LTL which aggregates freight from several customer
from numerous touch points requires dock-personal, material handling equipment etc., that
increase the material-handling cost (Coyle 2011). There also runs the risk of loss/damage if
proper tracking and safety mechanisms are not in place. This is evident in the case as they
incurred huge loss and damage bills and high material handling cost. The firm used cross
docking facilities where shipments from suppliers or inbound trucks arrive at a transit point
and sent directly to buyer locations without storing them. Though they were able to leverage
TL economies they felt there was opportunity for improvement. As pointed out by (Chopra &
Meindl, 2013) the complete benefits of cross-docking can be achieved only if economies of
scale can be attained both in their inbound as well as outbound shipments which needs effective
coordination and transport mechanisms. In the existing framework there was no way to
implement milk runs, and team felt they were missing an opportunity to reduce transportation
costs. The team found that despite efforts they were still running empty backhauls, which
means increase miles travelled without load that results in added cost and time consumed
(Coyle 2011). Also significant amount of quantities were moved through parcel and airfreight.
All this shows a lack of an optimized transportation network, poor trailer loading policies that
were leading to increased lead times, higher material handling & holding costs and
transportation costs. In addition their purchasing, sourcing and supplier delivery options were
not analysed and synchronised with their transportation and distribution mechanisms. Freight
from Asian suppliers was received on the west coast and then shipped by trucks to the
distribution centres and retail stores, increasing time of delivery and transportation cost.

5. The Club War – Case Study
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5. Recommendations
In the given case the main inefficiency lies in management of physical flow of materials from
source to consumption. As identified by the re-engineering team there is a lack of efficient
transportation network which includes optimal use of all available modal transportation,
routing and distribution mechanisms. However warehouse retailing firms also face the risk of
capitulating to the temptation of adding new features or making too many changes, diluting the
original strategy, pointed out by (McLaughlin 1992) as the “wheel of retailing” due to which
much of the competitive advantage gained by the organization is compromised. Jim needs to
keep this in mind while formulating new strategies. As pointed out by (Harrington 2008) the
retail sector is known for its demanding service requirements and Jim will need to thoroughly
assess cost and service trade-offs before deciding on the way forward.
Information plays a crucial role in planning and execution phases of logistics activities.
(Schoenthaler 2003) elucidates how accurate and timely information affects supply chain
performance. Jim could benefit from implementing CPFR (Collaborative Planning,
Forecasting and Replenishment) a technique that combines the advantages of EDI and VMI
(Prater 2013) that would provide greater supply chain visibility and achieve better co-ordination
while planning the front-haul and back-haul transportation network. This combined with TMS
(transport management system) and WMS (warehouse management system), ERP 2 and MRP2
tools can help Jim to design a better inbound and outbound transportation network that can be
synchronized with sourcing and distribution network. However as pointed out by (Fliedner
2003) and (White 2013), for CPFR to work successfully and to reap the complete benefits of
it, there needs to be strong supplier-buyer relationships where both parties work together to
mutually agreed goals.
(Christopher 2005) further elucidates on how firms can gain long-term supplier relationship
can create value to the supply network. Jim needs to improve these relationships and negotiate
better incoterms (International Commercial Terms) which relates to the rights and obligation
of parties in contract with relation to the delivery of sold goods (Coyle 2011), such as DAF
(Delivered at Frontier) where the exporter responsible for transportation and risk of damage or
DES (Delivered Ex Ship) / DDU (Delivered Duty Paid) where exporter takes additional
responsibilities. However Jim needs to examine the quality aspect and past history of the

6. The Club War – Case Study
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service rendered by theses suppliers before deciding the incoterms. This would reduce the bill
of loss/damage that Sam’s Club is incurring. In addition, Jim needs make these purchasing
decisions in view of the current transportation inefficiencies.
In terms of their transportation and distribution network, Jim could use the option of a
“Tailored Network” that uses an effective combination of TL, LTL, cross-docking and Milk
runs which can further help in reducing cost and improve the responsiveness of Sam’s Club
supply chain. Depending on the demand of products, shipment can be sent directly (preferably
for high demand) or to and from a DC (for low-demand). Emphasis should be to use TL as it
is the low-cost option, and reduce the shipments through LTL which can be achieved using
TMS by optimizing the trailer capacity. As pointed out by (Irista 2005) through TMS, various
permutations and combinations of these arrangements can be analyzed and optimal solutions
that reduce the transit time and transportation cost can be arrived at. For smaller shipments
especially to the retail stores, that does not fill a truck, Jim should use Milk runs along with
cross-docking. This requires significant amount of coordination and can only be achieved by
improving the information and communication technology used by the firm. For larger
shipments, Jim must make use of “Economy of Scale" and "Economy of Distance" and use
direct shipping that would simplify operations and co-ordination and reduce the transportation
time. For shipment arriving from Asia, landing on the west-coast, Jim could use the option of
using mutli-modal transport such as rail-truck, while considering the type of product, degree of
spoilage or damage as it would increase amount of handling required. Jim must also evaluate
the option of near-sourcing some of these products and make necessary trade-offs between
transportation cost and price of these products from low-cost producing countries. These steps
would decrease the transportation cost significantly. As pointed out by (Harrington 2008)
through improved relationships and co-ordination with suppliers and their carriers, Jim could
also make use of overlapping networks and reduce the effect of empty backhauls.

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6. Conclusion
As seen in this case study firms need to regularly revisit and re-evaluate their purchasing,
sourcing and logistics mechanisms and align them to their organizational strategy. In the price
club or warehouse retail market, the main differentiator is the efficiency of the supply chain at
lowest possible cost. Firms need look out for every possible opportunity to improve efficiency
and reduce cost in their current operating environment without losing track of their core
competency that will enable them to achieve greater competitive advantage.

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7. References
Chopra,Sunil,andPeterMeindl.2013. Supply Chain Management - Strategy,Planning and
Operations. Pearson.
Christopher,Martin.,.2005. Logistics and Supply Chain Management - Creating Valueadded
Networks. PearsonEducationLimited.
Coyle,J.,John.,Novak,A.,Robert,Gibson,J.,Brian.,Bardi,J.,Edward.2011. Trasportaion - A supply Chain
Perspective. SouthWesternCenage Learning.
Fliedner,G.,.2003. “CPFR: an emergingsupplychaintool.” IndustrialManagement and Data
Systems,Vol103(1) pp.14-21.
Fliedner,G.,.2003. “CPFR: AnEmergingSupplyChainTool.” IndustrialManagementand Data
Systems,Vol.103(1) pp.14-21.
Harrington,Lisa.,.2008. “Ground Tactics: OptimizingTransportationNetworks.” Inbound Logistics.
http://www.inboundlogistics.com/cms/article/ground-tactics-optimizing-transportation-
networks/.
Irista,P.,.2005. “TransportationOptimization:IsThisthe NextStep?” HK SystemsCompany.
McLaughlin,Edward.,Hawkes,Gerard.,Perosio,Debra.,.1992. “Wholesale ClubStores:The Emerging
Challenge.”CornellFood Industry ManagementProgram pp.1-46.
Prater,Edmund.,Whitehead,Kim.2013. An Introduction to Supply Chain Mangement - A Global
Supply Chain perspective. NewYork:Businessexperpress.
Schoenthaler,R. 2003. “Creatingreal-timesupplychainvisibility.”ElectronicBusiness 12-13.
White,Andrew.,.2013.“Best PracticesCollaborative AdvancedPlanning&Schedulingpresentation.”
Gartner,Inc.,.