During the summer of 2010, I participated in the Manchester Business School (MBS) intern project in ASDA and worked as assistance in aiding procurement team with the "Deep Dive" project. This project focuses on cost reduction through tenders of the product, fixture and merchandising and consultancy services. For example, the most strategically important task in the Deep Dive was the selection of 3rd party merchandisers for the business in the next few years, which aims to reduce million of sterling cost per year. The intern in ASDA entails working approximately 3 days per week from early June to the end of August.
1.2 The Organisation
ASDA is a widely known retailer and the second largest company in the UK retail industry. Till now ASDA has established more than 360 supermarkets, foot stores and living stores (non-food stores) covering most areas of England and Wales, and it is expending the business more aggressively in Scotland and Northern Ireland. After in 1999 being acquired by Wal-Mart, the global No.1 retail giant, ASDA obtained new management skills and professional knowledge to run the business and its market share kept growing from then on. ASDA, now part of Wal-Mart family, is well-known for its "Everyday low price" strategy. In order to maintain the low-cost business model, ASDA has built an empire that tightly controls its procurement, logistic processes, inventory management and in-house merchandising. The advanced information technology system ensures the availability of operation tracking in every store and reports problems as soon as possible to guide decision making at both headquarter and store level. It is a fantastic experience for me to have an intern in such a big enterprise, which to a large extent broadens my horizon and offer me some cherish insight to my future career.
1.3 Roles & Responsibility
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As a MBS student, I was expected to be a business consultancy that gives ASDA ideas about how to choose the service suppliers. For one thing, I helped ASDA staff to complete some fragmental pieces of work, such as collecting the information from company proposals and reorganizing merchandisers' data. For another, it was expected that with the specific business knowledge learning in MBS I could analyse the data collected and then offer a methodology or a framework to evaluate the candidates that guide the selection process.
2. Skills and Knowledge Gained
2.1 3rd Party Merchandising in ASDA
In the first month in ASDA, my colleague students and I were working in a 3rd party merchandising project. ASDA intended to reduce the number of 3rd party merchandisers from currently 22 to about 3. Therefore, some evaluations of the merchandising work in ASDA stores are needed. And it also requires identifying the potential performance of 3rd party merchandisers.
2.1.1 What is 3rd Party Merchandising
Being a big member in retailing industry like ASDA means it needs to undertake product merchandising activities in the stores. Some allows store employees to handle these activities, but now many stores are requiring merchandising be handled by an outside company. These third-party merchandisers are not direct employees of the stores or vendors, yet they are responsible for handling and placing vendor merchandise. Third-party merchandising is a fast growing industry; just few years ago such companies barely existed.
With specific knowledge, skills and technologies, the 3rd party merchandisers are experts in merchandising activities such as arranging shelves appearances, managing in-house stocks, reporting inventories and doing promotion campaigns. It is expected that by outsourcing merchandising activities to 3rd parties, sales would increase because these experts know how to attract consumers. According to the ASDA 3rd Party Merchandising Final Report (2009), the sales performance of nearly all categories in ASDA stores became better after contracting a 3rd party to do the in-house merchandising activities. Besides, contracting a 3rd party merchandiser is to some degree able to lower the operational risk in business, as it does not require ASDA to recruit, train and manage the merchandising people. What ASDA needs to do is to pay fixed service fee to the 3rd party merchandisers for the services and keep some level of operational supervision and control. When there are problems in sales due to the merchandising, ASDA is able to legally terminate the contract and readjust swiftly the merchandising strategy by hiring other companies to keep its lost minimum.
2.1.2 How ASDA Reduce Cost in 3rd Party Merchandising
Always on Time
Marked to Standard
ASDA, famous for its "Everyday low price" slogan, is always seeking ways to reduce cost so that the some savings can be delivered to customers by lower the prices of products in ASDA store. When I got involved in the 3rd party merchandising, I found that there is surprisingly a large amount of potential benefits ASDA could obtain from these activities. Currently ASDA spends more than 20 million pounds to total 22 in-store 3rd party merchandisers. Although these 3rd party merchandisers be capable of increasing the sales volume and revenue, it costs much higher by contracting them comparing to using internal staff. We compared the labour costs of 7 external merchandising companies that are demonstrated below:
Table 1: Store Cost per Week
Total Std Hours
ASDA Colleague Cost
Mills & Boon
Total Call Cost/Week
Source: ASDA 3rd Party Merchandising Final Report 2009
Table 2: Store Cost per Annum
Store Cost Per Annum
Total Estate Cost Per Annum
Merchandiser Total Cost
ASDA Colleague Total Cost
Total Potential (Savings)
Mills & Boon
* Data in both charts based on 354 ASDA store (Blue Gem only in 103 stores)
**Merchandiser hourly rate based on £12, ASDA colleague hourly rate based on £7.47
Source: ASDA 3rd Party Merchandising Final Report 2009
From the statistics above, it is clear that the merchandiser cost is much expensive than ASDA employee wage spending. The total cost per annum is more than 5 million pounds higher than colleague cost, which also means theoretically speaking there is a potential to save 5 million by lowering the merchandiser hourly rate to the same level of colleague wage. Of course it is impossible for merchandisers to provide such a low service rate, but ASDA could negotiate with them to give a better offer and lower price, which would bring at least 2 million pounds saving. To achieve the saving, ASDA intends to cut the number of current merchandising service suppliers from 22 to about 3, to whom ASDA can increase its bargaining power by supplying a big contract that any merchandiser can hardly refuse. If this change implemented successfully, it is predicted that a 5-8 million cost can be reduced.
2.1.3 Findings from Merchandising Cost Saving
This story tells me that we need a broader insight of business when making a strategic decision. Although the labour cost of 3rd party merchandiser per hour is only several pounds higher than that of ASDA colleague, when considering the scale of ASDA business (approximate 360 stores in UK) it turns out to be a huge amount of expenditure which has the potential to be reduced. In many situations, people may ignore or neglect this small aspect of operation; and ASDA pays attention to this problem and explore another way to improve its cost control, which, in my understanding, is the most crucial value in retail industry, as customers usually feel like buying low-price products in a store.
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It remains me another famous story sharing in Wal-Mart and ASDA. Wal-Mart found a way to reduce its cost by cutting the package boxes of products. A box costs only 1 or 2 pence; but since there are tremendous of stocks sold in Wal-Mart, the total cost of these boxes was billion US dollars. It also needed money to pay for employees who took the products out of the boxes and cleaned the useless boxes after then. Therefore, Wal-Mart asked vendors cutting the external boxes, which reduced billions of dollars cost for the giant.
I always admire ASDA (and Wal-Mart) for its cost control and management. And before I went to ASDA house, I regarded that ASDA was doing extremely well and there was few methodologies to continue to reduce cost. However, from the labour cost comparison above, another millions of cost saving is achievable by tightening the merchandising management, which helps to consolidate ASDA's core competitive advantage in the UK retail industry. Then I realized why ASDA and Wal-Mart are able to establish an empire in the world in a just-40-year time: the company could continuously find the problems and give potential solutions in the business which the competitors could not find or recognised these problems and solutions much latter. That is one of the most crucial merits how Wal-Mart leads the industry, from which other companies and businessman should learn and get inspiration.
2.2 Store Observation
During the working process of the 3rd party project, I have learned new knowledge about how to engage into a new business as soon as possible at the very beginning. Although most of my time in ASDA is spent in the head office, I have visited local stores as it is significant crucial to know the actual business practices of ASDA whose major revenue is from transactions at store level. It is not an appropriate way to carry out the company projects simply applying theories, business models or charts in books, and sitting in the office without some level of understanding about how really merchandising activities in ASDA stores go on. Observation should be the first step, and to a large degree one of the most important ones, that can offer a basic outlook of business operation.
2.2.1 The Need for Store Walking
Being a student without any working experience in retail industry, I had totally no idea about what in-house merchandising is and who the 3rd party merchandisers are. In the beginning I searched for academic papers and references about third-party merchandising from the Internet, and turned to ASDA colleagues for official documentations, but it was difficult to build an overall in-store merchandising procedures in mind because of the complexity and diversity in written papers. As a result, my colleague students and I decided to visit the ASDA stores in Manchester to collect first-hand information by ourselves.
2.2.2 How to Do Store Walking
Before going to the stores, my fellow students and I did research in advanced and created a list of observation so as to collect as much information as possible in a short period of time. Besides, the colleagues in ASDA House procurement team gave us lots of support and suggested us what we should do during the walking. The list is shown below:
Sign in via colleague entrance;
Take a general store walk. It is an entirely different experience as a shopper than when looking from a work perspective. Look at:
The full range of products ASDA sells;
The number of colleagues working in store;
The profile of ASDA customers - who are they? What are they buying?
Look at shelves:
Are they full? Are they tidy? What is missing? Is there any relation to time of day/week?
Observe people working in store:
Colleagues in ASDA uniform - what are they doing? E.g. if they are filling shelves - what shelves? If they are not filling shelves what are they doing as an alternative?
People working not in ASDA uniform - these are likely to e merchandisers - what are they doing? If they are filling shelves, how does their brand look compared to the rest of the range? Better or worse?
Chat to colleagues
Ask colleagues about the merchandisers who come into store and what is their view. Do they do a good job or not. What do they do that is or isn't help?
2.2.3 The Findings from Store Walking
It was a fantastic experience working in a store being a staff rather than a shopper. We followed the guideline above to carry out our observation, for example, checked the division of different categories such as herbs, confectionary, soft drinks and cosmetics, checked the availability in shelves of every category, and observed whether the Shelf Edge Label (SEL) of products were correct. Through observing the performance of merchandisers, I gained a better idea about how the general in-house merchandising operation are carried out: firstly, the merchandisers check the availability of each category, and scan the bar code of products which are nearly or already sold out in shelves by a hand device; secondly, merchandisers go to the back and bring out the products which need to be refurbished and then place them on shelves tidy and clear; thirdly, record the number of stock refurbished and put the inventory data into information technology system; finally, merchandisers clean the rubbish and damaged stock.
Through in-store observation, on the one hand I get a better understanding of merchandising route map, and I also find some problems in the operation, on the other hand. When walking in the store, it could be seen that certain shelves were untidy and some SEL were missing; a number of merchandisers gossiped together instead of doing their jobs, which means there were problems in merchandising efficiency. What impressed me most was that a customer came to me for help because the pepper powder he wanted was out of stock on shelf. And then I spoke to a store merchandiser and asked whether there was still inventory. But the merchandiser gave the customer and me his disappointing reply no less than 15 minutes. The customer showed his unsatisfactory to the work efficiency and the stock management in ASDA and he said he would go to Tesco next time.
Obviously observation is a good way to access the knowledge about how business is running at different level. Besides in stores, in ASDA home office how white collar employees do their jobs can be observed to find out the role they should play and they are playing, whether there is any conflict or inefficiency in need of handling to improve overall performance. This observation experience also has changed some of my opinions towards doing business. I had believed that through advanced computer technology and report system, the managerial level could obtain enough information to make the decision and strategy. However, it turns out to be wrong. Some small problems in business cannot be indicated via the numbers in the financial report but these problems have a potential to cause damage in the operation. For example, if the problem causing unsatisfying shopping experience mentioned in the previews paragraph remains unsolved, more customers may switch their buying in ASDA competitors like Tesco, Sainsbury's and Morrison, and ASDA would lose its market which would probably limit its bargaining power with suppliers. Then the low-cost strategy might be constrained which would only make situation even worse. As a businessman or business consultancy, one should keep his/her eyes open and be sensitive about the unhealthy operation in the company business.
Also there are some limitations I found about doing the observation. For example, it is time consuming and what we observe at one time is only a small scale of the business. The sales performance of retail industry is highly affected by the different whether, dates and seasons. Even within 1 days there are peak times and bottom times of sales. For example, the sales of ice cream would be expected to peak at June because of the hottest weather; shopper would buy more goods on holidays; more people are likely to visit ASDA stores during lunch break or off the work in a day. It will be even more complicated when considering so many different categories ASDA sells in stores. As a result, it needs a long-time and regular observation in order to gain a deeper understanding of the sales in shops and how merchandising activities are done. It cannot be known how actually the merchandising activities affect the whole ASDA business financial performance only by observation. Reports and analysis from a broader perspective and scope are necessary as complements of observation which help to investigate the general scheme of retailing. As the ASDA intern lasted for only 12 weeks, it was not practical for me to take a longer observation in stores. Therefore, some understandings about 3rd party merchandising remain unclear and inaccurate, which requires further research and investigation via other ways.
2.3 The Tender for Suppliers
In late 2009, ASDA started to carry out a public tender for merchandising services suppliers. In the first step, ASDA sends Proposal for Request (PFR) to bidders and collected general information about company history, financial situation, and facilities and so on. About 9 to 10 companies giving best answers will be chosen and invited to give a presentation about how they will roll out the projects in the send step and finally 3 merchandisers will be selected to implement the project. The core question in the tender is how to evaluate and prioritise the suppliers, in what ways, from what perspectives and by what criteria.
2.3.1 The Suppliers
Most of the 10 companies have established for at least 10 years and have extensive experiences in field sales area and in providing market analysis and technical solution for retailers. Some of them have been already working for ASDA directly, like Dee Set and CPM but others remain unknown. These companies are good at merchandising a wide range of product categories and equipped with advanced information technology system which ensures the effective and efficient control and management. They use insight and influence to give their clients cutting edge solutions which are implemented through in-house sales teams. All of these companies are prestigious and have received awards and built reputation in the industry and have established harmonious relationships with product suppliers and vendors within UK and worldwide.
2.3.2 The Difficulties in Evaluating Suppliers
When I took involve in the project, I found that there were several difficulties to understand and evaluate the performance of the suppliers after collecting the data:
1. Information about Suppliers Unknown
7 out of the total 10 suppliers have no direct business contract with ASDA. What we can know are based the responds of PFR and other second-hand information and in some situation these amount of information are not reliable enough to guide to make a decision in such a big project. Besides, in the PFR of a number of information of some suppliers about financial status, current contracts or facilities and equipments remain unclosed which makes it even difficult to evaluate the companies' performances.
2. Information about Suppliers Non-quantifiable
Although the general company performances can be observed in financial reports, some key performance indicators (KPIs) are non-quantifiable, for instance, efficiency of merchandising, report and communication technology they access, skills and knowledge in different categories, corporation culture and reputation, and staff motivation. These non-quantifiable characteristics are considered as the most important parts to evaluate a supplier, but there is no an effective method to compare these KPIs of every company.
3. Information about Suppliers Diverse
In the PFRs and presentations, services suppliers adopted different model to organize data and give the project proposal. For example, some companies listed breakdown of the cost, dividing it into fees in planning, training, salary, IT facilities, while some other companies divided it into account controlling, accreditation, management, execution and central support. And in the proposals, the organisational structure and IT system adopted by different companies diversified each other which can hardly make a sensible comparison. Even the existing information, numbers and data are inaccurate as most of them are estimated ones as they are not and they cannot be carefully and elaborately tested and verified.
2.3.3 The Way of Evaluating Process
We were trying to select merchandisers who offer lowest price and at the same time provide the best services that can boots the sales. But when it comes to hiring and contracting third-party merchandisers, each chain approaches the service differently. This is because KPIs are established after a merchandising company is chosen, with companies and parameters varying. Elements that vary include which categories the service supplier will handle, what services will be included, which vendors will be serviced, what the hour requirements will be in and out of season, and how the merchandising company will be compensated. Because of the difficulties mentioned above, in the beginning we were confused and worried about the project. I thought it was too complicated for me to finish such an important project as we are just students who have no idea and experience in the industry.
But things went on better then. The staff in ASDA gave us a lot of support. Adam Davis, the buying manager in procurement team and leader of 3rd party merchandising tender project, said: "The aim of this tender is to give ASDA millions of saving. We don't need to care too much about the future sales, because it is the marketing division's duty. What we need to do is to keep cost as low as possible. If we reduce the cost by 30 percent while the future sales drop by 20%, then we still make profit." He also mentioned that ASDA is a bold company and if there is a proposal that has a 70 percent, or even 60 percent chance to make profit, then ASDA will do it. These gave us guidelines that focused on cost-control orientation. We referred to Resource-based View and created a scorecard of companies by evaluating and ranking the prices those suppliers offer, their turnover in the current 5 years, the number of their employees, the experiences they have, the technology they adopt, how long they have been established and what awards and certificates they have and so on. Through this scorecard we can have some understandings about which companies own the resources and potential to carry out ASDA plan in a lower cost. To overcoming the missing and diverse information, we MBS students collected unified sorts of information by contacting the suppliers and requesting them to fill up our questionnaire. Finally all data were ready and my teammates and I successfully built up the scorecard.
2.3.4 The Findings
It was a harsh experience of making a judgement in a complex business plan but finally we completed the task and created a way that provided references for further work. During the process, I had felt confused and helpless at first; but eventually I found several factors that could guide decision making.
1. Company Goal
Decision making should help to achieve the company goal. As the strategy of ASDA is to reduce cost, in this 3rd merchandising project, the most important measure of the suppliers should be the investigation about how the suppliers can reduce cost for ASDA. The duty of procurement people is also searching for the lowest and best suppliers. Therefore, it is rational to choose the suppliers who could offer a low hourly rate for merchandising activities. However, it does not mean that low cost is all we need. We must leverage low cost and return on investment, but here low cost is more important. In the ASDA business model, only when low-cost strategy is achieved, ASDA can sell its goods in lower prices then competitors', and this is absolutely attractive for customers' everyday life consumption. After identifying the corporate goal, it becomes much easier to make a decision that fits the strategy of the company.
2. Corporate Culture
In ASDA's corporate culture, creativity and risk taking are encouraged and people's effort are appreciated. This also gave me direction to finish the task. Although these were some level of uncertainties to carry out the tender and future job, ASDA encouraged people to do the project if there is a possibility to achieve the goal. As a result, in the evaluating process, data estimation and business forecast were accepted by ASDA at this stage. If the company encouraged risk avoidance, then this tender may not be able to carry out because the future business was hard to exactly predict. This is also one factor that guides me to complete the task.
To sum up, corporate goal and culture are key factors in business. When making a strategic decision, one should ensure that the strategy fits the company overall goal and corporate culture. In contrast, when some problems or difficulties existing in decision making, one could refer to overall goal and consider company cultural factors which could help to make a correct decision.
3. Problems Found During ASDA Intern
It is not always a happy journey working in ASDA, in some situations I also found problems and difficulties that frustrated me a lot. However, these problems inspire me as well, and from which I can learn the way to tackle them when I meet the similar issues in my future career.
3.1 Contradiction between Work and Dissertation
3.1.1 The Problems
The first problem I met in the intern is the contradiction between ASDA work and my dissertation topic. What ASDA wanted us to do were fragmental pieces of work: collecting data, filling scorecard and so on. Even in the 3rd party merchandising project in which we had work for nearly 2 month, we had little opportunity to go in deeper to see the whole tender process and result. As an external and temperate staff, I was not permitted to access some company information because of the confidential agreement. As a result, it was quite difficult for me and my group mates to write an outstanding, in-depth dissertation relating to what we were doing during the ASDA intern. In the first 2 months, we were simply doing the ASDA jobs unpaid and had totally no idea about our dissertation topic. When the dissertation submitting deadline was approaching, I felt extremely nervous and frustrated, not knowing what to do and what to write.
After discussing with my colleague students, I decided to turn to our supervisor Dr Leo McCann for help. We set up meetings with Dr McCann and explained our situations to him. Dr McCann suggested us to think out another topic about ASDA other than what we were doing and started our research immediately. We adopted his advice. Having read books and references, we made up our mind that focusing our dissertation on ASDA people management and high performance work system. In order to finish our dissertation on time, we created a timetable about what we should do in the last 6 weeks. And then in the first week we talked to the company and our line manager in order to get approval for carrying out interview and questionnaire in ASDA home office and at the same time we would finish the tasks they gave us. Getting the permit, we started to build interview questions and questionnaire in the second week and intended to collect all the data needed in the third week and then began our writing. Following strictly the timetable, everything went on smoothly and our dissertation writing was back on track.
I consider the contradiction between work and dissertation as the most urgent problem during my internship because I will lose my degree if I cannot finish the dissertation on time. There were mainly 2 reasons causing the problem. On the one hand, I did not create a timetable at the very beginning. In the first 6 weeks I simply worked for ASDA and wasted our time that should be used in our dissertation. I did not put everything in order which delayed the dissertation process. On the other hand, I did not talk to our supervisor or line manager as soon as possible. Only when I found that thing became worse did I turn to them for help.
From this experience, in the future job it is necessary to create a timetable for any task at the beginning and follow it in order to finish task on time, and the timetable will help to identify the existing problems, not let them being discovered when deadline is coming. If some problems found, it is crucial to speak to others to identify solutions as soon as possible. Communication is particularly imperative in business and do not be afraid to talk to others.
3.2 Conflict in Teamwork
Working as a team often causes communication and coordination problems, and those relating to "fair" task contribution. One significant issue during the intern was the conflict in understanding about task. For example, when designing the questionnaire about human resource management in ASDA, I preferred to ask same questions to all the interviewees while others believed that specific questions should be asked to people working in different division. I argued that asking same questions was easy to analyse and compare the outcome; but my teammates insisted that different questions would provide more exact feedback and data. Diverse opinions sometimes brought tension among group members. Another issue was in some occasions one member in a team did an easier job than the other did, which others felt unfair.
In order to reach a coherent understanding of what we were doing and what we should do, my colleagues and I set up regular meetings in ASDA. To solve the conflict, each side with own idea provided theories, evidences to support his/her opinion and explained why the job should be done in that way. It was not a quarrel but a friendly discussion. A "the minority is subordinate to the majority" principle was adopted to reach an understanding. When one was still unconvinced, we put all ideas down and turned to ASDA colleagues and listened to their suggestions as they had abundant experiences in both team working and expertise. Sometimes all of us compromised and tried to take different opinions into account. To overcome the problems about "fair participation", we divided one task into different sections, set up leader in each individual section and every member got involved in all sections and reported to the task leader, and final we integrated all sections into one report. This to a large extent ensures everyone making contribution to the group and it is accepted by member. However there are still some limitations in the solution: it constrains the productivity as every member needs participate in every section; work would be delayed if the one cannot finish his/her job on time; the final report might not be coherent and logical because every section is completed by different people, and it requires one member to adjust the report which may be regarded as an additional "unfair" job.
It is natural that conflict happens in teamwork. In this situation, communication is needed to reach a common understanding. Evidences should be provided in making a statement in order to convince others. When there are still problems in different opinions, it is a good way to turn to experts for advices or arbitrations to tackle the problems. Regarding to fair participation in teamwork, it is impossible to achieve an absolute fair for every one. Finishing the task should be prioritised and as a team we need to focus on collective interest instead of considering much about personal benefit. For those who are more capable, they should take more responsibilities so as to gain an outstanding result. However, each group member should endeavour to make contributions and free-rider should be punished.
4. Outcome & Conclusion
During the 3-month-long work in ASDA House, I learned amount of imperative experiences as a member in the retail industry. There is lots of fun working in ASDA while at the same time I overcame frustrations and problems in three months. It broadens my horizon and offers me improvements in many aspects.
1. Interpersonal and Teamwork Skills
Through the experience of working in a team in ASDA, I have grown to be more engaging, more confident and more effective in what I do. I learned how to coordinate with my teammates and the ways to solve conflicts. I myself became more willing to participate in collective tasks as my effort will be appreciated by others.
2. Communication Skills
The experience has exposed me to people and experts in retail industry and had some of the most satisfying experience with them. When I get confused about business operation and my dissertation, colleagues in ASDA give me lots of advices and ideas and share with their own experience which is of great help. I'd never thought I have meet some really nice people and made a good number of friends.
3. Business Analytical Skills
I have learnt to think more critically in the business operation. I did a lot of work and solved a lot of problems. I learn to think a head, plan and be prepared. Always try to learn all you can. I was given very useful feedback and encouragement by Adam which was very nice and appreciated. The many examples of critical thinking applied include: the broad insight of business activities, the importance and limitation of observation, the way to guide decision making, the method to evaluate suppliers in a tender.
As a MBS student, when I graduate I would like to work as a consultancy in fast consumption or retail industry in my future career. Some of the companies I have in mind are local large corporation such as Wal-Mart, Unilever, and P&G. For a long run I intend to formulate my own company and develop my own products and business model, hoping them would be successful and make a change in the world by helping people in some way. Through the completion of the ASDA intern, I believe it has brought about many benefits in my life and career goals. It offers me business insight and understanding about the industry, the professional skills required in completing tasks. Moreover I have seen some weaknesses in myself. I believe how I would achieve my career goal is through, networking, further building my skills in business management and professional communication, gain more experiences and maybe further education later on.