Aldi Neston

1. Introduction

As soon as Aldi, the discount supermarket entered into e-commerce, it recorded a boom of $6.9 billion sale from $5.2 billion (Baldwin, 2015). The boost not just happened due to entering into e-commerce, but also by investing into distribution centres and new stores. Aldi invested approximately $438 million in the distribution centres and new stores in order to cater to the needs of the online business (Tugby, 2015). As Aldi’s strategic framework did not employ much staff on the stores anyways, the shift towards e-commerce had been primarily towards the distribution centres and stock.

Aldi had been proudly hailing 30% cheaper prices as compared to its competitors, and after making its business online, it has been able to give better discounts to its customers, finally fetching better profits (Craik, 2015). The company that operates hundreds of stores across the nation announced record operating profit within 52-weeks. While Aldi aims at opening atleast 1000 stores nation-wide by the year 2022 would also change its strategy of employing less staff. It is likely to double its recruitment in the coming years to fill up the staff-needs.

As the company recorded this level of sales and profits, there are various challenges that it had come across. These challenges relate to the distribution centres and the process of handling the distribution process. As Aldi has been new to online business, it has not taken risk of selling fresh groceries online, which saved it from additional set of tasks that would have been involved in the management of its operations (Farrell, 2015). It is presently in the business of selling packaged foods, drinks and other utilities.

2. Entry into E-commerce

Aldi states that with its online business evolving, it is trying to work around its unique operating model in such a way that facilitates its functioning in a profitable manner. In addition to providing sellables online, Aldi is giving that benefit of tasting the item and visiting the store to buy other things as well. Aldi had been selling its food items in competitively discounted prices since decades, with less staff employed, and distribution centres managed professionally.

Despite the fact that any company plans well while entering into e-commerce business, there is still

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room for understanding any operational gaps. This could be seen in the case of Aldi as well. There have been some instances where the company had to urgently close a distribution centre. However, in this report we aim at identifying the factors that lead to the challenges that distribution centres of Aldi faced due to sudden change in its operational strategy.

3. Role of Distribution Centres in Aldi’s E-commerce

There had been a traditional way of receiving orders, storing the stock, picking the material, and transporting through distribution centres after packing and shipping. This process demands a change as soon as a company takes its business online. The process of taking orders, packing, shipping, and delivering it to the customers changes when any business starts working virtually.

In a traditional setup, when a company delivers orders to the customers, they could take a few days to complete the order, however, when it goes online, there is a need to take quick actions and deliver the order within a few hours (Graves, n.d.). This need is due to the dynamic nature of the industry, where every other competitor wants to take a competitive edge over the other by adopting strategies that are different. This makes it important for Aldi to understand that it nomore has the flexibility of responding to orders in its own time, but as quick as it could in order to not lose the competition, as e-commerce is extremely competitive in terms of pricing, quick response, and ease.

Highlighting the above fact, it is important to stock more in the distribution centres and re-arrange the entire operational structure. Aldi would have to address the need for stock-keeping units proliferation. It is important for the internet retailers to address the need for ever-increasing merchandise, which primarily includes those items which are faster in selling. A small percentage of that stock is made by those items that are slow-paced. Picking the SKUs becomes a common challenge for the distribution centres and their related operations when their respective businesses go online (Wortmann, 2004).

3.1 Understanding need for Dynamic Action

The process of picking an order cannot be taken easily, as is done in a regular business operation. When an order is placed to an online retailer, it comes a responsibility to handle the order effectively and quickly. The strong operational setup of the distribution centres plays the major role in that. It is

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to be understood that in regular businesses, the product purchase is the prime expectation of the customer followed by the price at which it is brought, but in an online purchasing experience, the focus shifts from providing mere products to providing an overall experience. To add, the experience must be competitive, as Aldi would face severe competition from various other brands, who might not have been a serious threat for Aldi before entering into the online business.

3.2 Understanding Online Customership to guide Distribution Framework

Expecting a wide range of SKU offerings has become common among the basics of what an online customer would expect. There is an entire study of what process of action and thoughts an online customer goes through while shopping on an ecommerce website. This information is indispensable to collect in order to guide the operating chain block by block. It has been evident lately that those making purchases online are not simply looking for desirable products on competitively low prices, but are trying to find features

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