The Supply Chain and Value Chain Based on Best Buy

The Supply Chain and Value Chain Based on Best Buy

By Karen Vanderlaan

University of Alberta

EXSCMA 5635 SMT

Operations Management

Anna Dechamplain

Due October 11, 2018

Suppliers:

Best Buy uses strategic sourcing and focused vendor management. 45% of their products come from 5 key suppliers (Apple, Samsung, Hewlett-Packard, Sony and LG) To strengthen the relationship with their key suppliers they have incorporated these suppliers into their retail stores further down the supply chain and creating “stores within a store.” These suppliers rent space from a Best Buy location to have dedicated sales staff but save on having to invest in their own brick and mortar stores. When you consider that the top 20 suppliers are 70% of Best Buy’s brand portfolio it is key to build and maintain relationships through the manufacturing process.

Manufacturing:

To maintain an ongoing relationship with international suppliers Best Buy has set up a sourcing office in Shanghai. The Shanghai office is a vital link between the factories manufacturing the goods and head office in Richfield, Minnesota. They use a software system called “Eqos Collaborator.” It is a one stop shop for communication. It reduces communication gaps and lead times which results in reducing errors through the process. Best Buy is also working with contracted suppliers on building a private label portfolio to provide unique products to balance out the select in their stores along with value and quality.

Regional Distribution Centers:

How to distribute is a big question to answer these days. To stay relevant they are developing an omni-channel distribution retail environment. There are regional distribution centers that are the hubs that connect to delivery distribution centers. As of 2016 there are 8 regional centers and 14 delivery centers in the United States. Product does not always flow from one down to the other. (not represented by an arrow in the chart) Depending on the destination, product can be shipped directly from a regional hub to the customer skipping traditional movement of goods due to the end goal of an omni-channel distribution.

E-Commerce & Retail Stores:

Both of these are about connecting to the customer.

Retail stores are the traditional brick and mortar destination. Customers can go to their local store and physically experience products that they are interested in. Over the years Best Buy has incorporated “store within a store” concepts to commit to their 5 keys suppliers. The stores have a curated selection to balance the different needs/wants of their customer base. Knowledgeable staff that are not commission based create a safe environment for customers to ask questions and selection the right product for them instead of worrying about an employee trying to make the sale.

E-Commerce on the other hand is a wide selection at your fingertips. Whenever an idea for one’s self or a gift idea a customer can go to their website and start searching. Best Buy has also launched a Marketplace. The Marketplace is a similar notion to what Amazon has. Free shipping over $35 helps consumers by not diminishing their online shopping experience by a surprise shipping fee when checking out their digital shopping cart. Another option is BOPIS (Buy Online Pickup In Store) which creates flexibility for the customer.

Delivery & Pick Up:

To keep the omni-channel distribution this is all about what the customer prefers. The traditional consumer is fond of the full retail experience plus the capability of taking it home the same day. Though what if the product is too big to take home or they are not tech savvy enough to install; they can enlist delivery and/or The Geek Squad to make the buying process smoother.

The customer who uses e-commerce to complete their shopping experience have different needs/wants. Could be a great sale that they can’t make it into the store but can BOPIS later. Or it’s a gift and it’s easier to ship it direct to the recipient. Or they like taking their time price matching or spec comparisons with all the variety the website offers vs the curated selection in store.

Customers & Consumer Use:

Best Buy is working on creating a responsive supply chain. Over the last 20 years the typical supply chain has morphed. It’s not a straightforward structure anymore. The structure has to understand the customer wants, needs, values, etc. Transformation has been key in Best Buy staying relevant while their traditional competition has failed and the rise of e-commerce has escalated. The Customer Benefit Package (CBP) that Best Buy has cultivated includes an app, credit card, price protection, reserve & pick up, easy returns, order tracking, installation & repairs, Geek Squad, free shipping, delivery, trade-in recycling, etc.

Inputs:

To start off the value chain Best Buy starts with a sustainability mindset. To drive change and innovation in the electronics marketplace they work with their vendor partners. They are also focused on always contributing to the customer experience.

Support & General Management Processes:

These are the elements that support the value chain from start to finish. From looking at their corporate structure the main elements for their support system are procurement, e-commerce & information technology, accounting & finance, and human resources.

Procurement is involved in real time inventory that makes sure they have the right goods in the right quantity in the right places. They communicate with suppliers and even have an overseas office to be near the source. Purchasing supplies and materials while focused on sustainability and the end user.

E-commerce and information technology is needed for the survival of such a large