H.E. Butt Grocery Company

1
H.E. Butt Grocery Company

• Jae-Young Chung
• Ian Kwan
• Doris Lim
• WonShik Woo

2
Company Overview

• 12th largest grocery retailers
• Over 7 billion in sales
• 260 supermarkets, mostly in Texas
• Gas 'N Go outlets.
• Operates facilities for processing milk, meat,
  ice cream, and baked goods.

3
Industry Overview

• A wave of Consolidation
• - Through acquisition to increase efficiencies
  and strengthen market positions
• - Some small localized stores bankrupt
• Online grocery
• - customer segment - save time and the trouble
  involved in going to the store.

4
Total Electronic Grocery Spending

• Percentage of industry total

5
Suggested Services by HEB

• Online Service
• - Provide info services recipes, food safety
  info.
• - Kiosks in the stores for web site access
• - Provide value added services retain
  customers
• Transactional Pharmacy Web Site
• - Order online and receive delivery via direct
  mail
• - Leverage existing assets, build e-commerce
  expertise
• Pick Up Service
• - Pick up from the stores or convenient location

6
Efficient Consumer Response (ECR)

• Industry cost-reduction initiative
• Responsive, consumer-driven systems combine
  manufacturers, brokers and distributors
  maximize consumer value minimize the supply
  chain cost.
• Example use of paperless system between retail
  checkout the manufacturing line.

7
Structure of new supply chain

• Store Replenishment System
• - Use POS data to produce a perpetual inventory
• - SRS judges stock-outs at the shelf level,
  not warehouse level.
• Fast Slow Warehousing
• - To manage fast slow-moving items from
  different distribution centers delivery systems
• Intranet B2B infrastructure
• - Use of Extranet collaborate with suppliers
• - Use of Intranet for info exchange within HEB

8
Differences of its approach

• Avoid last mile delivery by having depots
• Kiosks inside the stores to provide access to
  their web site
• Launch transactional pharmacy web site
• Use Internet to accompany its retail store
  business
• Focus on improvements in its retail store

9
Comparison between HEB and others
10
Benefits created by its approach

• Reduce shipping cost by avoiding last mile
  delivery
• Depots could be used as cross-docks to enable
  home delivery model in the future
• Tap into new market
• Deepen relationship with customers
• Increase data volume for internal marketing
  analysis
• Give options to customers

11
Challenges of the approach

• Process Engineering
• Huge Investment (8 digit)
• Increase in fixed costs

12
Electronic Tagging

• Currently no electronic tagging due to expensive
  price and ethical concerns
• Should implement in the future
• Price decreases
• Customers are willing to allow HEB to check down
  on their behaviors

13
Conclusion

• HEBs approach (establish online presence and
  improvements in operations and supply chain) will
  work given the benefits outweigh the costs
• Implement electronic tagging and loyalty card
  program in the future