The countries of Gulf Cooperation Council (GCC) have experienced an unprecedented growth of the population’s buyer capability (Viau 11). The booming economy has opened numerous opportunities for local retailers. Hypermarket concept is gaining wide popularity in the Middle East, as it enables the customers to shop for a diverse range of products in the same location. The number of hypermarkets is constantly growing in the United Arab Emirates and other countries of GCC.
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Lulu Hypermarket is the largest hypermarket chain in the country. It also has numerous outlets in other GCC countries and is considered a leader in retailing in the Middle East. The analysis of supply strategy employed by Lulu Hypermarket chain helps to explore the specifics of retailing business in the United Arab Emirates and define the challenges met by the company in establishing an effective supply chain.
Supply Chain Process Map
Lulu Hypermarket offers a wide range of products, including digital products, fashion and lifestyle products, grocery and fresh food products, and home décor and household products. Each of the categories requires special supply chain process due to the specifics of each of them. The supply chain process map reflects the specifics of certain categories of products. In particular, fresh grocery products with limited time of storing provided by local manufacturers are not stored in warehouses prior to being distributed to the system of hypermarkets.
The Supply Chain Process Map reflects certain specifics of the range of products sold by Lulu Hypermarket. Both international and domestic manufacturers supply the distributors with the products that are sold in Lulu hypermarkets. The company is famous for its effective supply chain that is much more modern and efficient than most of supply systems of other retailers in the country. Such advantage lets the company be recognized as a leader in the efficacious logistics in hypermarket industry in the country.
Supply Chain Analysis
As Lulu Hypermarket sells a wide range of products, each of the categories requires effective supply chain system. Digital products, fashion and lifestyle products, grocery and fresh food products, and home décor and household products have certain special characteristics that lead to the differences in the process of providing their continuous supply.
Lulu Hypermarket needs a “robust logistics and supply chain management network” ensure its sustainability and competitiveness on the market of food retail through focusing on quality and timely supply of local and imported products (Hajjar and Sweeney 9). The United Arab Emirates is considered a leader in optimizing supply chain, and Lulu Hypermarket can be regarded as one of the pioneers in establishing an efficacious food supply chain in GCC. The company pays much attention and invests much money in logistics.
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Warehousing management is one of the strongest sides of the company’s logistics strategy that benefits it with significantly reduced costs for transportation and helps to provide fresh food products. The company uses LFS400 warehouse management system for its hypermarket chain in the United Arab Emirates, as well as in other countries of the region (“LuLu Hypermarket Boosts Warehouse System” par. 1). Lulu Hypermarket upgraded its warehousing technology after opening a distribution center in Dubai Industrial Park. The facility occupies 25000 square meters and is capable of storing nearly fifty thousand of various products. This warehouse is connected to a central IBM computer located in Abu Dhabi, which provides a linkage between different sites and a central software installation (“LuLu Hypermarket Boosts Warehouse System” par. 2).
The usage of such warehouse management systems enables the company to achieve high accuracy in inventory and picking and optimize the logistical resources (“LuLu Hypermarket Boosts Warehouse System” par. 3). The company uses the system’s flexibility and simple customization to meet the customer requirements. Besides, the company strives for cooperation with various warehousing companies in the region. For example, in 2011, the company signed a contract with Gulf Warehousing Company (“Gulf Warehousing Company” par. 1). The cooperation with various warehousing companies in all countries where it operates enables Lulu Hypermarket to use the most efficient warehousing solutions, reduce the costs of logistics, and provide the customers with fresh grocery products stored in appropriate facilities.
As most of GCC countries, the United Arab Emirates has a lack of arable land and scarcity of water. Specific climate conditions cause the country’s heavy dependence on food products import, as according to the Arab Agricultural Development Organization (AADO), net imports account for 78% of food consumption in GCC (Hajjar and Sweeney 7). In the United Arab Emirates only nearly three percent of the land is suitable for cultivation (Hajjar and Sweeney 7).
However, the demand for food products is growing enormously because of increasing population, rising income levels, and urbanization. Food sector shares the largest part of the sales of Lulu Hypermarket. Therefore, the company heavily relies on the import of food products and has to seek for effective solutions related to food supply chain issues to ensure its sustainability during the rise of customer spending in food retail sector.
The food supply chain in Lulu hypermarkets consists of several main participants providing the hypermarket units with the products. After the primary production stage, food materials are assembled and go through the value-added processing at manufacturer’s site using previously provided package materials. After the manufacturer sells the products to distributors, they are responsible either for international or local transportation of products to the company’s warehouses (if the goods have a long serviceable life) or directly to hypermarket sites (if the goods have a short serviceable life). The system of food supply chain used by Lulu Hypermarket is similar to the system of supply of Western food retailers. It main specific feature is heavy dependence on foreign distributors and manufacturers producing refined sugar, chicken meat, wheat, dairy products, chocolate, tea, etc. (“Top Imports” par. 1).
The supply chain for other categories of products is similar to the one used in the food sector. However, certain differences exist, as digital, lifestyle, and household products can be stored for long periods. Therefore, the effectiveness of their supply heavily relies on the warehousing systems enabling constant access to these products and prevention of their shortages. While constant food products supply depends on the speed of transportation from foreign distributors, digital and household products supply depends on the efficacious organization of their storage.
Lulu Hypermarket is known as “a trend setter of the retail industry in the region” and is considered one of the most successful players in the retail business in the United Arab Emirates and other countries in the Gulf region (“About Us” par.1). The analysis of the company’s supply chain system reveals that Lulu Hypermarket successfully copes with the challenges related to the specifics of the region and effectively uses logistics to provide a constant supply of products to its consumers and avoid the possibility of shortages.
About Us. n.d. Web.
Gulf Warehousing Company Signs Deal with Lulu Hypermarket. 2011. Web.
Hajjar, Mohamed, and Michael Sweeney. Opportunities for Supply Chain Consolidation in GCC Food Sector. 2015. Web.
LuLu Hypermarket Boosts Warehouse System. 2008. Web.
Top Imports – United Arab Emirates – 2011. 2011. Web.
Viau, Lucie. The United Arab Emirates (UAE): Agri-Food Supply Chain. 2011. Web.