Working together to benefit everyone
NGS, Albert Heijn in the Netherlands, ICA in Sweden and Norway and Ahold Central Europe (ACE) have joined forces to purchase a wide range of products that go into our stores.
The program was launched in March 2006, following a series of successful pilot projects in 2005. It began by focusing on Private Label products (our own brands) and, in 2007, will extend to A-brands, Perishables and Not-For-Resale (equipment and materials used, for example, in the stores themselves and in distribution centres).
How NGS works
Instead of Albert Heijn, ICA or ACE each buying separately from their own suppliers, the three companies now look for opportunities to combine their purchasing. This lets them achieve the economies of scale that come from being part of the Ahold family. And most important, they can pass on these benefits to their customers.
More than economies of scale
Creating value for our customers is not simply a matter of ‘bundling volumes’ as it is called. The three businesses have set up dedicated Private Label ‘sourcing hubs’ – one in Zaandam, the Netherlands, the other in Stockholm, Sweden. Here, teams of European Sourcing Managers and sourcing analysts also analyze the whole supply chain, from raw materials to the finished products in the stores. Using this detailed understanding of the supply chain, they can identify additional opportunities to operate more efficiently and economically.
Practical results, multiple benefits
Case study: In 2005, a team from Albert Heijn and ICA visited the plants of Private Label suppliers to gather information on pet food products. The team opened cans, checked product specifications, looked at packaging. They saw that one supplier was producing very similar products for ICA and Albert Heijn and that, across Europe, package sizes differed.
In situations like this, harmonizing recipes and packaging can simplify production and generate cost-savings, keeping prices competitive in the stores. Moreover, with increased knowledge of how suppliers calculate their prices, the hubs can negotiate more effectively, which also means better deals for customers.
In addition, the NGS way of working enables our businesses to spot opportunities across Europe and to call on Ahold’s combined resources to take advantage of them. For example, by using Ahold’s own logistics capabilities to transport goods, they can keep transport costs down and benefit from competitive prices from suppliers based outside their own region.
NGS increases customer choice too. As Albert Heijn, ICA and ACE share knowledge and experience on product assortments, they can quickly introduce new products – ‘copy pasting’ products that customers have appreciated in one region to stores in another.
Putting the customer first
By enabling us to take a strategic approach to sourcing and to maximize our combined purchasing power, NGS plays an important role in our commitment to making it easy for customers to choose the best. But we will only do this where it makes sense for them, because – as in everything we do – our customers’ needs come first.