Competitive Advantage Analysis, Essay Example

The two organizations I selected to study for this analysis were CVS and Walgreens because they are both known to the public as leading corporations in the convenience store/pharmacy industry. Five important supply chain functions that will be used to compare these competitors are transportation, warehousing, post-sales service, sourcing and procurement, and returns management.

CVS pharmacy outsourced the transportation of their goods from the warehouse to the stores by using Ryder to optimize the delivery. A case study conducted by Ryder found that CVS’s use of this transportation company resulted in a 95% increase in delivery time to the stores and increased truck and driver reliability due to regular maintenance. Although this enhanced CVS’s productivity, Walgreens was recently named the leader for freight chain supply efficiency and environmental performance. Because they were able to optimize their routes, decreasing miles travelled and gas used, they were able to deliver their products to the stores more quickly than any other convenience store in 2012 (Business Wire, 2012).

CVS recently altered its warehousing strategy; they improved upon their prior ERP warehouse by combining this application with Descartes’ connectivity via XML, EDI, and email; this is expected to reduce warehouse inventory by about 17%. On the other hand, Walgreens optimized their warehouse space by making use of Kiva Robots, which are flat orange machines that are used to take items off the shelf and put them into boxes. This procedure has reportedly doubled productivity for the company and reduced energy costs. Although both of these optimization techniques are clearly useful, it is uncertain as to whether either company dominates in this category.

There are no sources that provide information regarding the post-sales service that CVS provides. However, the corporate office is known to accept exchanges if items are damaged or provide customers with coupons if they find their shopping experience unsatisfactory. Walgreens has a similar policy.

Although there isn’t much information available about the sourcing and procurement strategy that CVS uses, there are currently criticisms against the company regarding a violation of its policy stating that suppliers are not able to give the company gifts and free samples to executives and company managers in exchange for business. Despite this policy that CVS and many similar companies have in place, CVS breached this ethical requirement in 2008 in an event called the “CVS Caremark Charity Classic”. Many vendors used this event as an opportunity to become closer to company executives. In one of the most extreme examples, KKM LLC, a third party manufacturers rep firm that is responsible for representing other companies who sell to CVS, paid for a $50,000 yachting and golf weekend in full for two top CVS managers. Since this borders on scandal, and critics of Walgreens did not provide any similar accounts and nor did the company release any of its sourcing and procurement data, we can assume that Walgreens is the leader of the two in this category in terms of ethics, at minimum.

Although exact information regarding the returns management step of the supply chain is unavailable for both Walgreens and CVS, we can make certain assumptions about the company’s based on their relative success in their industry. Firstly, it is a known fact that both CVS and Walgreens used computerized systems to track their materials. Both companies use scanners in the store to keep track of their items that will allow them to determine what products need to be restocked; a similar method is used for materials in the warehouse and factories. Overall, this method enables the company to know at what point the product is in the returns process and it will be able to take the appropriate action.

Overall, Walgreens is the dominating business in terms of their supply chain. They have award winning transportation and effective warehousing, while CVS cannot boast this same success.

References

Business Wire. (2012). Walgreens Named Top Performer, Leader for Freight Supply Chain Efficiency and Environmental Performance. Regional Business News. Retrieved from http://ehis.ebscohost.com.ezproxy.umuc.edu/eds/detail?sid=765bef83-a1a4-4ef8-9d77-80af22af131b%40sessionmgr14&vid=10&hid=115&bdata=JnNpdGU9ZWRzLWxpdmU  mc2NvcGU9c2l0ZQ%3d%3d#db=bwh&AN=bizwire.c44563319