Mercadona´s

Visit Summary

Eduardo Lasprilla
May 18, 2011
Eduardo José Lasprilla Pina May 16, 2011

Mercadona´s Visit Summary

1. Warehouse organization and schema based on product characteristics:

Mercadona has created the first intelligent warehouse that eliminates risks associated
with workplace accidents. This plant has 150,000 mts2 with 700 employees.

This platform includes the most innovative technological advances and represents a
new logistics concept. The transport of goods through the warehouse and the pallet
preparation are carried out automatically or semi-automatically, with mechanical
systems that limit employee exertion, creating ergonomic and high-quality job
positions. This high degree of automation of the entire process permits the preparation
of 20,000 pallets daily, completely eliminating manual handling and overexertion for
the employees, which reduces the risk of workplace accidents.

2. Ordering processes
The TQM model that they use has enabled management to take a multidimensional
approach and look for excellence along the company’s entire chain of value creation.
This includes the ordering process which is made automatically (pull system). As soon
an article is purchase in a supermarket the information is sent directly to the
warehouse to create a new order to be delivered.

3. Store service characteristics and coverage

Mercadona has oriented its entire business model toward the total satisfaction of its
customers, who are its true “bosses.” Customers are at the top of the company’s
organizational pyramid. The philosophy of Mercadona is to focus on increasing the
value that it provides for each customer. First, it pursues a policy of low prices,
eliminating discount offers, promotions and temporary discounts. It also manages to
maintain a constant dialogue with the customer through meetings with people who live
in neighborhoods near the supermarket. In addition, it provides specialized courses
about its own corporate product lines, as well as ‘open door days,’ blind trials, and so
forth. Mercadona gives priority to these types of initiatives over large-scale campaigns.

It also has designed its stores so that they are divided by environments, and has taken
other measures to minimize the time it takes for customers to make their purchases.
The company has achieved noticeable growth in its sales per square meter in each of
the supermarkets in the chain.

4. Transport (in come and out come) characteristics

In one of their warehouses they have 5 subgroups, in each one of them they arrange
the products to be sent as soon as the picking process is done. They utilize a transport
supplier to pick up their product and they establish the routes and the supermarkets to
send the products. One of Mercadona’s main goals is to reduce the impact of
transportation on the price of products. They call this “transporting more for less”
which also has the positive side effect of having a smaller impact on the environment.

International Master in Business Management (IMBM). Mercadona´s Visit UAB

Eduardo José Lasprilla Pina May 16, 2011

5. Personnel shifts and personnel policies

Mercadona´s in-store logistics personnel work for store operations and report to the
store manager. They focus on process and product improvement. Mercadona cross-
trains employees so their productivity is not tied to store traffic. Cleaners can work the
cash registers during busy periods, and cashiers can shelve products during downtime.
Departmental specialists can assist customers during busy periods and order
merchandise and arrange their sections during slack hours.
Workers learn about their schedules one month in advance and don’t have to work
different shifts from one day to the next. Over 85% of Mercadona’s store employees
are full-timers, and they have fixed salaries with a variable bonus.Their employees are
also paid more than is typical for retail in Spain. Not surprisingly, employee turnover is
low, only 3.8 percent per year.

6. Picking processes
The Picking processes at Mercadona has become an important part of their supply
chain process. Its automated storage area requires only few workers per shift to
supervise equipment operation, replenish picking areas and forward completed pallets
to the dispatching area. As labor is reduced, warehouse operators can also eliminate
many of the occupational safety concerns associated with manual
case picking because workers do not have to bend and lift cases to take them from one
pallet to another. They can also reduce the amount of product damage
and picking errors associated with it.

7. Cross Docking cases

Mercadona uses a Cross-docking practice in logistics which consists in unloading
materials from an incoming semi-trailer truck or railroad car and loading these
materials directly into outbound trucks, trailers, with little or no storage in between.
This is done to sort material intended for different destinations and to combine material
from different origins into transport vehicles (or containers) with the same, or similar
supermarkets.

8. Suppliers and standardization of logistical components

Mercadona has more than 100 integrated suppliers (Hacendado, Bosque Verde,
Deliplus and Compy brands). More than 2,000 Suppliers trade and service Suppliers.
500 Million euros invested by integrated suppliers to distribute their production
activities throughout Spain.

The Intersupplier relationship is based on stability and cooperation between the two of
them. Both Mrcadona and the Intersuppliers know the expectations of the Boss
(customer), therefore they share training and information to improve the process.

International Master in Business Management (IMBM). Mercadona´s Visit UAB

Eduardo José Lasprilla Pina May 16, 2011

International Master in Business Management (IMBM). Mercadona´s Visit UAB