Dejan Virijević: “We are preparing ourselves for a lot more competition arriving soon.”
Nine questions about the topics on the supply chain agenda of a supply chain professional.
By Helen Armstrong (Supply Chain Movement)
Serbia is often overlooked as it nestles geographically and politically between east and west. It has a free trade agreement with the EU and a bilateral agreement with Russia yet the Maxi chain of supermarkets is committed to sourcing locally. Since opening its first supermarket in Serbia in 2000 it has grown into a leading food retailer with 360 stores under the Maxi and Tempo brand names. These brands have become synonymous with a wide assortment of fresh produce and a place for family shopping. Three years ago the company joined the Belgium-based, multi-national food retailer, the Delhaize Group. While it has some 3,400 stores around the world, the takeover reinforced the company’s pledge to offer Serbian customers a locally differentiated shopping experience. Dejan Virijević has been with the company for 11 years and is responsible for the supply chain in Serbia and the 40 stores in neighbouring Bosnia & Herzegovina.
1. What is your supply chain strategy? Operational excellence, product leadership or customer intimacy?
We focus essentially on customers. Our retail chain is recognised for its service, close relationship with customers, sourcing of local produce, supporting the local community and for our social responsibility. We have different banners and store formats – convenience, supermarket, hypermarket and discount – to suit specific local needs with an emphasis on fresh produce. The products are a mix of national brands and an increasing number of private labels. We focus on top selling items but all products count.
In Serbia the market is not as mature as in Western Europe but competition is coming so we are in the process of ensuring that we have the right supply chain in place. We’re in the middle of transforming our supply chain operations into a powerful source of competitive advantage as we aim to secure a leading position. We are building a 72,000 m2 distribution centre that will open at the end of this year. We are also investing in our fleet of vehicles, introducing new IT solutions and preparing people, processes and suppliers for the moment the distribution centre opens.
2. What is your responsibility regarding the supply chain?
I moved into this supply chain function one year ago and I’m now responsible for procurement, distribution and imports-exports. Over the last ten years I have worked in buying, marketing, category management and, as well as some restructuring projects, my key responsibility was global sourcing.
Our strategy is to source locally but if we can’t do that or the assortment is not wide enough then we import. 15% of our total supply is imported. These imports come from the EU (60%), Asia (20%) and South America (20%).
We have several supply chain strategies that work on the same platform but they’re adapted to fulfil different requirements. So, for example, when we import from the Far East, due to long lead times, we design the entire supply chain by planning backwards, taking into account order placement date, ETD, ETA, border controls, shipping times etc, to have the product on time in all our stores.
When we source locally the focus is on freshness and we are building a concept of close collaboration with all our vendors in order to have high service levels and speed to market. At the moment about 53% of our supplies are centralised, as stores still work with individual customers but we are aiming for more centralisation.
3. What are the main business challenges that drive supply chain projects at the moment?
We anticipate a lot more competition arriving soon, which we believe will be very good for us too. Lidl already has some locations and we expect it to enter the market around the end of the year. Carrefour announced it is interested in coming here and Tesco may too. We are preparing ourselves.
When Delhaize took over it realised it needed to invest in the supply chain if we are to maintain our leading position in Serbia. We have two major supply chain projects running at the moment; building the 50 million euro distribution centre and investing several million euros in our lorry fleet and drivers to improve operations. At the same time, our top priority is to improve collaboration with suppliers to secure higher product availability for our customers. To achieve this we created a new concept to measure suppliers’ logistical performances such as service level, OTIF delivery, quality of delivery. We are also investing in tools to help us with real time demand and supply planning to improve accuracy of forecasting. Bringing the right product at the right time to the shelf is key. However, we will still focus on having people on the ground to communicate and forge relationships with suppliers otherwise we won’t succeed.
4. Which supply chain challenges keep you awake at night?
The emphasis is on fresh and our priority is speed to market – to be the fastest – and to deliver a full fresh assortment of meat and fruit & veg on a daily basis. We are best in class in Serbia and we want to keep this position. But we have a lot of competition from local butchers and greengrocers since a lot of customers still prefer to shop at open markets instead of supermarkets.
Serbia is not an EU member yet it has free trade agreements with EU, EFTA and neighbouring countries and bilateral agreements with Russia, Turkey, Belarus and Kazakhstan. This makes it possible for the Russians to come here and buy all our fresh produce, which does sometimes happen.
When we lack local fresh produce we import and this amounts to almost 40% of our fruit & veg requirement so supply chain planning is the key to success. Sometimes this can be tricky because the market is missing service providers for various functions so retailers are forced to make in-house solutions for processes like ripening of green bananas.
5. What do you do about these challenges?
We contract production to local growers and we support local factories in order to secure availability, have better control over the supply and shorter lead times. We tell producers what they should grow and harvest. At the same time we try to import less.
It’s our ambition to change the way we cooperate with suppliers. We have been making presentations about key supply chain initiatives and new working methods but three major factors are important: Information sharing, integration and relationships. We now sit at a table and openly discuss all subjects and show that gains can be shared between the two parties.
While setting up the Supplier Performance Measurement initiative we first had to educate suppliers about KPIs, which was not always easy but it has been crucial. As well as measuring supplier performance based on KPIs we’ve switched from a policy of sending out penalties for non-delivery. Instead we are very tolerant to suppliers who support us in this new way. We are reassessing how we continue with those suppliers who are not able to meet our minimum requirements.
6. Who do like to meet for exchange of knowledge?
I always like to meet supply chain professional because we face similar challenges. Also, because I had a chance to travel a lot, I was able to meet and exchange knowledge with so many retail professionals, from Walmart, Wegmans, Carrefour etc.
Now, I’m privileged to be in this company because my colleagues from Belgium, Greece, US etc, help and share a lot of information. I have over 10,000 business cards so I’ve met a lot of people!
7. What book has inspired you the most and why?
Recently I read Who’s in the room by Bob Frisch. He has some interesting thoughts on the way decision-making occurs within companies, not always in the boardroom. He suggests how a company can more forward by having teams – formal and informal – make the decisions. But any free time I have, I try to spend with my two-year-old daughter.
8. Where do you see yourself professionally in five years?
I’ve been in the company for 11 years in different departments including category management, buying, marketing and now the supply chain. Bearing in mind my passion for retailing I think I will stay in the supply chain or operations. My dream job is global sourcing but I can cover this from the supply chain.
9. What do you use for an agenda?
I still use a moleskin notebook for writing down notes but of course I have a smartphone which I renew regularly!