After reading the case study on Lotte Shopping Co. Limited which is South
Korea’s leading retailer, I came to realize that it is never too late for any
businessman to change the landscape of an industry that is currently
dominated by business giants.
The case of Lotte shows that a company’s view on innovation as a strategy
for business survival in a rapidly changing environment is an initiative that
can be carried out. True enough, Lotte has proven itself as a serious
competition of any business offering products in a variety of categories such
as fresh and processed foods, electric home appliances, clothing and
In fact, Lotte Mart has rapidly expanded over the years to become an
international retail enterprise with revenues of $6.5 billion and approximately
160 stores in South Korea, China, Indonesia and Vietnam. This growth is
fueled by the retailer’s award-winning supply chain management strategy. I
am quite impressed that since implementing the solutions in 2007, Lotte
Mart has won awards and recognition each year for its efficient consumerresponse initiative and supply chain excellence. The retailer placed first in
the 2008 National Customer Satisfaction Index, an annual study compiled by
the Korea Productivity Center, Chosun Daily and the University of Michigan.
Lotte Mart also ranked first for brand recognition among Korean retailers in a
2008 survey conducted by the Korea Productivity Center and JoongAng Ilbo.
After reading materials on Lotte’s core supply chain management processes
for ordering, markdowns, operations and space management, I came to
discover that Lotte has a much better supply chain management processes
than their competitors.
Customer-Oriented Business as Lotte’s Management Philosophy
Indeed, Lotte has unique business policies. The management philosophy
“Always with You” reflects that the company is aiming at customer-centered
management that focusing on earning each customer’s satisfaction and
trust. I do believe, therefore, that every business should follow suit what
Lotte has treaded in order to become competitive since businesses can be
socially relevant only when they are meaningful to their target customers.
Augmented Visibility at the Store Level
It is impressive that Lotte designed and developed a replenishment system
to automate their ordering process. This system helped Lotte Mart reduce
the amount of work required to order products and lower its overall stock
levels. While the system provided initial improvements, Lotte Mart realized
that the benefits were limited by the data entered into the system and that it
lacked visibility into how much stock each store required.
To resolve the disconnect between stores and merchandising, Lotte Mart
needed an advanced generation approach that would enable it to drive more
precise ordering with accurate information on store-level merchandise
Advanced Category Management that Reduced Stock, Increased
Sales, Decreased Days of Holding
Lotte Mart decided on a phased approach for its JDA implementation. The
company launched the first phase with a pilot test that involved two stores in
Korea and two categories, skincare and instant coffee. The retailer selected
the skincare category because of its complexity, offering thousands of SKUs
across multiple brands. The instant coffee category was chosen since it
encompasses many fast-selling products. As such, Lotte Mart would be able
to easily determine the results and benefits of leveraging advanced category
Additionally, Lotte Mart launched its second phase of the JDA
implementation, leveraging the JDA solutions to manage every category in
its hypermarket stores with the exception of fresh foods and fashion.
Lotte Mart’s POG approach continues to deliver results. Store operators
report that the JDA products have synchronized display quantity with
inventory orders to significantly decrease stock at the stores.
After two years of using JDA, their stock has decreased another 10 percent
and their sales increased by 4 percent – even in their competitive industry.
They have also significantly improved their labor efficiency while their
merchandisers now have more time for analysis and are pleased that the
store displays are being done exactly as they intended to help drive sales,
showing that Lotte is indeed a company that their competitors should watch
out for as far as strategies are concerned.