Galen Westond overseas the Wittington Group which is the company's owner. Holt Renfrew is a high-end retailer in Canada with ten stores located in seven different metropolitan areas and the company's flagship store is located on Bloor Street, Toronto. The retailer sells top quality, branded and private-label designer fashions as well as cosmetics and sells a plethora of designer names such as Prada, Gucci, Armani, Dolce & Gabbana and Oscar de la Renta to name a few. As a luxury retailer the company targets an upper demographic and must stay on the cutting edge of the fashion industry to remain competitive. The company has also launched hr2 by leveraging their 175 years of Canadian retail expertise. hr2 offers Canadians who love fashion and leading brands, a new and unique designer product selection -- at great value -- and with a great shopping experience (Holt Renfrew, N.d.).
Holt Renfrew began in 1837 as a modest hat shop in Quebec City and over the years the brand developed and expanded across Canada (Holt Renfrew, N.d.). In the 1930's Holt Renfrew began exclusive accounts with some of the best designers in Europe and in 1947 hosted Monsieur Christian Dior when he launched his "New Look." In 1986, W. Galen and The Hon. Hilary M. Weston bought Holt Renfrew. Under their ownership Holt Renfrew has become Canada's destination for luxury retail. Holt Renfrew has over 2,500 employees with nine stores across the country in Vancouver, Calgary, Edmonton, Montreal, Quebec City, Ottawa and Toronto (Bloor Street, Sherway Gardens and Yorkdale Shopping Centre) (Holt Renfrew, N.d.).
Holt Renfrew's success has led to problems in the supply chain management of many of the products that they sell. The retailer operates on a seasonal basis. Although peak sales periods were: March/April, July/August and November/December, the company used publicity campaigns throughout the year to promote various products. Holt Renfrew's buyers, located at the company's flagship store on Bloor Street in Toronto, issued approximately 21,500 orders a year from about a thousand suppliers. The 80,000 square-foot distribution centre (DC) was designed as a flow-through warehouse, where incoming goods were to be immediately processed and shipped to the stores. There is also a warehouse that stores the merchandise that does not sell at the retail outlets.
Tony Kelly has a unique opportunity to address some of the challenges that have grown over time in the company's supply chain management (or lack thereof); the problem however is how Tony should create a strategy and can best implement changes to transform to company's supply chain operations.
Tony Kelly is a new employee to Holt Renfrew. New employees in an organization are often more likely to pick up on areas for improvement than someone who has been in that environment for so long. More able and willing to promote and implement radical change. Organizations that want to pursue discontinuous innovation, innovation that is likely to create a new trajectory, face the challenge of having to move 'outside the box', beyond its prior experience (Bessant, Von Stamm, Moeslein, & Neyer, 2010). The ability to select discontinuous innovations requires a radical shift in the core assumption that discontinuous innovation is a matter of simply building a portfolio of projects with a mixture of risk. Therefore if a discontinuous strategy is chosen as the organizational objective then the company should attempt to enlist the ideas of an outsider who can provide different perspectives. However, that being said, Tony must use this opportunity to transform the supply chain to help the company move towards its organizational goals as well as his own personal career ambitions.
The DC is cluttered with merchandise everywhere, under conveyors and scattered across aisles. Not only does this indicate inefficiency in the supply chain, it also likely poses significant health and safety concerns and cannot be avoided under the current operational model. It is obvious that some action needs to be taken not only to improve the organization's ability to provide customer service but to reduce risks for health and safety claims/issues resulting from human resources. Secondary warehouse is used for items not sold in store. It seems like a waste to have a whole warehouse solely dedicated to excess material. You should be able to significantly reduce the amount of products wasted through improved planning and eliminate the need for a whole additional facility though better supply chain management.
The supply chain is one of the primary ways in which an organization adds value to the consumer. Value is gained through this process in several ways. It can come from design, quality, price, or efficiency (most likely some combination of these factors). Furthermore, supply chains can be optimized for tactical considerations such as turnover rates or economic, strategic decisions such as location or product life cycle management, or even strategic factors such as creating long-term partnership or maintaining sustainable practices. Through any combination of these factors, an organization can create a competitive advantage in regards to its operating environment.
Supply chain management is beginning to define the ways in which it integrates with other business functions such as marketing, logistics, production, and operations (Mentzer & Esper, 2011). Despite many challenges in operating a global supply chain with three thousand suppliers, many of these challenges can be mitigated with appropriate supply chain management. There are areas where supply chain management theory and methodologies can provide fresh insights and innovative solutions in addressing these problems; regulation and standards, product lifecycle management, traceability and recall management, and supplier relationships (Marucheck, Greis, Mena, & Cai, 2011). With this in mind, the company should undoubtedly take a lean approach to looking at their supply chain. By using an end to end value stream example it is apparent which operations add value to the organization and which can be seen as non-value-added (from a lean perspective).
Figure 2 - Value Stream Example (Wood, N.d.)
Lean SCM is more of a philosophy than a structured approach to improving defect rates. Lean Manufacturing replaced the Just-in-Time (JIT) model that focused on decreasing inventories and the risk of obsolescence. Furthermore, research has also indicated that Lean Manufacturing and Six Sigma are repackaged versions of their former models and given that they are ending their lifecycles, it is estimated that new management trends are expected to emerge shortly (Naslund, 2008). However, despite whatever label is attached to the concept, Holt Renfrew definitely needs to apply some supply chain management insights to improving their supplier relations as well as their inventory levels.
The lean concept is an approach that focuses primarily on reducing waste. Anything that does not add value to the consumer or the finished product is considered to be waste. Therefore things like inventory and administrative functions are waste. Inventory does not add value to the end product or to the customer because it adds nothing significant tot the product. It is more of a necessary evil that results from inefficient systems and the same can be said about administration.
It will undoubtedly be hard to convince the organization that all of the luxury designer items sitting around are waste. Imagine what kind of reaction that you would get if you picked up a box of thousand dollar Prada shirts and called them waste. It is likely that the reaction would be something along the lines of "are you crazy?" However, goods that are not adding value to the organization are exactly that -- waste. In fact, they are worse than just waste because they are counter-productive to organizational goals. They are costing the company money in storage space while also diminishing the company's ability to keep stock on the shelves of their core operations. They are adding no value to the organization by sitting around in storage and therefore something must be done with them. One idea would be to improve the distribution to the factory outlet shops so that more of the older items could be sold at a discount. Another idea would be to look for strategic partnerships that can offer new discounted distribution channels to further alleviate the excess.
There are seven wastes of a lean system that are often cited as points to look for in supply chain operations. The 7 wastes consist of (i Six Sigma, N.d.):
In this context it is important to define value; value is any activity that is added that the customer would actually pay for; if given the option and waste is any activity that does not add value to the product or service. Waiting (when a good or process sits) is waste because it serves no purpose and adds no value and transportation is any "unnecessary" movement or transport of a good. Thus, from this perspective, it is easy to determine that the second warehouse is definitely waste and a non-value added process that actually increases motion as well.