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Retail Supply Chain Analysis
Company X is a well-established online retailer based in Great Britain. It sells a variety of food and non-food related products and delivers them to the consumer's doorstep. In an era in which consumers are increasingly turning to online retailing as a convenient way to shop and "add more hours to the day," a number of online retailers are becoming even more aggressive in the UK market, thus infringing on Company X's profits. Company X's Board, upper Management, and stakeholders are concerned about the future strategic direction of the company, specifically holding on and growing market share. To that end, the Managing Directory and strategic planning departments believe that Company X should expand from the online only model to at least 20 new brick and mortar sites in major cities (London, Birmingham, Manchester, and Liverpool).
Positioning Strategies - Currently, Company X is considered to be "middle market" range. Not exclusive enough for upscale, too expensive for casual. This strategy has worked for them during flush economic times, but seems to be sitting on the fence and really unappealing to many during tougher economic periods. Even during tough times the demographic that can shop for upscale-like items seems more insulated; it is the lower and middle who then cannot afford Company X prices and delivery service. Right now, they are trying to appeal to the 25-45 professional working women, largely because everyone is pushing that segment. Instead, it might be better if the company differentiated a bit rather than staying the same. Certainly, their branding with fresh products delivered is helping; but they clearly have the capabilities of targeting the individual demographics and psychographics of individual areas better. In addition, readapt focal strategies to appeal to BOTH male and female of all ages and provide them with upscale and appealing goods at an appropriate value. Finally, in much of Company X advertisements, they say that they want to provide affordable luxury, but when the consumer shops, they find neither -- they find affordable items, but not necessarily luxurious; or high-end luxury that is not affordable -- perhaps a brick and mortar will help them decide which player they want to be, and do it right. What is apparent, according to the research, is more of a convergence in which the two business models minimize the drawbacks of each, build upon the strengths, and rather than cannibalize, create a culture in which if the consumer cannot shop at one, they are tuned to shop at the other, thus allowing for revenues to remain more inclusive (Enders & Jelassi 2000).
Indeed, one of the strategic paradigms Company X had to view was the issue of the product life cycle when taking their "unit/skus" and lumping them into a single unit of foodstuffs and homewares. The classic model of a product life cycle has four basic stages: Introduction, Growth, Maturity, and Decline. These cylces may be mitigated by product extensions, etc. -- in the case of each of Company X's lines, there is a differentiated product cycle. However, as part of a strategic assesment, it is important to view the company's overall place in the market (red line). Too, Company X continues to reinvent itself, and with each cross culture opportunity, the cycle is repeated. In general, a product life cycle looks like this:
Supply Chain management overview -- One of the topics of consideration regarding Company X's ability to perform well is their ability to use the appropriate level of supply chain management issues to interconnect their organization appropriately. Currently, Company X uses two modes of delivery -- a centralized warehouse in which food supplies are cleaned, packaged and delivered to the customer using an internal fleet and a direct from manufacturer to consumer delivered through UPS, FedEx, etc. On items that are not perishable or stocked in the warehouse. Using a strict supply chain model, we would find that right now the captive preordering of the clients (see arrow) allows for an easier purchasing model, only production that provides the service or readying the product for delivery, and then distribution. With 20 new locations, however, there may be a need to change the loop in differing ways so that the perishable product loss is minimized. The model for prediction will need to be based on several other factors besides current sales data, since the pattern of purchasing will change, and there will be greater opportunities for different types of purchases (e.g. impulse buys, emergency needs, longer-term planning for parties, etc., and even ancillary purchases based on display and sale items). Based on past data, however, tweaking and adopting a more rigorous supply chain model will both quantify and improve Company C's monetary and efficiency models for the new venture:
Supply chain management can easily and quickly improve productivity by saving in sourcing, supplier management, production planning and analysis, control and analysis of inventory, and sales order entry and may indeed have additional benefits to core business grouping.
With the above increased areas of efficiency, there are increased inventory turns and reduced days in inventory, which will be particularly important when dealing with Reduced days in inventory = reduced sales days = reduced accounts receivable days
Efficiencies breed reduced inventory write offs and scrap, bad product, spoilage, etc.
Efficiencies allow a greater use of the fixed assets and greater productivity of staff and equipment -- an important issue with 20 additional stores.
Typically, supply chain management reduces costs of goods, because raw materials and goods are sourced and used better; can be transferred, reallocated, etc.
The internal productivity often translates into a greater use of human resources; again providing greater efficiencies depending on the model -- also translating into fewer picking errors.
With reduced A/R, combined with reduced errors, there are reduced bad debts and account write offs; while still maintaining and increasing cash flow potential.
Customer retention -- or in the case of Company X -- migration rather than cannibalization - and service is improved based on the flow through of the efficiency quotient (Pisello 2005).
Retail logistics and trends- Any organization must evolve to remain successful. Complacency would be a major threat to Company X, as would any roadblock that would diminish access to real-time information. For Company X, it is also vital to retain experienced human capital that has the ability and expertise to continue the relationship with the manufacturers with whom they have become so dependent, and to continue with the negotiation and special relationships with said companies. Greed, too, would get in the way of a company like Company X -- which it why it is so vital that they retain greater continuity in their own management team. With increased globalization and availability of products from alternative sources, despite economic downturns, through effective merchandising and the ability to secure high-traffic locations, Company X stands to benefit from the trend towards greater needs for foods, beverages, tobacco and ancillary products, as well as convenience items, cooking supplies, both gourmet and ethnic items, and sections for finer wines and malt beverages. Combining the ability to deliver, party plan, pre-order, and add a section of "prepared meals," catered items, and a more sophisticated deli section, Company X is well placed to overcome some of the initial difficulties within this market segment (British Retail Consortium 2007).
Demographics -- Demographic trends for the major urban centers of England show support for Company X's expansion into the brick and mortar business. In many areas, both educational and income levels are slightly on the rise, and even in those families in which income is not dramatically increasing, there is a prescient desire for a higher standard of product, more choices and convenience, and an increasing number of options, particularly for day commuters who work in urban areas and commute to suburbia. In particular, the idea of Company X combining resources like cafes, coffee shops, delis, cookware and lifestyle sections with higher end global produce and consumables, tends to appeal to the modern middle and upper class segment equally. By sheer buying power alone, having twenty stores plus continued home delivery options will allow Company X's buyers to make deals on hard to find produce of high quality well ahead of most grocers. The volume and attention to detail, as well, will allow for a more unique and specialized "feel" to shopping. Computerized data base and some limited psychographic profiling, as well as the addition of a book, periodical and gift section will likely appeal to this segment. The opportunities abound for adding particular items, and most especially, to be able to deliver and ship gifts and items throughout Great Britain and potentially globally. All this fits in quite well with the targeted demographic, which, at the minimum, comprises almost sixty percent of the U.K. Workforce (See graph) (Birkin & Clarke 2002).
Financials -- The actual fiscal outlook for each individual store will vary considerably based on the particular location, rental/lease agreement, partnership arrangements with manufacturers, etc. However, based on conservative estimates,…[continue]
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