Supply chain management and competitive priorities at Harvey Norman

Organization Behavior

Internal Supply Chain Management

ABOUT HARVEY NORMAN

Harvey Norman is a large scale retail chain owned and operated by Harvey Norman Holdings Ltd. It is one of the most successful retailers in the Australian region. It promotes and sells all kinds of consumer products of world's top quality brands. The major product lines include personal computers, cameras, gaming, mobile phones, audio and video players, home appliances, furniture & bedding, gifts, home decoration and interior designing, fitness machines, leisure, etc. Headquartered in New South Wales, New Zealand, Harvey Norman operates with more than 230 stores in Australia, New Zealand, Ireland, Malaysia, Croatia, Singapore, Slovenia, and Northern Ireland. It was established in 1982 by Gerry Harvey and Ian Norman. The holding company, Harvey Norman Holdings Ltd. has also franchised a number of retail chains in Australia; including Space Furniture, Joyce Mayne, Ariston Appliances, Domayne, etc.

Harvey Norman has a wide range of product lines; each of them is operated by a separate franchisee firm. The franchising arrangements are made either on the basis of ratio from the sales revenues or a fixed payment after a specific period of time. In addition to a large number of franchised retail outlets in different cities and towns, Harvey Norman also operates through an online store. This web incarnation allows the customers to search for their favorite brands, check their availability, compare prices with other brands, and add chosen products to their shopping cartels (Harvey Norman 2012).

Harvey Norman has a large supply chain network spread all over the country. The most important supply chain members are the suppliers of consumer goods. The supplier network consists of manufacturers of top quality brands that sell their products to Harvey Norman at wholesale prices. These products are placed at high, medium, or low shelves in Harvey Norman stores according to their demand, popularity, and pricing. The second most important member of Harvey Norman's supply chain is the distributors. Harvey Norman has taken the services of numerous well-recognized distributors from the local markets that are responsible to deliver the new supplies of products to the company's retail outlets all over the country. The marketing and promotional agencies are also an integral part of the company's value chain (Hackman & Wageman 1995). These agencies and firms promote the branded and unbranded products offered by Harvey Norman to the potential target markets (Harvey Norman 2012).

COMPETITIVE PRIORITIES

With the help of its vast supply chain network, Harvey Norman aims to achieve some competitive priorities which cannot only help it in beating the competitors in the short run, but also enable it to accomplish its strategic objectives in the long run. These competitive priorities include product strategies, cost and pricing strategies, quality management, and customer services efficiency. These priorities are discussed in the following section in detail:

1. Product Strategies:

Harvey Norman sells and promotes a wide range of branded and non-branded products for the customers from all age groups and income levels. Therefore, it enjoys a large customer base and high sales volume throughout the year. The brands in the same product line are categorized according to their quality and demand. For example, the most demanded products are placed in the high shelves so that they are more noticeable to every incoming customer. On the other hand, the brands with low promotional priorities are placed in low shelves.

2. Cost and Pricing Strategies:

The very first thing which Harvey Norman thinks of while developing its operational strategy is the cost and pricing of its products. The major costs involved in this business include transportation and distribution expenses, marketing and promotional costs, and salary and administrative costs (Samsona & Terziovskib 1999). Harvey Norman purchases all the consumer products from their manufacturers at wholesale price which allows it to earn a good profit margin by selling them at their final consumer price. Despite having a retail chain of more than 230 stores, Harvey Norman has not yet reached the cost leadership position in its industry. The main reason is the intensity of competition which deprives Harvey Norman from charging a low price from its customers and keeping its profit margins at their lowest level. The other costs of operations are also very high in the Australian market which also puts a heavy burden on its profitability (Hill 2005).

Harvey Norman can achieve cost leadership by cutting down extra expenses which are incurred on unnecessary advertisements and controlling its operational costs which make the least contribution to its sales revenues (Boyer & Verma 2009). On the contrary, if it is unable to control these costs, they will put a direct impact on its financial performance by reducing profit margins and causing potential losses in the future. In order to achieve the cost leadership position in the industry, Harvey Norman can make purchases from manufacturers in bulk quantities. In this way, it can get the supplies at lower prices than its competitors (Swamidass 2000). Harvey Norman also aims to achieve this goal through automation and e-marketing. The online store contributes a great deal in the overall sales of the company. The company's website is also among the most cost effective mediums of promotion where customers can find all types of information about the company's product offerings (Harvey Norman, 2012).

3. Quality Management:

As a top retailer in the Australian market, Harvey Norman has always emphasized on meeting the customers' expectations through highest quality products and superior customer services. For Harvey Norman, quality not only relates to the value or reliability of the products; it is considered as the strongest tool for building long-term relationships with the customers. Therefore, it chooses the most reliable suppliers from the market that can provide it the original brands purchased direct from the manufacturers. In addition, the supply chain network of Harvey Norman has a direct link with the top manufacturer brands which place their products in its stores for promotional purposes. The quality of customer services is ensured by treating the customers in the most pleasant manner, answering their complaints and queries on immediate basis, and making every effort to develop a positive image of the company in their minds.

4. on-time Delivery:

On-time delivery of products is one of the most important competitive priorities for a retailer (Kotler, Brown, Burton, Deans, & Armstrong 2010). In order to become the most competitive and successful retailer in the Australian market, Harvey Norman has set this type of customer service as its top priority for both physical retail outlets and online store. For Harvey Norman, on-time delivery means the minimum gap between the time when a customer places an order and the time when he receives it. At physical retail stores, the sales staff makes sure that each incoming customer is given full attention. The staff is ever-ready to help him in every possible way and make his shopping experience enjoyable for him. Similarly, when a customer places an order on the company's website, the company tries to deliver it as soon as possible. Harvey Norman gives emphasis on-time delivery because it recognizes its significance in building strong relationships with the customers (Ferrell & Hartline 2011).

5. Variety:

As a large scale retail store, customers expect Harvey Norman to have a wide variety of every product category. Harvey Norman is a financially strong and operationally stable retail chain. Therefore, it can make bulk purchases of products from their manufacturers. Harvey Norman aims to make the wide variety of product lines as its competitive strength which can be used to compete with the other industry competitors in a more effective and tactful way (Harvey Norman, 2012). Variety in each product category gives a number of alternative choices to the consumers which ultimately make their purchase decision easier (Blythe & Megicks 2010).

COMMON PRACTICES IN SUPPLY CHAIN Management

The main supply chain members for Harvey Norman are product manufacturers, distributors, marketing and promotional firms, and business development firms. The strongest supply chain relationships of the company are developed with the product manufacturers and wholesalers which sell their products at very reasonable prices. Harvey Norman has a broad supply chain network which helps it in analyzing the difference in prices and contacting the suppliers which charge the least margin for their products. Harvey Norman places almost all categories of consumer goods which come from top brands as well as from new businesses. Another common practice is the differentiation of products according to their supplier's brand image in the market. For example, if a product is purchased from a well-recognized brand, the sales staff also suggests that product to the customers. On the other hand, if some unknown brand places its product for promotion, the staff does not guarantee its high sales (Lancaster & Withey 2007).

The distributors of the company are responsible to deliver its products to its outlets throughout the country. They are also paid extra commission if they find new potential markets for the company's business and growth strategies in the future. The distributors are chosen on the basis of their recognition and past performance in the same industry (Ellwood 2002).

INNOVATION IN PRODUCTS WITH THE HELP OF SUPPLY CHAIN MEMBERS

Harvey Norman has boost up the process of continuous improvement in its business operations for the last few years. The most recent development in this regard is the purchase of Sterling Business Integration Suite for automating purchase orders which are placed by franchised outlets from the company's suppliers (Channel News 2010). This business integration suit facilitates the franchised outlets in making their operations well-organized and more efficient than before (Logisticsit, 2010). It also reduces the lead time for every new order which results in quicker delivery of products at the outlets (Paley, 2006). The suppliers also help the company in bringing improvements in its existing product lines (Lancaster & Withey 2007). For example, the suppliers of raw material provide the highest quality raw material to produce the best products for the customers. Similarly, the product manufacturers keep on bringing improvements in the features, attributes, and packaging of their products so that the popularity of these products does not go down in the Harvey Norman stores (Bamford & Forrester 2010).

Harvey Norman also keeps the latest models of consumer and electronic products at its physical and online stores. When customers visit its physical outlets or website, they get the latest information about their favorite brands. Thus, the biggest role in the innovative product offerings is played by the company's internal and external supply chain members who provide superior customer services at the stores and deliver high quality raw material and finished products, make on-time deliveries, use highly advanced computerize systems for quicker order processing, and ensure regular supplies to the company throughout the year (Kurtz, MacKenzie, & Snow 2010).

RECOMMENDATIONS FOR IMPROVEMENT IN THE SUPPLY CHAIN OPERATION

1. on-time Delivery:

First of all, Harvey Norman should ensure that its suppliers deliver the supplies of their products on time. The retail stores must not run short of high and medium shelve products. The supplies must reach at all retail stores according their customer traffic, sales volume, and demand for the products. For on-time delivery of products at the warehouses and retail outlets, the distributors should be made equally responsible. Harvey Norman should ensure that its order delivery time is not just short; it must be the shortest among all its competitors. The distributors can be paid extra commission for quicker deliveries to farther destinations in the country (Bamford & Forrester 2010).

2. Support to Supply Chain Members:

The best way to improve the supply chain relations is keeping an eye on the financial conditions of supply chain members and the environmental factors that affect their businesses. For Harvey Norman to improve its supply chain operations, it is vital to build strong relationships with every supplier and manufacturer. It should increase their sales by promoting their products on its website, and in retail stores through in-store displays. If the financial conditions of some supplier or distributor are not feasible to operate at a larger scale, Harvey Norman should allow them to supply small orders. Moreover, Harvey Norman can pay extra commission and bonuses to suppliers, distributors, and business development firms on exceptional performance during a particular period of time. It will also help the company in strengthening its business relationships with these key supply chain members. In contrast, if some supplier or distributor is unable to perform well due to unfavorable business environment, Harvey Norman should support it financially and help it to sustain in the market.

3. Product Innovation Cycle:

Moreover, the product development or innovation cycle should be made as short as possible. In order to stay competitive, Harvey Norman should place the latest models of consumer products in its retail stores for sale. Once a new model of some product is launched, it must be made available in the physical outlets as well as on the website for online order placement. The suppliers and distributors can play an important role in shortening this product innovation cycle for the company. Harvey Norman should always keep in touch with the manufacturers in its supply chain about their latest product offerings which can be sold in its retail stores.

4. Variety:

While extending the variety of products in every product line, Harvey Norman should keep in view the current demand, level of acceptability in the past, and prices of the products. It should not purchase all the products in a single category just to extend their variety. Instead, each product should be chosen after analyzing its different purchase attributes. On while offering a large variety of products will increase the number of supply chain members, but it will also increase the costs of operations at the same time. Therefore, it is recommended that Harvey Norman chooses its product lines according to the current demand and customer preferences (Kurtz, MacKenzie, & Snow 2010).

Computerized Map:

Start

Customer enters the Store

Customer visits the Website

Searches for the product

Found

Not Found

Leaves the Store or closes the website

Checks Price, Quality, Brand and other product attributes

Worth buying?

No

Yes

Searches for Alternative products or leaves the store

Makes Purchase Decision

Places Order to the Salesman

Adds to Shopping Cartel

Fills in order and selects Payment

Confirms and Submits order

Gets delivery of the product at doorstep

Gives Receiving on the sales receipt

Transaction done

Goes to Cash Counter

Takes the Product

Transaction done

Makes Payment through Cash or Credit Card;

Takes Sales Receipt

Exits the store

Places Order

Company contacts Supplier

Customer takes delivery and makes payment

Customer makes a decision:

The step 'customer makes a purchase decision' is divided into two steps. The first step 'places order to the salesman' shows the purchase process at a retail store while the other 'adds to shopping cartel' represents the online placement of order. That is, when a customer makes his purchases by physically visiting a retail store, he chooses his favorite product and places order to the sales staff that is available to assist the customers. The sales person takes the product to the counter and asks the cashier to charge the payment for that product from the customer. The customer pays the amount, takes the product, and leaves the store.

The second case is online shopping where customer chooses his favorite product on the retailer's online store and adds it to his shopping cartel which is his personal account on that online store. He chooses the mode of payment, makes payment, and submits order for the product. After a specified period of time, the customer gets the product at his doorstep.

Customer Complaints:

Good organizations always institute effective systems for handling customer complaints and queries. If there are no such systems, customers may get extremely dissatisfied with the customer services of the organization and may lose their loyalty with its brands. The following process is followed by companies which effectively manage their customer relationships by handling their customers' queries and complaints:

Customer Complaints

Poor Customer Services

Non-supportive staff

No response to questions or queries

Long queues at the Cash Counter

Company takes corrective actions

Improves Customer Services

Gives training to the staff

Provide quick response to queries and questions

Increases the number of cashiers or cash counters

Shortage of Supply:

If a customer wants an item and can't find it in the store, he will either look for it in another store or place an order in the first store. The retailer will note this non-availability upon the customer's request and contact the respective supplier to deliver a particular quantity of that product as soon as possible. This step is drawn as follows:

Customer searches for a product

Not Found

Searches for some substitute product or leaves the store

Informs the retailer

Retailer contacts the supplier

Customer is informed of his order

Supplier makes delivery of the product on a particular date

Finalizes the price and orders a quantity

Customer gets the product