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Essay: Operations and Logistics of Primark in-store and online

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Introduction

This report examines the Operations and Logistics of Primark IN-STORE AND ONLINE and how the supply chain is being managed in Primark, it also looks at the relevant theories of operations management that can be applied to PRIMARK. The following theories will be discussed in this report, PROCESS MAP, similarities and differences between Primark in-store and online using the 5 performance objectives and conclusion.

PRIMARK is famous for providing cheap high street clothes to consumers and has about 161 stores in the United Kingdom. Primark, a subsidiary of its parent company ABF (Associated British Foods).  Primark majorly deals with 3rd parties as their suppliers, working with 700 suppliers from China, India, Bangladesh, turkey and Eastern Europe (Primark, 2015).

Primark, later on, started trading in the UK around 1973 and in 2006 its operations started in Spain, since from 2008 – 2009 Primark is also present in other countries. Primark’s chain consists currently from 193 stores, and its core products are fashion clothing. Besides, Primark offers its products online through its official website which is also called Primark online store. With little times, Primark online store has also shown a good success and gain fair market share in online clothing business (Primark, 2015).

According to (Slack et al, 2010), operations management is the activity of managing the resources that create and deliver services and products. Here, Managing process in Primark will be discussed using the four Vs:

  • Volume: Primark products are made by their suppliers, with over 700 suppliers associated with Primark. It has been able to provide different range of products. Primark supplier’s produces on a large scale and products are distributed in bulk. Primark is one of the leading retailers that sells cheap clothes and still retain its volume to be high because its consumer buys higher volume of products at affordable price. Primark is a high volume mass service operation serving 10,000 to 15,000 customers each week.
  • Variety:  Primark has a product range that comprises of clothes for men, women, kids, teens and babies.  However, Primark has been able to capture the minds of consumers by changing taste and fashion in line with the current fashion. Its supplier’s supplies different types of products to enable customers to have different buying habit towards the product.
  • Variation in demand: The demand of Primark product is relatively high depending on the season. E.g. Primark’s busiest trading period are weekdays during lunch time, evenings, weekends and holiday period such as Christmas.  As a result of this busy period, there is high demand during this period, Primark employs a lot of part-time staffs to help respond to any unexpected variation in demand.
  • Visibility:  Slack et al 2007 define visibility as the level of operational exposure the customer experiences. From the definition, Primark is said to have a low visibility as a result of customers being exposed to front house operations but not the back house operations such as supply chain management, inventory control etc.

LITERATURE REVIEW OF OPERATIONS MANAGEMENT

Primark’s operation management will be discussed using some relevant theories such as Supply chain management, JUST-IN-TIME, QUEUING MODEL, INVENTORY MANAGEMENT and CAPACITY MANGEMENT.

JUST-IN-TIME: definition,

In the case of Primark using just in time in the supply chain management, Primark has been able to adopt just in time to ensure that product or materials received from suppliers must be transported directly to the warehouse, thereby transporting materials to stores in the right time, right quantity and right location when needed. However, Just-in-time has helped Primark in the following ways-

improved movement of goods in/through/out of the warehouse

Reduce warehouse cost i.e. reducing the cost of storing excess stock in the warehouse

Another theory to consider is a queuing model, from the primary research, carried out it shows that Primark needs to solve their queuing system or waiting for lines in order to get maximum customer satisfaction. Queuing theory can help to deal with problems involving waiting.

Slack et al  2014, summarized queuing theory with four parameters:

The distribution of arrival times

The distribution of process times

The number of servers at each station

The maximum number of items allowed in the system.

Furthermore, queuing theory can be characterized into three, these are arrival process, service process and number of servers (EventHelix.com, 2015)

Arrival process: In Primark, the arrival process illustrates customer arrival into the store.

Service Process: the time it takes a customer to be served and order processed.

Number of servers: the total number of cashiers available to process a customer order.

There are different types of queuing system

M/D/n: in this queuing system, the service time is always the same for customers.

G/G/n: this is the most widely used queuing system because it has ‘n’ number of servers and no analytical solution is given.

M/M/1: this type of queuing system only involves one server and many customers waiting to be served.

Primark adopted M/D/n type of queuing system where there are many servers attending to a queue and service times are deterministic, one reason the service time are deterministic is because the length of time spent in a queue depends on how many items customers are purchasing or errors made by servers handling the purchase.

Primark can solve their queuing problem by opening more tills at the point so it can reduce the waiting times of customers.

INVENTORY MANAGEMENT

Slack et al defines inventory management as the stored accumulation of materials or resources in a transformation system. Primark has been able to manage inventory by ensuring materials or stocks are transported into the store from the warehouse. Basically, to control inventory you must depend on supply and demand. The law of demand states that if the price is low, the quantity demanded will be high and vice versa, Primark strategy in selling cheap retail clothes has driven the demand to be relatively high. Primark’s product can be demanded during weekdays, weekends, discounted sales and offers thereby causing the inventory to be stocked up to avoid any shortage. Slack et al also suggests that if the rate of supply exceeds the rate of demand, inventory increases but when the rate of demand exceeds the rate of supply, inventory decreases.

CAPACITY MANAGEMENT

According to (Slack et al, 2013) capacity is ‘’the maximum level of value-added activity that an operation, or process, or facility is capable of over a period of time.” Primark has been able to forecast demand in relation to the capacity its can retain by planning capacity. Primark uses capacity planning to ensure there is no shortage in the availability of its products. In addition to this, it includes 3-floor space with Manchester being the largest with a retail space of 155,000 sq ft. (Primark, 2015).

PROCESS MAP FOR PRIMARK IN-STORE AND ONLINE

Quality

The quality of Primark`s product strictly relates to the price and suppliers that Primark works with. So it is one of the best quality-price ratios in the market. And in both format whether in Primark In-store or Primark online the quality of the product is same. In the In-store the aspect of service quality is more important as compared to its online store because customer needs more assistance during the shopping, In Primark online store a customer helpline is also available which provides any information or assistance customers seeks (Rushton, et al., , 2014).

Speed

Speed is a shorthand way of saying response time, it means the time between an internal or external customer requesting or service or a product, and them getting its delivery.  Again, there are internal and external affects (Hill, Hill, 2012). The speed of making a purchasing transaction in Primark online solely depends upon the customer. Some customer takes their time to explore on its online website and some take few minutes. However, speed is a major feature of online stores. Customers are not required to spend their time in travelling to store; hence speed on Primark online is far too high as compared to Primark In-store. However, the actual time in which customer receives the physical product is naturally higher in Primark online as compared to Primark In-store, where the customer gets the physical delivery of clothes then and there.

Despite its endeavours to provide best services customer appears somewhat little unsatisfied due to waiting long in the queues on cash counters. This frustration of consumers in the long waiting line affects their overall experience and the complaint about slow speed of order processing. These are the area of operational management where Primark-online has outclassed the physical store as the customer can process their orders within few minutes.

Dependability

Dependability means ‘being on time’. In other words, customers receive their products or services on time. In practice, although this definition sounds simple, it can be difficult to measure. What exactly is on time? Is it when the customer needed delivery of the product or service? Is it when they expected delivery? Is it when they were promised delivery? Is it when they were promised delivery the second time after it failed to be delivered the first time? Again, it has external and internal effects (Fernie, Perry, 2011).

In terms of dependability, Primark physical stores are more dependable than its online stores because, many customers due to various online frauds scandals are still reluctant to buy online and for this reason Primark online cannot expect its major business from its online operations and have core financial dependence from its physical stores.  However, with growing online shopping trend Primark online store has also become more dependable, the issue in the timely order delivery has been a focus of Primark’s online operations.

Flexibility

This is a more complex objective because Primark uses the ‘flexibility’ to referee various aspects of its operations. The biggest flexibility of Primark both in its In-store and online stores is its preparedness to change and adapt quickly to the market environment. It terms of operational management Primark online is more flexible than its physical stores; they are not required to watch out market timings, social and political environment to schedule their business timings. Primark online store remains open 24-hour whole year (Rushton, et al., 2014).

Primark in-store is less flexible because of their physical environment, a particular physical store can only be used to target certain market segment. Physical stores have to close for some hours due to cleaning and maintenance purposes. Primark in-store are also less flexible due to high dependence on logistic and supply chain. They cannot sell a highly demanded clothe item if it’s not physically available in the store. Whereas the online stores do not have physical stock compulsion hence any item can be sold online and can be supplied to customers from stocks.

Cost

Basically, the cost of establishing Primark online store was far too little as compared to Primark In-stores. Primark has the reputation of location on prime location which enhanced its cost of establishing a physical store. There are two important points here. The first is that the cost structure of different organisations can vary greatly. Second, and most importantly, the other four performance objectives all contribute, internally, to reducing cost. This has been one of the major revelations within operations management over the last twenty years (Fernie, Perry, 2011).

In Primark online the products prices are little lower than Primark In-store and this is mainly due to cost factor, because they Primark online don’t have the overhead of renting a pad in a strip mall, high electric bills, and a staff of sales people, which reduces overall operational cost of Primark’s online store. Primark online store’s cost is also because they do not have to decorate the inside of the store, purchase outside and inside display units or signage. Since Primark can manage the work in the online store they don’t even have to hire external maintenance providers. In Primark online store, costs are related directly to its website, shipping and accepting online payments (Primark, 2015).

Conclusion

In conclusion, Primark has shown it can compete with other competitors through their supply chain management and it has also been shown that one of their operations management problem they have is waiting long on the queue, if this queuing problem can be resolved, it will help Primark to focus more in terms of quality and customer satisfaction. Also, based on the five operations performance objectives Primark online store has more strength and less weakness as compared to its physical store. The online stores can offer similar product quality at much faster speed and low cost. The issue of reliability, however, is the area where Primark In-store still has edge over Primark online

Reference

  • Eventhelix.com, “Queueing Theory Basics”. N.p., 2015. Web.  Accessed date 8 Dec. 2015
  • Hill, A., & Hill, T. (2012). Operations management. Palgrave Macmillan.
  • Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.
  • Fernie, J., & Perry, P. (2011). The international fashion retail supply chain. In Fallstudien zum International Management (pp. 271-290). Gabler Verlag.
  • Primark (2015). About Us. http://www.primark.com/en/about-us/about-primark.  Accessed date  27 Nov 2015.

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