Executive Summary
This report will outline the supply chain of omni-channel fashion menswear retailer, Regent. It will consider the role of logistics service providers and business relationship issues, as well as discussing the impact of current and future trends upon this supply chain. Supporting visuals are also included in this report such as a supply chain flow chart and various maps, along with a glossary of key terms.
Regent’s storage facilities, inventory, unitisation and packaging, and communication should all be kept in-house, with only transportation and manufacturing being outsourced. This is to keep costs low and avoid potential setbacks and issues arising due to miscommunication. Manufacturing should take place in Turkey where items should be barcoded before being transported to the UK via several transportation methods such as road in the form of lorries or courier vans, and sea in the form of ships or ferries. This transportation should be carried out by both DHL and FedEx logistics service providers. Regent possess eight stores in: Aberdeen, Glasgow, Manchester, Liverpool, London, Cardiff, Dublin and Belfast, as well as a central distribution centre in Manchester. UK customers can purchase products from these stores as well as on their website, a series of concessions and in the future via a digital app, but Regent is still unavailable to International consumers.
Business relationships with both other business and consumers are vital to the success of a business and should be treated with care as dishonouring these relationships can result in many issues. Future and current trends such as sustainability and rapid delivery can have a huge effect on the global supply chain and force retailers and even logistics service providers to improve their logistics in order to remain competitive. A digital app is a great way to target and sell to consumers, and will soon be a necessity as consumers increasingly want to be able to obtain products through many different channels; both digital and physical. Value is essential in the retail market and retailers should always be looking at where they can add value to differentiate themselves from competitors and appeal to consumers. As the world of retail and supply chain management is so fast-moving and rapidly evolving, it is essential to operate a supply chain with an integrated approach in order to remain efficient but still flexible and responsive to demand and consumers wants and needs.
Contents
Tables and Figures
1.0 Introduction Page 1
2.0 Logistics Mix Page 2
2.1 Storage Facilities Page 2
2.2 Inventory Page 3
2.3 Transportation Page 4
2.3.1 Turkey Page 5
2.3.2 UK Mainland Page 6
2.3.3 Ireland Page 7
2.3.4 Online Orders Page 8
2.3.5 Returns Page 9
2.4 Unitization and Packaging Page 10
2.5 Communication Page 11
3.0 Logistics Service Providers Page 12
3.1 DHL Page 12
3.2 FedEx Page 12
4.0 Business Relationships Page 13
4.1 B2B Page 13
4.2 B2C Page 14
5.0 Current and Possible Future Trends Page 15
5.1 Rapid Delivery Page 15
5.2 Sustainability Page 16
6.0 Digital App Page 17
6.1 The Leagile Supply Chain Page 17
6.2 The Value Chain Page 18
7.0 Conclusion Page 20
References Page 21
Bibliography Page 31
Appendices
I United Kingdom Map (Mapsof.net 2016) Page 32
II Glossary of Key Terms Page 33
III Supply Chain Flow Chart Page 34
IV App Front Page Page 35
V App Product Selection Page Page 35
VI App Product Page Page 36
Tables and Figures
Tables
1 Inventory Types (Dargie 2016a p. 15) Page 3
Figures
1 The Logistics Mix Page 2
2 UK & Turkey Map (Bing Maps 2017) Page 5
3 Salipazari Limani/Port (Google Maps 2016c) Page 5
4 Seaforth Dock (Google Maps 2016d) Page 6
5 The Five Modes of Transportation Page 6
6 Manchester to Liverpool Dock (Google Maps 2016b) Page 7
7 Liverpool Dock to Belfast Port (Google Maps 2016a) Page 8
8 DHL Logo (DHL 2016) Page 12
9 FedEx Logo (FedEx 2016c) Page 12
10 Effects of Interdependence (Kumar 1996) Page 13
11 Agile vs Lean Model (Lim 2014) Page 17
12 Leagile Supply Chain Model (Childerhouse and Towill 2000) Page 18
13 Porter’s Value Chain Model (Dudovskiy 2015) Page 18
1.0 Introduction
The world of fashion retail is innovative and fast moving, where greater flexibility and rapid responsiveness to consumers is key (Bhardwaj and Fairhurst 2010) as consumers want the newest fashions in their wardrobes quickly and conveniently, as many customers will abandon an online purchase due to unsatisfactory delivery options (Charlton 2013); proving efficient logistics are key to a fashion retailer.
Independent menswear fashion retailer, Regent, trades in medium to high-end fashion items. This retailer operates within the UK and has eight stores (see appendix 1). Regent sells merchandise through store concessions, while providing a larger product range online.
Regent plan to launch a digital app to allow customers to purchase products. Strengthening brand identity and customer satisfaction maximisation is a company goal and they look to expanding their online sales to international consumers as currently their online deliveries are only available to UK consumers.
2.0 Logistics Mix
The ‘Logistics Mix’ consists of five components (see figure 1 & appendix 2) which are interlinked and should be managed effectively (Fernie and Sparks 2009). The aim of supply chain management is “to satisfy end customer requirements” and increase revenue and potentially market share (Childerhouse and Towill 2000 p. 338). Mango is a prime example of a well-managed and highly efficient supply chain (Bruce and Daly 2011).
2.1 Storage Facilities
The first component of the Logistics Mix is storage facilities (see appendix 2). Regent should set up a single small distribution depot in Manchester, UK (see appendixes 1 & 3). Womenswear fashion retailer, Missguided has recently set up a storage facility in Manchester due to significant growth and need for expansion of warehouses (Williams 2015). Showing Manchester has the potential for large premises and expansion.
Manchester is ideal as it is central in the UK (see appendix 1) which “lies at the heart of an expansive motorway network, ensuring easy access to the UK’s major cities and centres of commerce” (MIDAS 2014 p. 1). Manchester has good transportation links (TfGM 2016), so the distribution centre will be easily accessible and all Regent’s retail stores can be reached easily and more quickly than in other cities such as Aberdeen or London (see appendix 1). This shorter distance between the distribution centre and Regent’s retail stores means that Regent is close to the consumers so delivery times and transportation costs are reduced (Gattorna, Trost and Kerr 1996), an approach adopted by Nike (Harrington and Smith 2013).
As storage companies look to generate profit for their services, Regent could run their own storage facilities cheaper as it is a small centralised distribution centre, so should be kept in-house; Britvic Soft Drinks Ltd follow this approach (Taylor 1997). Fernie (cited in Brewer, Button and Hensher 2001) states that keeping this logistics activity in-house makes it easier to monitor and control costs, and set benchmarks for costs and operations, which will be beneficial to Regent.
2.2 Inventory
Inventory (see appendix 2) can be categorised into different parts (see table 1) and must be stored appropriately taking factors such as demand, season and temperature into consideration.
Table 2 – Inventory Types (Dargie 2016a p. 15)
Regent should keep their inventory management in-house as the retailer is still fairly small and does not cater to international consumers at the moment. Keeping this function in-house allows Regent to differentiate from competitors if they optimise the management of their inventory and effectively provide products to satisfy consumers (Traxler 2012). This is a key advantage as Regent aim to strengthen brand identity and through deliveries they wish to maintain customer satisfaction. Outsourcing functions can look appealing at first as cost-savings and increased efficiency is often advertised by providers, but hidden costs such as taxes often arise (Mann n.d.). Centralisation lowers inventory costs and heightens control, as well as increasing delivery precision and information (Graungaard, Zachariassen and Arlbjorn 2012).
Outsourcing this function creates potential for setbacks and problems to occur such as damaged or lost inventory or the unfulfillment of orders, resulting in revenue loss and customer satisfaction and business reputation damage (Mann n.d.).
2.3 Transportation
All transportation (see appendix 2) will be outsourced to a logistics service provider (see appendix 2). Outsourcing allows the company to concentrate on core competencies such as boosting customer satisfaction through customer service, and as these providers have industry experience and contacts they have vast resources to ensure reliability and timely delivery (Flat World Solutions 2016). These providers also usually have good supply chain relationships, are constantly improving their services to the rapidly-changing supply chain environment and it also reduces risks as the provider assumes responsibilities (Flat World Solutions 2016).
2.3.1 Turkey
Regent’s stock is produced by a manufacturer in Turkey and transported to the UK (see figure 2). These goods should be transported by lorry to the port in Istanbul (see figure 3 and appendix 3). Istanbul port is ideal as it is a very large “Deepwater Seaport” (SeaRates 2016 p. 2). It provides an array of port services such as navigation equipment; and has multiple cranes for use including mobile and floating cranes (SeaRates 2016).
2.3.2 UK Mainland
Ferry transportation should be used from Istanbul to England (see appendix 3), as sea transportation is more cost-effective than air. As Regent are a small company they are not transporting huge amounts of inventory so the expense of air freight would be unjustifiable (Gourdin 2001). The goods should arrive in Liverpool Seaforth dock (see figure 4) which has recently had a £400m development carried out and “the North West is also packed with warehouses and with firms specialising in logistics and distribution” (Houghton, Turner-Le and Weston 2016 p. 6). Matalan and Home Bargains rely on imports from this port (Houghton, Turner-Le and Weston 2016).
The goods should be transported from Liverpool docks to the Manchester distribution depot by lorry (see appendix 3) where unitisation and packaging processes will occur. Road transport is the most versatile and flexible of “The Five Modes of Transport” (see figure 5) which are “road, rail, pipeline, water, and air” (Gourdin 2001 p. 85). Road also appeared to have the lowest overheads and highest useful load when compared to air, ship, and rail methods (Gattorna, Trost and Kerr 1996).
The goods should then travel by lorry from the distribution depot to the six UK mainland stores located in Aberdeen, Glasgow, Manchester, Liverpool, London, and Cardiff (see appendixes 1 & 3). This method is most suitable due to being cost-effective, capable of transporting adequate volume of product, and the universality of the road networks allows nearly all places to be accessible (Benson, Bugg and Whitehead 1994). The product then reaches the customer through sale at one of the six UK mainland stores or concessions.
2.3.3 Ireland
Regent also have two stores in Ireland, located in Dublin and Belfast (see appendix 1). The goods should travel by road from the Distribution depot in Manchester to Liverpool dock after unitisation and packaging processes have been carried out (see appendix 3 & figure 6). Road transport is more cost-effective and allows increase flexibility in comparison to rail and is much cheaper than air transport (Gourdin 2001). Liverpool port is the “UK’s largest transatlantic deep-sea port and container terminal” (McDonough 2015 p. 3) so should be able to cope with the demands of cargo shipping and allows for expansion into international deliveries in the future.
After shipping from Liverpool port to Belfast port (see figure 7), the goods should then move via lorry to the Irish stores and concessions for purchase by customers (see appendix 3). Belfast port is a “principal maritime gateway and logistics hub” (Belfast Harbour Commissioners 2016 p. 1) which handles around 70% of Northern Ireland’s seaborne trade (Belfast Harbour Commissioners 2016) so will be able to cope with the demands of shipment and like Liverpool port, allows expansion into the shipping of international orders.
2.3.4 Online Orders
Regent want to ensure customers are satisfied with their deliveries and returns process, therefore the process must be streamlined and efficient. Goods should go through the unitisation and packaging process at the Manchester depot (see appendix 3) and handled in the online orders department. Online orders should be processed and delivered to the customer by click and collect from a store; or by home delivery.
Click and collect online orders should be picked and packaged in the online orders department in Manchester and delivered to the customer’s specified local store via courier van ready for collection (see appendix 3). The package should then be scanned instore and a text message or email sent to the customer alerting them that their online order is available for collection. Home delivery orders should follow the same process but delivered to the customer’s home by courier.
Courier van transport is perceived to be more reliable than traditional transport companies as they operate on a smaller customer base which creates a more personal service (Capital Express 2013) which may increase customer satisfaction which is a goal of Regent, as customers may feel more valued and cared for. Speed and affordability are advantages as couriers work on a local scale which means they can often offer same-day delivery and they “ship without usual package regulations and additional fees” (Capital Express 2013 p. 1). This means customers have more delivery options and lead times are reduced which can boost satisfaction as it has been shown that 50% of customers have abandoned a purchase due to insufficient delivery options (Charlton 2013).
Also with decreased costs, this saving can be passed onto consumer and discounted or even free delivery could be added which will further increase satisfaction as a survey found that 58% of customers “have added items to their shopping carts to qualify for free shipping and 83% are willing to wait an additional two days for delivery if shipping is free” (Dreyer 2014 p. 2).
2.3.5 Returns
For customers to return their unwanted items purchased in a Regent store, they should take the item back with the receipt to a Regent store. The item can then be sold in the store to which it was returned and the customer can receive a refund. Online orders should be handled in the same way where items are returned to the customer’s local store, or a local courier van service (and ferry if from Irish customer) can pick up the unwanted items and transport them back to the online orders department at the Manchester depot (see appendix 3) where the return can be processed and the customer refunded. There should be a returns label provided with online orders as “52% of consumers want to see a return label right in the box” (UPS 2014 p. 7). It is vital that this process is streamlined and efficient as to maintain customer satisfaction as “82% of shoppers respond positively to the ability to return product to the store or ship it back using a free pre-paid label (UPS 2014 p. 4) as “68% say free returns shipping is key to a positive returns experience” (UPS 2014 p.7).
2.4 Unitization and Packaging
Firstly, items should be barcoded at the manufacturer (see appendix 3) so can be scanned at every stage of the supply chain shipping process which allows tracking, updating of inventory levels and automatic replenishment orders placed with suppliers (Gourdin 2001).
Unitisation and packaging (see appendix 2) will mostly take place in-house at the Manchester distribution centre (see appendix 3). Items will be sorted into boxed batches and barcoded. Unitising these items lowers handling costs, creates labour savings due to making handling less time intensive and allows transportation savings as unitised loads are moved faster so the process at loading docks and warehouses is much faster (Phoenix Wrappers n.d.). Items will be placed inside plastic totes to protect them from getting damaged in transit and will be hung and priced instore by sales staff.
2.5 Communication
Communication should be kept in-house as this personalises the customer experience, as demonstrated by Dell who keep their customer services functions and communication in-house (Christopher and Towill 2000). Social media can also be used to communicate with consumers as there are over “one billion smartphones in the market” (Harrington and Smith 2013 p. 3).
RFID (radio frequency identification) technology allows boxes to be tagged electronically with a device which transmits information such as contents, movement and location. This information is instantaneous and real-time and can be obtained at any point in the shipping process by a scanner (Gourdin 2001). Regent should use RFID to communicate information within the supply chain to the contacts within such as manufacturers, logistics service providers and customers. This technology can “streamline stocktaking operations, strengthen customer relationships, facilitate promotional activities and allow retailers to allocate resources more effectively” (Moon and Ngai 2008 p. 597).
3.0 Logistics Service Providers
3.1 DHL
DHL should be used for sea and road transportation of store stock as they are a highly-reputable market leader in sea transportation (Molyneaux 2013); offer a wide range of reliable ocean freight services (DHL 2016b); and their “comprehensive overland transportation service comprises more than 180 road terminals in more than 50 countries, over 3,500 weekly international departures, door-to-door tariffs and full tracking capability” (DHL 2016c p. 1) in Europe, Africa and the Middle East; making them able to support the current trend of customers who want rapid delivery with tracking available (Dawson 2016). Marks and Spencers use DHL to handle their collect-in-store service (Martindale 2013).
3.2 FedEx
FedEx should be used for road transportation of online deliveries and returns as they are a widely recognised and trusted company who “deliver the best service to customers without compromise” (FedEx 2016b p. 1). They also cater to over 220 countries and territories; have over 150,000 motorised vehicles are specialised and experienced in their field (FedEx 2016b). FedEx also provides consistent online tracking of deliveries (FedEx 2016d). FedEx supports the future sustainability trend as they have set numerous goals to reduce environmental impact and earned numerous awards for their efforts to reduce their carbon footprint (FedEx 2016a) and offer sustainable transportation in partnership with the EMBARQ program (FedEx 2016e).
4.0 Business Relationships
Business relationships are vital to the success of a business, Bruce and Daly (2011 p. 212) states that collaborative relationships and partnership are “preferential situations” and “beneficial to all parties involved”. As Regent is planning to expand towards international deliveries they will have to connect with and maintain effective working relationships with suppliers, logistics service providers and customers where various issues may arise and the need for considerations to be made.
4.1 B2B
The nature of manufacturer to retailer relationships was identified and discussed by Kumar (1996) which figure 10 shows. Kumar also states that “trust is the antithesis of power and it is trust that leads to cooperation” (Fernie and Sparks 2009). Therefore, trust is key to an effective working relationship where manufacturers may be more willing to work with Regent and even make certain allowances such as trade credit. Dishonouring these relationships and breaking trust can cause relationship breakdown and damage to company reputation as demonstrated by Marks and Spencer when they “decided to source products offshore and thereby sever links that has been fostered for generations” (Fernie and Sparks
2009 p. 40).
Benetton maintains good working relationships with the numerous international companies which they outsource competencies to, to maintain efficiency throughout, despite division of labour and premises. This means that lines of communication are effective and clear, with all stages in production being notified of changes or issues (Fernie and Sparks 2009). This could cause significant problems internationally if not maintained due to language barriers and miscommunication.
4.2 B2C
Retailers must maintain positive relationships with consumers to ensure customer satisfaction, loyalty, and positive business reputation. Today customers want constant contact, especially after placing orders (McGovern 2016). To do this a good B2C relationship must be maintained through text or email shipment and delivery alerts and tracking capabilities, RFID can help strengthen this communication and relationship (Moon and Ngai 2008). This relationship is key in the success of launching into an international market as you must gain a positive reputation from consumers and encourage repeat purchases.
International consumers may also have different wants and needs to those in the UK which must be met. Regent should develop a good B2C relationship by finding out what their customers want through regular surveys (Hann 2012), otherwise they issue of obsolete and unwanted stock not suitable to local customers could arise, resulting in increased costs. Dell are a perfect example of a company with good B2C relationships created through their range of assistance and helplines (Christopher and Towill 2000).
5.0 Current and Possible Future Trends
5.1 Rapid Delivery
Rapid delivery is a current trend as customers want their products quickly and at a time and place convenient to them; resulting in delivery lead times (see appendix 2) decreasing and many companies such as eBay and Amazon offering one-hour or same-day deliveries (DHL 2015). Many companies offer more flexible delivery options as “consumers prefer one in four packages be delivered to locations beyond their home” (UPS 2014). Topshop offers ‘click and collect’ (Topshop 2016); Amazon offer parcel lockers (Amazon 2016); and a recent innovation has allowed parcels to be delivered to a car trunk via a mobile application which CarDrops.sg already use (CarDrops 2012) and Audi are trialling this technology in collaboration with Jack & Jones (DHL 2015).
This trend could impact the supply chain considerably as it forces companies to improve their delivery methods and delivery lead times to maintain customer satisfaction. The purchase and integration of improved technology, transportation and labour can be highly expensive (Christopher 2005), and so therefore many companies may not be able to afford this vast expense, and therefore may lose customers to competitors due to having much longer lead times and less flexible delivery options.
5.2 Sustainability
Sustainability is a possible future trend as companies are consistently looking to increase sustainability within their logistical operations (Fernie and Sparks 2009). Fast Fashion (see appendix 2) was initially “a niche concept offered by a few key players such as Zara and H&M” (Barnes and Lea-Greenwood 2010) and is often unethical and highly damaging to the environment, and many companies like ASOS are looking to combat this by using ethical sourcing practices as well as using ethically sourced labour and suppliers (ASOS 2016). This could increase manufacturing and delivery costs and lead times throughout the supply chain which may have to be passed onto consumers through product prices or delivery charges which may considerably reduce satisfaction of price-sensitive or time-conscious consumers, but may also positively affect the satisfaction of ethically-conscious consumers (Ethical Consumer 2016).
6.0 Digital App
In the future, Regent are to launch a digital app like Burton (Burton n.d.) and Topman (Topman n.d.), allowing consumers to purchase their products from their digital devices. Their app (see appendixes 4, 5 & 6) will use both ‘push’ and ‘pull’ strategies (Christopher 2003).
6.1 The Leagile Supply Chain
Today most organisations, like Zara (Myerson 2014) operate using a hybrid supply chain model that combines IT-supported and paper-based processes (Raab and Griffin-Cryan 2011). To ensure customer satisfaction, a mixed approach of both ‘lean’ approach as used by Toyota (Sehgal 2010) and ‘agile’ (see appendix 2) approach (see figure 11) as it is too simplistic to concentrate on purely maximising efficiency and presume that a supply chain is either innovative of functional as customers have different needs and expectations (Fernie and Sparks 2009); therefore a ‘leagile’ (a combination of both lean and agile approaches) approach must be used.
A ‘leagile’ approach (see figure 12) embodies both ‘push’ an ‘pull’ strategies to maximise responsiveness while maintaining efficiency (Fernie and Sparks 2009). The company ‘pushes’ products onto consumers through their app using techniques such as ‘Editor’s Picks’ and the alerting them that there is limited stock of the item. This approach also embodies ‘pull’ strategies as it focuses on customers’ needs and ‘pulls’ customers in with seasonal items such as winter coats being offered or incentivising the purchase with discounts (see appendixes 4, 5 & 6).
6.2 The Value Chain
Value can be added in various areas of Regent’s supply chain, as shown by Porter’s ‘Value Chain’ (cited in Christopher 2005) which consists of five primary activities and four support activities as shown in figure 13. If Regent can differentiate themselves by carrying out one of these areas either superiorly or cheaper than competitors, then value has been added and they will gain a competitive advantage. While the inventory is not being processed, but just standing still, there is no value being added it is called vertical time (Dargie 2016b) and this takes place when the items are in stores (see appendix 3). When this inventory is going through some process such as production, transit or unitisation, value is being added and it is called horizontal time (Dargie 2016b) which takes place at various stages in the supply chain such as when being shipped from the manufacturer and when being packaged (see appendix 3).
7.0 Conclusion
In conclusion, logistics is one of the most vital elements a company can get right in order to succeed. If they do not manage their supply chain process effectively; maintain positive B2B and B2C relationships; and ensure all their resources are at the right place at the right time they will not be able to fulfil orders and maintain customer satisfaction. As customers are becoming increasingly demanding it is very important to run your business with a leagile approach, incorporating a variety of distribution channels so customers can receive products in a place, way and time convenient for them which is done through the use of digital apps, technology and still the traditional bricks-and-mortar store.
Businesses must continue to improve and maximise the efficiency of their supply chain processes to ensure delivery is fast, flexible and convenient for consumers while remaining both cost and time effective. The transport of goods from manufacturer to supplier must be managed with care to ensure all inventory arrives safely and in a timely manner to avoid any delays and setbacks in distribution to ensure customer satisfaction is maximised. The same should be done with returns; the customer should be able to return goods conveniently be that through a UK store, courier pick up or even return by post. These elements are all vital to the success and growth of a business, as satisfied customers are more likely to become loyal and purchase repeatedly.