CASE SOLUTION

West Marine: Driving growth through

Shipshape Supply Chain Management

Submitted by:
VED PAL
09BM8077
 
STRATEGIES OF WEST MARINE AFTER MERGER WITH E&B

In 1997, West Marine acquired an East Coast competitor, E&B Marine and
the consequences were: sales fell by almost 8 % and peak-season out-of-stock
levels rose more than 12% as compared to the previous year. The analysis
regarding this gave the logic that infrastructure of West Marine was not strong
enough to support an organisation almost doubled its size and thus, Supply Chain
was badly hit.
In late 1998, John Edmondson was brought to lead as the CEO of the
company. To scribd the turnaround of the company he focussed on the following
four areas: (1) Leadership, (2) Strategy, (3) People and Culture, and (4) Systems and
Processes.
• Leadership: All the areas where the business was falling, all the key players
were changed by veterans from the industry. He went for more experienced
people in his management team, people who has handled large and complex
retail organization.

• Startegy: Upon joining West Marine, each executive was given the general
mandate to turn around his respective function. The strategic plan started
with West Marine’s vision of being ‘the best boating products company
everyday’. It then, outlined a series of specific financial goals (company wide
performance indiactors), that include ROE, cash flow, comp sales, EPS,
productive service levels, market share, customer satisfaction and associate
satisfaction. Finally, it went for SWOT analysis for itself and grabbed the
opportunities in coming years.

• People and Culture: West Marine started a cultural change drive on the
idea of providing “better than expected customer service”. The leadership
team addressed all the problems head on and also, outside experts in
cultural change were brought in to more appropriately direct the passion
and energy of the organization. Significant effort was put in redefining roles,
the silos mentality was totally abandoned and new transparent
communication was established.

• Systems and Processes: To address the problem, the new management

team started attacking every process, reviewed tens of thousands of
processes and reinvented all of our systems to figure out how the ongoing
SG&A can be taken out of the business at the same time as the operations
starts more effectively

Supply Chain Collaborations: Particular emphasis was laid on changing the

Supply Chain Management Practices at West Marine. It’s supply chain was more
complex than the supply chains of most speciality retailers. The E&B acquisition
further compounded supply chain challenges by adding more stores, new SKUs
and different assortments. The supply chain improvements started with team
putting halt to all store expansion to relieve some of the immediate pressure on the
supply chain. Critical importance was placed on improving end-to-end supply
chain visibility and effectiveness, driving down related costs and improving the level
of supply chain collaboration within and outside west marine. The company then
decided to go for Collaborative planning, forecasting and replenishment (CPFR).

CPFR: IMPLEMENTATION AT WEST MARINE

Collaborative Planning, Forecasting and Replenishment (CPFR) formally

combined and capitalized on the intelligence of multiple trading partners in the
planning and fulfilment of customer demand. It works on the development of a
single, shared forecast that supported the joint plans of the trading partners in the
supply chain and drove their mutual replenishment activities. Clear performance
measures are defined to document operational performance expectations. Risk is
monetized so that partners faced clear financial consequences when agreements
are not met. Incentives were used to motivate collaborative, cooperative behaviour
and to share the benefits. Much of the value of CPFR resulted from the exchange of
more timely, complete and realistic forecast data, which led to higher forecasting
accuracy. It also linked best practices of sales and marketing divisions.

As a part of CPFR implementation, West Marine adopted conventional order

management, with the retailer driving forecast, order planning and order
generation. It implemented a successful, robust linkage between the point-of-sale
and DC systems to maximize automation and mass-maintenance procedures which
gave multi-echelon replenishment solutions. It implemented EDI using SPS
commerce solution and asked suppliers to begin using EDI. After the
implementation of CPFR, the stock rates at the stores came close to the goals of
96% in every store, forecast accuracy climbed up to 85% and on-time shipments
were also improved.

STRATEGIES TO BE BE ADOPTED FOR PROPOSED TAKEOVER OF BOATU.S.

West Marine should adopt the following strategies while going for the acquisition of
BoatU.S.:

• A vendor and SKU rationalization effort would be needed, when the company
is going for merging the two into a single brand West Marine. But if itwants
to go with Dual-Branding Strategy and decides to maintain the BoatU.S.
brand, the company has to develop a more diverse product base and more
unique assortments than ever before. It also needs to take care of the
integration of the replenishment activitiesbeacause these are mostly manual
processes in case of BoatU.S.

• Overall complexity involved in the supply chain integration of both

companies is high since both offered 50,000 SKUs via stores, internet and
catalogs. This is one of the most critical factor as West Marine cannot afford
to have a repeat of the Supply Chain breakdown, as happened in the case of
previous merger of E&B Marine. Thus, the experince gained from the CPFR
needs to be used and applied for the successful integration of two
companies.