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SrOmni Channel Fashion Report
SrOmni Channel Fashion Report
BS2317-Helen Dargie
Hannah McInally
1503991
Word Count
2
Executive Summary
This report shows a logistics plan for the fashion retailer Garcons. It
outlines the options available to the retailer in regards to the logistics
mix, showing that if the logistics mix is managed well within the company
it can lead to a competitive advantage in the market. In order for a
successful logistics plan to be achieved, each element of the logistics mix
(storage, inventory, transport, unitisation and communication) needs to
be analysed and decisions need to be made on whether aspects should be
kept in-house or be outsourced. It was decided for the retailer Garcon’s
that some elements of the logistics mix would be outsourced to a Logistics
Service provider, for example transportation and storage. This is due to
the size of the business and because the retailer has little knowledge of
resources or expertise in this area. Outsourcing will mean overall costs
can be lowered and an increase in efficiency and output achieved which
will ultimately enhance customer satisfaction. The size of the company
was taken in to consideration and it was recommended that some aspects
of the logistics mix remained in house in the early stages including
inventory and packaging. However, given the retailers objectives to
expand internationally the outsourcing of communication, inventory and
unitisation in future would be in Garcon’s best interested in order to keep
their companies supply chain flowing efficiently.
Outsourcing aspects of the logistics mix means the use of a third party
logistics service provider. When choosing a logistics provider is it essential
to the retailer that it chooses a company that suits their overall objectives
and has that adequate knowledge and best resources available. DHL was
the logistics service provider chosen for the retailer because of their good
fit to Garcon’s business vision of customer satisfaction and transportation
needs since they could resource an extensive transportation and storage
facilitity. DHL also have a proven track record of reacting quickly to
changing industry trends e.g. environmental issues important for Garcons
plans for future expansion into international markets. Choosing to
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outsource to an LPS mean Garcon’s must maintain a reliable mutually
beneficial relationship with DHL. In order for Garcon’s to achieve success
it must keep strong business relationship throughout the supply chain
between all stakeholders or the business will not be able to perform.
Road freight and manufacturing in Britain are future trends that could
have an immense impact the Garcon’s supply chain. Road freight is a
future trend that, if not managed carefully by the retailer, could result in
higher delivery and transport costs. Manufacturing in Britain is a trend
that could benefit the retailer if taken on effectively and lead to a
competitive advantage in the market.
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Contents Page
Page Number
1.0 Introduction 5
2.1 Transportation 9
2.2 Storage 10
2.3 Inventory 11
2.4 Unitisation 12
2.5 Communication 13
3.0 Logistic Service 13
Provider
4.0 DHL 14
5.0 Business Relationship 15
6.0 Current & Future 14
Trends
7.0 Garcons App 17
7.1 Supply Chain 20
Management
7.2 Value Chain 20
7.3 Agile Supple Chain 21
8.0 Conclusion 22
Appendix 1; Trade 23
Examples
References 24
Supply Chain Flow Chart 25
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1.0 Introduction
Modern retailing is fiercely competitive. In the current recessionary
environment the divide between those doing well and those doing
badly is growing. Large leading international companies like GAP Inc
have been hit hard (GAP, 2015) while others including the Spanish
fashion chain ZARA and Hennes and Mauriz (H&M) report growth
and high profitability (H&M, 2009); (ZARA, 2016). Success or failure
depends on an ability to meet changing customer demands and
being responsive to their needs; maintaining low inventories and
operating costs by being efficient and minimising funds being tied
up in working capital (Bruce & Daly, 2010) Studies of the most
successful fast fashion retailers specialising in rapid stock
turnaround reveal that the key challenge is the ability to optimise
supply chain management ((Bruce & Daly, 2006; Sheridan, Moore,
and Nobbs, 2006). To succeed retailers must offer today’s shoppers
who expertly switch channels and devices to suit personal
convenience a near perfect shopping experience across every
device. Consumer experience research shows that for today’s flex -
shopper convenience drives selection and purchase and that
fulfilment, delivery time and an ability to return goods to store or
free ship back are key(United Parcel Service of America, Inc.,
2014).
The aim of this report is to show a detailed logistic strategy that will
support the growth and the international expansion of the men’s
wear company “Garcons”, an independent fashion retailer that
stocks medium to high-end fashion. It will discuss some of the
challenges faced by an Omni-channel fashion supply chain and
outline best possible options for success of the company taking into
consideration the role of Logistic Service Providers (LSP). The five
elements of the logistics mix will be considered and academic and
trade examples drawn upon to establish the elements that should
be outsourced since this will be vital to the successful growth of the
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company (Mangano and De Marco, 2014). A review of the
importance of business relationships and the impact of two future
trends and how they will affect the business along with the
respected supply chain will finally show how Garcons can achieve
success through effective management of the logistics mix.
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2.0 Logistic Mix
In order for Garcons to manage their products successfully and fulfil
their marketing promise to the customer an understanding of what
stock is selling well and a quick adaptive response to any change in
consumer demand, in a cost effective manner is required (Fernie
and Sparks, 2009). However this is not easy and effective
management of logistics and “ensuring the right product gets
delivered to the right customer, in the right place at the right time”
is vital for success (Gattora, Day and Hargreaves, 1991 p.3). The
logistics mix is made up of five interlinking key elements which
include; Storage, Inventory, transportation, unitisation and
communication ( Figure 1).
8
Figure 1: Components of the Logistics Mix
Storage
Communi-
cation
Inventory
Logistics
Mix
Unitisation
Transpor-
tation
Market relationships
9
A review of these factors can help an organisation establish the
strategic, operational and the financial benefits of outsourcing and
weight has been given to these the present case study.
2.1 Transportation
Transportation is one of the most important and complex elements
in the logistics mix. It accounts for most of the cost and it is vital to
client and customer satisfaction (Gattarona, Day and Hargreaves,
1991). Sir Philip Green (Arcadia) is reported to have said that for
Top Shop, “speed was more important than price” (Spragg, 2012
p3). To remain competitive Garcons need to establish the quickest
and most cost effective way to import and distribute their stock to
retailers and customers and efficiently manage returns. Since the
need to boost supply chain responsiveness will have a major impact
on the carbon footprint and it’s also vital that an environmental
analysis is included in any transportation decisions (Golicic,
Boerstler and Ellram, 2010). Retailers often lack the knowledge and
expertise about supporting transportation services so outsourcing of
transportation to an experienced LPS is often in their best interests.
LSP’s have the advantage of understanding the transport industry,
costs, legislation and how to meet and improve environmental
performance. A further attraction is their ability to manage what
could potentially be difficult customer demands at busy and
unanticipated buying periods as well as the return of items. This and
the added power of being able to negotiate volume discounts in
times of rising fuel costs and environmental pressures is an
extremely potent argument for outsourcing this element
(Transportation of goods in the supply chain.doc;
www.campusmoodle.rgu.ac.uk).
Marks & Spencers (M&S) have firsthand experience of the benefits
of outsourcing transportation use the DHL supply chain who have
innovatively combined a significant chunk of the volume of the M&S,
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“Click and collect in store” delivery with their existing fleet deliveries
to and from stores in order to mange stock movement more
efficiently (Transportation of goods in the supply chain.docx;
www.campusmoodle.rgu.ac.uk). When Garcons global trade starts
to increase, following the introduction of their digital Apple App,
outsourcing of transportation would give access to much needed
intermodal transport, technology and specialised services like
Multiple Countries Consolidation. This would effectively add value
and create an competitive advantage when expanding globally
(Cheng and Tsai,2009).
2.2 Storage
Traditionally the warehouse was a means of holding stock and
avoiding loss through wastage and theft. Today storage has an
important role offering a facility to manage many aspects of stock
including movement, quality checks, sorting, labelling, coding,
packaging and communication. Companies also have to decide
where stock can be returned and some have dedicated centres for
reverse logistics (Transportation of goods in the supply chain .docx
www.campusmoodle.rgu.ac.uk). Effective management of storage
facilities is essential for the efficient and low running costs of a
company (Mangano and De Marco, 2014). However this can be
complex since there are several options available including
centralisations or decentralisation; location; size and availability of
onsite resources. Many retailers have found that centralisation
provides better retailer control, improves customer service and has
lower operations, distribution and inbound costs meaning the prices
stay competitive. Amazon efficiently and affordably manage
warehousing and distribution through centralisation. It helps their
online retailers to keep costs low and attracts customers online with
better pricing.
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Managing storage well has also contributed to the success of H&M
who have 3500 stores in 55 countries and yearly sales of $20.3
billion. H&M have survived the recession because of their flexibility
and ability to quickly turnaround styles with a lead time of two
weeks. Stock is held in centralised warehouses which replenish item
levels in stores quickly. Technology e.g. global EPR and Electronic
Point of Sale systems link their stores to production, suppliers and
the warehouse’s stock room to enable a quick reaction to new
trends and prevent overstocking. A mini load system is used to
move fast moving items and high bay racking improves storage
efficiency (Steffiengelmann, 2016).
The fast movement of stock and flexibility is also key for Garcons
and a centralised model with warehousing facilities and technology
that connects production, suppliers, sales and storage would be
advantageous. Standard outsourcing of this function to an LSP with
fashion and technology experience as well as already established
warehouse and distribution centres would support Garcons current
needs for its UK only operations. However, since managing the flow
of goods internationally is much more complex (Jeroen and
Denberg, 1999) specialised outsourcing may be needed in future
when concentrated inventory storage and fast delivery on order
fulfilment and return is needed as the company expands.
2.3 Inventory
Inventory expenses can rival transportation as the largest logistics
cost and can be as much as 30% of the retailers logistic costs
(Pedersen, Zacharia and Arlbjorn, 2012). A difficulty is that the very
nature of the fashion business makes it hard to predict what stock is
needed (Christopher et al, 2004). It could be argued that a “
stockless system” could be achieved if the retailer could move from
keeping stock in a warehouse to a distribution centre where stock
can be sorted for immediate store delivery (Fernie & Sparks, 2009 p
12
8) . The introduction of technologies like Radio Frequency
Identification (RFID) has gone some way to achieve this since
inventories can be recognised, tracked and traced enabling much
better streamlining of stocktaking operations and allowing retailers
to allocate resources more effectively (Moon & Ngai 2008).
However, it is still a complex process especially when multi channel
retail systems including online, click and collect in store or platforms
like Amazon Market place or ebay are used (Schneider and Klabjan,
2013). Appenix 1 gives a trade example
The purpose of packaging is to both protect and enhance goods and the
packaging type will depend on the type of transport being used.
Packaging costs have risen steadily because of the environmental
requirements of customers and government legislation, resulting in a
significant impact on overall logistics costs (Lockamy, 1995)
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2.5 Communication
In order for the logistics operation to run smoothly effective
communication between the company, manufacturers and suppliers, and
the customer is essential (Gattorna, Day and Hardgreaves, 1997). For
Garcons, effective online retailing communication is vital for ordering
and the return of dispatches. It is also imperative that the retailer runs a
successful communications unit in order to gauge customer feedback
(Hines 2009). However, as Garcon’s retail and online business are
presently UK based it is likely that an extensive communications team is
not needed and it is arguably in the retailers best interest to keep
communications in house. This may change with international expansion
since there will be a greater need for understanding communication;
dealing with language difficulties and culture; a need for improved
information technology (IT) and communication systems as well as
ability to cope with time differences. At this stage outsourcing would be
the best option allowing Garcons to achieve a smoother and more cost
effective international delivery since the systems and services required
will already be in place.
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are two main parts to e-retailing a web-front and an effective supply
chain to service the customer. Gracon’s need to develop facilities
and systems to underpin the e-fulfilment process and will need
support with:-
Fast response
Managing large number of small orders to individual customers
Demand order picking solutions
Precisely timed deliveries
Return handing solutions integrated in the process
High level of IT integration
4.0 DHL
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international expansion would be well supported.
(http://www.dhl.co.uk/en/about_us.html)
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supplier or they will be less likely to help resolve issues, cut lead times or
reduce costs.
The effect of the global economic downturn throughout the 2000’s has
had an impact everywhere. Diminishing incomes and consumer spending
has forced business to reduce costs by lowering production and shipping
levels. The global logistics industry has been hard hit and both retailer
and LSP’s are face challenges ahead as economies begin to recover and
new trends emerge (Logistics in 2020: The future of road freight - Kewill
Inc, 2013)
A key challenge to retail success are the trends forecast for road freight
including congested roads, rising fuel prices, green legislation and a
shortage of skilled drivers. All of these are likely to result in higher
delivery costs; poor stock turnover and reduced availability as well as
delays in delivery to both stores and the customers direct. If not
overcome these trends could have significant effects for Garcons since it
is almost impossible for the supply chain to keep moving within the UK or
internationally without using the road network. Most LSPs are working
hard to counteract and improve road transportation. Innovations include:-
Another key future trend that could affect Garcons supply chain is a
return to UK manufacturing & production. Significant increases in global
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manufacturing costs due to rising labour and fuel costs and a falling
pound have already seen the return of some of the bigger merchants who
who in the past have sought cheaper and more competitive
manufacturing overseas and a revival of British textiles. Sir Philip Green
(Arcadia) has increased its UK sourcing by 20% and he has indicated
plans to extend this in future (Lim, 2016)
The effects of Brexit on the supply chain have also not yet been fully
realised. In future the benefits of the EU single market could be lost and
predictions are that amongst those hardest hit could be UK online sellers
since the EU accounts for 45% of the UK’s exports and cross-border
online shopping.
Garcons could offset some of the future difficulties they face particularly
in their export and online shopping by following in the footsteps of M&S
and take advantage of the benefits manufacturing in the UK could offer
including the supply of high quality goods, a more responsive turn around
and smaller batch production to minimize risks and improve customer
satisfaction.
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GARCONS Pull
Garcons
chain by adding the product
to their online bag and
proceeding to the checkout.
Push
Garcons
Garcon’s will push it product
by displaying a “You may
also like” feature. Offering
ides that the customer may
like to purchase will increase
sales and profits.
Garcons Pull
19
Push
“New In”- this feature pushes the
customers through, as the will be
interested to see what is new in
stock.
Garcons
Push Push
21
Figure 3
Figure x
22
The agile supply chain is market sensitive and in contrast to the value
supply chain where projected demand determines what enters the
process actual customer demand drives the process.
Conclusion
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Appendix 1 Trade Examples
Inventory
In big companies with large and varied product lines the difficulty for
inventory management further increases and it is beneficial to outsource
their inventory matters to a LSP. Fortunately the menswear product line
for Garcons is similar meaning inventory matters can be kept in house.
This could change as the retailer grows internationally and at this stage it
would be beneficial for Garcons to then outsource.
One business who started off with their inventory in house but chose a
third part logistics provider (3PL) as the business began to expand, is the
online clothing retailer Tentree. Their environmental friendly focussed
business grew rapidly on the premise that for every item sold ten trees
were planted. Online orders, along with a growing concessions line in
some retail outlets proved too much for the business to handle in house
and they out sourced the inventory matters to A52, an omni-channel
logistics provider. Outsourcing for Tentree gave them the opportunity to
focus more time and attention on growing their retail distribution
(Deveau, 2014).
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References
Rabinovich, E., Windle, R., Dresner, M., Corsi, T., 1999. Outsourcing of
integrated logistics functions—An examination of industry practices.
International Journal of Physical Distribution & Logistics Management 29
(6), 353–373
Martin Christopher, Robert Lowson & Helen Peck Creating Agile Supply
Chains in the Fashion Industry International Journal of Retail and
Distribution Management, 32(8):367-376 · August 2004
25
John Fernie and Leigh Sparks Logistics and Retail Management:
Emerging Issues and New Challenges in the Retail Supply Chain Third
Edition
United Parcel Service of America, Inc. (2014) 2014 UPS pulse of the
online shopper. Available at: https://www.ups.com/media/en/2014-UPS-
Pulse-of-the-Online-Shopper.pdf (Accessed: 9 January 2017).
Sheridan, M., Moore, C. and Nobbs, K. (2006) ‘Fast fashion requires fast
marketing’, Journal of Fashion Marketing and Management: An
International Journal, 10(3), pp. 301–315. doi:
10.1108/13612020610679286.
26
Rao, K. and Young, R.R. (1994b) ‘Global supply chains’, International
Journal of Physical Distribution & Logistics Management, 24(6), pp. 11–
19. doi: 10.1108/09600039410066141.
Moon, K.L. and Ngai, E.W.T. (2008) ‘The adoption of RFID in fashion
retailing: A business value‐added framework’, Industrial Management &
Data Systems, 108(5), pp. 596–612. doi: 10.1108/02635570810876732.
Logistics in 2020: The future of road freight - Kewill Inc (2013) Available
at: http://www.kewill.com/blog/logistics-in-2020-the-future-of-road-
freight/ (Accessed: 9 January 2017).
Lim, V. (2016b) The Brexit impact on the supply chain. Available at:
https://www.tradegecko.com/blog/the-brexit-impact-on-the-supply-chain
(Accessed: 9 January 2017).
27
hl=en&lr=&id=HZvK5QJFVkgC&oi=fnd&pg=PP6&dq=packaging+and+visu
al+merchanding&ots=_TRTUb_ItF&sig=hoj4DpOnBh8X1WQv2uKVVf0D5Q
Q#v=onepage&q=packaging%20and%20visual%20merchanding&f=false
(Accessed: 4 January 2017).
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28
Fernie, J. and Sparks, L. (2009) Logistics and retail management:
Emerging issues and new challenges in the retail supply chain. 3rd edn.
London: Kogan Page Publishers.
Bruce, M. and Daly, L. (2006) ‘Buyer behaviour for fast fashion’, Journal
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29