Homebase's Supply Chain Management Essay: Strategies For Reducing Delivery Costs. (70 Characters)

Concept of Supply Chain management

Evaluate the supply chain management of Homebase and proposing strategy for reducing delivery costs?

The word “Supply Chain Management” refers to the flow of services and goods. In this process, organizations store the raw materials, process the raw materials and ultimately promote the processed product among the consumers. Apart from that, this management system helps the companies in gaining competitive edge with the help of an effective supply chain process. According to Fawcett, Ellram and Ogden (2014), organizations are following step by step communication with different stakeholders for launching the product or services to the targeted market. In this competitive market, organizations are focusing on increasing product availability as per the product or service demand. As stated by Tayur, Ganeshan and Magazine (2012), it is highly important for the organizations to deliver the products or services as per the market demand. An effective supply chain management system is not only helpful for reaching to the targeted consumers, but also effective for creating a high market demand.

This report is based on literature review is focusing on evaluating the supply chain management and its impact on organizational cost. The organization selected for this report is Homebase, UK, which retailer of home improvement products. Homebase deals with home improvement products since 1979 and the company operates from United Kingdome with over 265 stores all over the globe. The company especially deals with furniture, Kitchens products, outdoor living products, bathrooms accessories and gardening products. This report will emphasize that whether the company is considering the supply chain management as the key factor for reducing their delivery cost or not. Following is the literature review of supply chain management in relation with the activities of Homebase and the other organizations of this industry.

The process followed by the organizations for converting the raw materials into finished good and to deliver those finished goods to the consumers is known as the supply chain management. The concept of “just in time” is a method for reducing the time requirement of manufacturing process along with delivering the product within short time. This business method helps to deliver the product to the consumers within promised time (Fawcett, Ellram and Ogden 2014). As per the viewpoint of Seuring (2013), manufacture, sub-vendors, retailer and the service providers are responsible for conducting an effective supply chain within an organization. The entire process of an organization is focusing on fulfilling the market demand by delivering actual amount of finished goods. Moreover, Barney (2012) has mentioned that the way an organization has adopted for circulating their product or services is known as the supply chain process. For an example, the retail industry is dealing with the suppliers and the manufacturers for increasing product availability among the market. On the other hand, Ahi and Searcy (2013) identified that if a company is dealing with online product selling then the supply chain is including a product delivery section. There is different cost involvement in different stage of supply chain management and therefore, an effective supply chain management is highly important depending on the business process of the company. In case of Homebase, the company is providing delivery service to their consumers and therefore, the company is dealing with a strong logistic department (Zhu, Sarkis & Lai, 2013). Apart from that, the delivery service involves a certain investment for conducting the whole process.

Process of Supply Chain Management

The supply chain management is a systematic process, which helps an organization in conducting the entire mechanism successfully (Brandenburg et al., 2014). The Kaizen Model of management shows that continuous improvement in supply chain process is highly important in order to gain competitive advantage. This model focuses on five different aspects such as “teamwork”, “personal discipline”, “improved moral”, “quality circles” and suggestions” (Green et al., 2012). On the other hand, the quick response approach helps an organization to communicate with the suppliers at top priority. Apart from that, an effective supply chain process should have a proper monitoring mechanism for getting successful outcome. Following is the five-step process of an effective supply chain management, which can facilitate an organization in circulating products among the targeted market.

Plan: This is the first step of this process, which helps an organization to build an effective strategy for managing organizational resources to develop the services or the products. According to Pagell and Shevchenko (2014), in this process, manages and the employees of an organization is directly involved for developing an effective strategies. However, Hsu et al. (2013) argued that some managers are unwilling to consider the viewpoint of the employees while taking organizational decision. The research of Tseng and Chiu (2013) is showing that the planning process includes the ways in which the organization is going to utilize the resources. Resources include the raw materials and the workforce of an organization. In case of Homebase, the company is utilizing their resources such as workforce and raw materials for developing the products and services. Moreover, Lin (2013) has mentioned that the company is relying upon the employees’ decision for conducting the final decision-making process. The company is also focusing on delivering the products within the estimated time along with reducing the cost involvement. Majorly, the online retail organizations are considering the delivery cost while developing the strategy for supply chain management (Green et al., 2012). It helps the organizations in reducing organizational cost and increasing organizational profitability at the same time.

Suppliers: In this step of supply chain management, organizations choose the supplies from the market. In this step an organization develop the pricing strategy, delivery process and the payment process as well. According to Winter and Knemeyer (2013), this is the most crucial activity of an organization, as choosing the proper suppliers for the products and services is highly important for getting successive outcome. The delivery cost is determined in this particular step. In case of retail industry, either the organizations are choosing the retailers or they are directly delivering the product to the consumers. In order to deliver the product directly to the consumers, organizations are relying upon their logistic department (Mathiyazhagan et al., 2013). It is highly important for the companies to build a strong and long-term relationship with the suppliers for conducting sustainable business in competitive market. However, the process of logistic department is depending upon different external factors, which can create barriers for the logistic department while delivering products to the consumers.  

Plan:

Manufacturing: In this step, managers of an organization determine the process of production, testing, packaging and product or service delivery. In this process, an organization focuses on the internal process of the organization. As per the viewpoint of Sarkis (2012), the internal process refers to the performance quality of the workforce and their work productivity. Moreover, the managers are implementing strategies for enhancing performance quality of the workforce, which influence the quality of the product or services. The major aim of the managers is to improving the product quality for satisfying the consumers’ needs and expectations. However, Ashby, Leat and Hudson-Smith (2012) opposed that understanding the consumers’ expectation accurately is not possible for an organization. Organizations only can predict consumers’ buying behavior, which helps the organization in influencing purchase decision in an effective manner. In case of quality testing process, organizations monitor the product quality for ensuring the consumers regarding the product quality (Walker & Jones, 2012). Retail industry is considering this factor for retaining their consumers, which helps in gaining competitive advantages. However, this industry is dealing with high quantity sales and therefore, it is difficult for the organizations to maintain the product quality in frequent rate.

Delivery: This is the fourth stage of supply chain management in which organizations deliver the product to the consumers. Apart from that, managers coordinate with the order receipt for preparing the product. According to Paulraj, Chen and Blome (2015), this is the most important step of supply chain management in which organizations reduce cost and increases profitability. However, the delivery process is sometimes influenced by some external factors, which reduces organizational performance. In order to satisfy the consumers, managers focuses on time reduction of the delivery process. In addition, the managers are also considering the cost deduction while delivering the product to the end users (Simpson et al., 2015). Homebase is focusing on reducing the delivery cost and time for enhancing organizational profitability in an effective manner. In this section of supply chain management, delivery of the product is taken into consideration. The product can be delivered directly to the consumers or it can be the suppliers and wholesaler. In either case, it helps the company in increasing product availability among the targeted market. In current days, consumers’ buying preference is changing rapidly. As stated by Golicic and Smith (2013), the consumers are willing to buy a product after comparing with different brand. Therefore, Homebase has developed the online retail store, which is allowing the company in delivering the product directly to the consumers. Apart from Homebase, many other organizations such as Amazon and Alibaba are using this process of supply chain for satisfying their consumers (Govindan et al., 2014). Previously, Homebase was implementing the traditional process of product delivery; however, in current days, the company has adopted this innovation for gaining competitive edge.        

Suppliers:

Monitoring: According to Seuring and Gold (2012), this is the final step of supply chain management, which allows the managers to review the entire process of supply chain management for investigating the organizational performance. If one of the steps of supply chain fails, then the entire mechanism of the organization will be hampered and the organization may face critical situation. Therefore, it is important for the managers to conduct continuous monitoring process for getting successful outcome (Tatoglu et al., 2015). A successful process monitoring enables the company in gathering consumers’ feedbacks for identifying that whether the consumers are satisfied with the service or not. Depending on consumers’ feedbacks, companies are improving their internal process. However, Priem and Swink (2012) mentioned that there are many risk factors are associated with this process of change. In order to avoid the negative impact of change, an organization investigates the risk factors and takes necessary action for reducing negative impact of the risk factors. The retail industry is focusing on enhancing the service quality; while on the other hand, the manufacturing industry is considering the internal process for ensuring the product quality (Beske, Land and Seuring, 2014). For example, Homebase is monitoring the manufacturing process and the delivery process along with the entire supply chain process for satisfying the consumers’ needs and requirements.

Communication with shipping representatives

According to Beske and Seuring (2014), every organization is delivering their products to the consumers with the help of the shipping representative. The role of the shipping representatives is to negotiate the shipping cost with the shipping company. Therefore, it is highly important for the retail organizations to communicate with the representatives for reducing the cost of delivery. Moreover, this process helps a retail organization in making the delivery process more comfortable, which is important for satisfying the consumers as well. However, Awudu and Zhang (2012) have argued that in this process, a retail organization needs to build a long-term relationship with the representatives for maintaining a low delivery cost. Along with that, the company needs to ship bulk amount of products for considering the benefits of the representatives.

Flat rate of shipping

There are different shipping companies offering flat rate for delivering products. However, the cost of delivery is depending on the geographical location (Zhu, Sarkis & Lai, 2012). A retail organization needs to consider the shipment location before choosing the shipping company. In addition, shipping companies are offering a free packaging for the products, which is highly beneficial for the retail companies and therefore, selecting the shipping company is the most sensitive task for a retail organization. As per the viewpoint of Guang et al. (2012), the cost of delivery is depending on the product weight and the delivery zone as well. Therefore, process of flat delivery cost is confusing and the retail organizations need to identify the actual rate chart of the shipment company by communicating with the representative.   

Manufacturing:

Communicate with the consumers

According to Tatoglu et al. (2015), in order to reduce the delivery cost, it is highly important to communicate the consumers to know their requirements. For example, a consumer may need the product within a day. In that case, the company should avail air journey for delivering the product. However, Golicic and Smith (2013) stated that if the consumers don’t require the product within a day, then the company can reduce the shipment cost by availing a rode transit. The internal process of a retail organization is playing a major role in this aspect (Walker & Jones, 2012). Apart from that, use of innovative technology can help the company in knowing the customers’ needs and requirements in an effective manner. Therefore, it can be said that using the appropriate delivery process for the appropriate consumer can reduce the delivery cost of the product.

Determine the delivery cost

Determining the delivery cost for a particular product is a complex process. It is highly important for the company to set different delivery cost for deferent location (Mathiyazhagan et al. 2013). Apart from that, the product weight is also a considerable factor, which influences the delivery cost. In case of Homebase, the company is dealing with home improvement products and therefore, the products are difficult to handle on the time of transit. According to Green et al. (2012), it is highly important for the company to provide a quality packaging for reducing chances of product damage. A consumer will never pay for a damage product. Therefore, the company needs to invest certain amount in product packaging for reducing the entire delivery cost. However, Pagell and Shevchenko (2014) has argued that the delivery cost needs to be taken from the consumers for reducing overall organizational for a product.

Packaging

The packaging material can reduce the overall weight of the package. Therefore, it is highly important for the company to determine the required material for packaging the product (Seuring, 2013). Apart from that, the quality of the packaging material should be as per the requirement. A product, which needs a high quality packaging for ensuring low damage on transit, requires a high quality packaging. On the other hand, Brandenburg et al. (2014) opposed that for the products, which are not difficult to handle can be delivered with a low quality packaging. Therefore, a retail company can reduce the overall delivery cost by reducing the packaging cost.

Delivery:

Lean supply chain approach

The term lean refers to the process of reducing the wastage activities for enhancing organizational profitability. According to Tayur, Ganeshan and Magazine (2012), the approach of lean management can be implemented on the manufacturing process. It helps an organization in reducing organizational cost in an effective manner. Apart from that, the approach of lean can also be implemented on the logistic and supply chain of an organization. This approach is focusing on the consumers’ needs and requirements and depending on the consumers’ needs and requirements, organizations develop the internal organization process such as supply chain and logistic mechanism by deducting the wastage processes (Zhu, Sarkis & Lai, 2012).

In addition, adding value to the existing service as per the consumers’ requirement helps an organization in satisfying the consumers in an effective manner. As per the viewpoint of Lin (2013), in order to increase value of the ultimate service, it is highly important for the company to understand that what are the organizational activities are creating value for the consumers. Reducing the extra organizational activities can reduce the overall organizational cost for the company. When it comes to the supply chain process, there are different activities, which are not creating value for the organization and the consumers as well. Winter and Knemeyer (2013) has stated that this theory of supply chain suggests that reducing the extra organizational activities of supply chain management can reduce the delivery coat of products. In case of logistic activities, an organization monitors the market demand and as per the market demand the organization produces the products. In this process the organization can reduce cost requirements by identifying the activities, which are not effective for conducting the entire process. However, Ahi and Searcy (2013) have argued that the process of reducing waste activities is very complex and most of the companies are struggling while conducting lean management of supply chain and logistic process.

In order to gain competitive advantage, retain industry is focusing on reducing their manufacturing and delivering cost as well (Tayur, Ganeshan & Magazine, 2012). As the retail market is very competitive and every organization is relying upon low pricing strategy, it is not possible for the companies to reduce their product cost for increasing profitability. Therefore, in current days, the intention of business organizations has diverted to the cost of supply chain and the product delivery cost. According to Sarkis (2012), there are different companies are offering home improvement products like Homebase and therefore, the company has implemented a strategy for satisfying the consumers by providing product delivery. However, Paulraj, Chen and Blome (2015) have mentioned that in previous day, the company was using a traditional process for delivering the products. Therefore, there are certain cost involvement has introduced, which the company is reducing by implementing lean theory of supply chain.

Conclusion

Section I

Description of the existing supply chain for the Dulux supplier:

What is your current supply chain model?

We receive deliveries direct from suppliers for some product ranges and also through depots. Seasonal stock is delivered initially at the start of the season by a single container direct from the port. Horticulture product is delivered through a specialized depot.

What stages include the logistic process? (Please put stages in numerical order).

Supplier:1

Central warehouse:

Distribution center:2

Local warehouse:

Store:

Other (please explain)

Which operations include every stage? (please tick)

In order to gather primary data from Homebase, the researcher has created 27 questions. In this section, managers of the company have provided their viewpoint regarding the supply chain process, which has been adopted by the company. After gathering the primary information, it can be said that Homebase has adopted a lean supply chain model in which the company receive deliveries directly from the suppliers. In order to deliver seasonal stocks, Homebase use single container.  The primary data gathered suggests that the logistic process of Homebase includes two major stages such as suppliers and distributor channel. In addition, the operations include in each stages are packaging, loading, transportation and unloading. In this particular process, the current delivery time of Homebase of 6 to 10 days from the date of shipment. Apart from that, manager of Homebase has stated that just 60% to 70% products are delivered on the expected time. In order to adjust ordering volume, Homebase use an automated ordering system. In this particular system, the organization can modify the product quantity during the process. When it comes to the transportation, Homebase has adopted three kinds of transportation system such as central to local warehouse, local warehouse to store and store to customers. The primary data collection process reviled that flexibility in transportation process is one of the major reason of transportation outsourcing.

Conclusion

After preparing the report, it can be concluded that transport delay is one of the major issue faced by Homebase. Apart from that, from the primary data collection process, it can be said that Homebase has a poor distribution network. As per the literature review, it is highly important to improve the supply chain process in order to reduce delivery cost. Therefore, this report consists of different models, theories and processes of supply chain management. Implementing these processes would reduce the delivery cost for Homebase effectively. 

References

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