Retail Distribution Logistics

Assignment Spring 2022

Consumers no longer see the line between traditional and online shopping and digital disruption has seen new retailers enter the marketplace and major High Street brands disappear.  Many retailers approach e-commerce as an extension of their physical activity, while others are creating innovative solutions to e-commerce supply chain challenges.

Purpose of this assessment

This assessment is designed to test your ability to critically analyse the impact of e-commerce on the outbound supply chain.

It brings together the 2 key learning outcomes of the module:

• Through appropriate research critically evaluate the outbound logistics function of a retail operation and recommend improvement ideas and concepts
• Through analysis and synthesis of information demonstrate your knowledge of distribution and logistics with respect to linkages and integration with other business functions and the customer

Background

“According to McKinsey, [during 2020] 10 years of e-commerce adoption was compressed into three months. And, not only did the shift to an e-commerce-first mindset happen in countries where online shopping was already widely accepted, but it also happened in cultures where in-person, local, cash-reliant and daily shopping is the norm. It’s likely that consumer behaviour will never return to what it was pre-pandemic, but rather take form under a new normal driven by convenience, flexibility and personalisation — all of which can be accomplished through e-commerce.”[1]

“Dixons Carphone today said its online electricals sales more than tripled over eight weeks when its Currys PC World and Carphone Warehouse shops were closed at the height of the coronavirus pandemic. Ecommerce continued to grow even when shops reopened – though growth then moderated to doubling, compared to the same time last year.”[2]

“The problem is that many established retailers tend to approach ecommerce as an extension of their physical activity… It’s often seen as another flagship store that just takes products and uses the existing supply chain. There often isn’t the innovation or radical rethinking of how the organisation works.”[3]

Assignment Brief

Task 1 – 65% of the grade

Acting as a Business Consultant to a UK retailer, prepare a report that critically analyses their current retail e-commerce position and the impact of this on their outbound supply chain. 

Task 2 – 25% of the grade

Looking over the next 5-10 years, make recommendations to a new retailer (in the same or a different retail sector) to enable them to build a resilient outbound supply chain for the future. This will require you to critically evaluate the future challenges your organisation is likely to face in this area of its business. 

10% of the grade will be awarded for the use of appropriate references and citations, and overall presentation.

Assessment Strategy

The report should include but not necessarily be limited to:

• Single, multi- and omni-channel strategy
• Technology
• Warehousing
• Customer behaviour, loyalty and relationship management
• Customer deliveries (store and/or home)
• Returns and reverse logistics
• CSR considerations

For each of the points you are required to produce evidence to support your position and recommendations.

Criteria

Students must be able to demonstrate an understanding of relevant theories and analytical models and apply them to aid the analysis of this environment.

You will be expected to critically evaluate all of the key perspectives of this assignment rather than a description.

You will be required to show evidence of research around the key elements of outbound supply chains and their impact on the organisation and customers.  Research of the chosen companies should be placed in the context of the report.

Word Limit

This is a 3,500 word assignment (excluding contents page and appendices) in the form of a structured management report that follows the assessment strategy.

Students are advised to stick closely to the word limit within a maximum +/- 10% variation in total word count. Work submitted that exceeds the word limit will be penalised by 10 percentage points on the basis of failure to demonstrate academic discipline.

Marking Guidelines

1. Current situation                                                                      65%
2. Future challenges                                                                     25%
3. Use of appropriate references and citations                            5%
4. Overall presentation                                                                5%

Tasks 1-2 will be graded using the Marking Rubric below

Structure and Outline of the Report

• Executive Summary
• Contents
• Introduction
• Main Body (including Headings)
• introduction – M&S brief history scan and scope
• talk about how most business both apparel, food and technology are rapidly adopting technology and e-commerce
• talk about aldi/lidl e-commerce retail
• also talk about how the Covid-19 has become a catalyst in accelerating the adoption of e-commerce
• Main body (including headings)
• current retail e-commerce position and the impact of this on their outbound supply chain.
•  
• Conclusions / Recommendations
• Appendices
• References
• Word Count:    3,500 +/- 10%

Key Dates

Launch of Assignment:  

Submission date:               Electronic Submission (via TurnitIn)

by

Grades released:            

Undergraduate marking scale

Applies to proven instances of academic offence.

APPENDIX 1

Analysis: Coronavirus – the devastating impact on fashion’s supply chain

As shuttered fashion retailers cancel orders, suppliers around the world face a bleak future.

7 May 2020

https://www.retail-week.com/fashion/analysis-coronavirus-the-devastating-impact-on-fashions-supply-chain/7034780.article?authent=1 (Accessed 8 October 2020)

Fashion retailers have been some of the hardest hit by the pandemic, faced with the double whammy of mandated store closures and a plummet in demand as shoppers working from home cut back on buying clothes.

Fashion sales plummeted 28.4% year on year in March, according to the Office for National Statistics.

As former LK Bennett chief executive Erica Vilkauls explains: “Sales of fashion and home goods have crashed as consumers spend on essential items.

“Retailers and their logistics systems, distribution facilities and supplier networks weren’t engineered for the rapid shifts in demand patterns that have occurred in the last couple of months.”

Vilkauls says that, as a result of this, “cash preservation has become the most important aspect to a non-essential retailer”. “Orders are being revised downwards as retailers plan to shutter shops for good in favour of online trading.”

This has had a profound impact on fashion retailers’ suppliers.  In Bangladesh alone, British retailers have cancelled an estimated £2.5bn in clothing orders, with fashion giants including Arcadia, Frasers Group, Asda, Debenhams, New Look and Peacocks among those that have pulled the plug.

Bangladesh’s commerce minister Tipu Munshi has warned that this will result in many suppliers falling out of business permanently, and has called on the UK government to intervene.

So what is the true impact of cancelled orders on fashion’s suppliers?

‘Not a single cent of income’

Mostafiz Uddin is chief executive of the Bangladesh Apparel Exchange and managing director of Denim Expert, a clothing company that supplies international brands including Arcadia and Peacocks.

His business has been crippled by both retailers cancelling orders, he says.

Uddin’s company, which employs 2,000 people, has not received “a single cent of income” over the last month – including payment for clothes that have already been manufactured and, in some cases, transported to the UK. 

Uddin says he and other local suppliers are keenly aware of the situation in the UK and are not expecting retailers to place significant future orders until the pandemic is under control.

For the time being, he will pay his workers by taking out personal loans and selling his own assets. He does not believe the $588m aid package from the Bangladeshi government will stretch far enough to support the millions of garment workers in the country and fears his employees will not be left with enough to survive on.

“Can I terminate my workers? Where will they go? These workers are 18- to 20-year-old girls, getting $100 a month, and they have six people in the home,” he says.

“I need to do something to feed them because I cannot let them go like this; they have no place to go. I don’t know how long I can do this, but as long as I can breathe I cannot leave them.”

By keeping on workers he is in the minority of business owners, he says, as many other suppliers in the region are laying off staff in a bid to cut down on costs.

Uddin says that, from Arcadia alone, the value of orders cancelled equates to approximately $2.5m (£2m), the majority of which were either ready to be shipped or had their fabric already acquired at the time of

Peacocks has cumulatively cancelled orders of over 43,000 pairs of jeans with Uddin, which were in various stages of production.

He is adamant that retailers should pay for orders that were in progress, either through fabric having been acquired or garments produced.

Ethical Trading Initiative executive director Peter McAllister concurs.

“To cut off a supplier, not talk to them or work through what would be a reasonable share of the burden, as well as not paying for orders, which equates to a supplier not being able to pay wages when work has been done, is unacceptable and inhumane,” he says.

“Sadly, it is an approach far too many retailers are taking.”

Incommunicado

For Uddin, blanket cancellations with no further communication from retailers are both disrespectful and avoidable.

He explains that buyers from the Arcadia team visited his factory on March 1 – just six weeks before he received a missive from the business cancelling all orders, which was circulated to hundreds of other suppliers.

“The biggest hurt comes from the fact that they should have picked up the phone or emailed me personally to explain the situation and asked how we could co-operate together.

”There are things I could have offered – longer payment terms, held goods – I could have found a way to explain the situation to my fabric manufacturers. But now they are not communicating or replying to emails, so how can I communicate with my people?

“They should have treated us as a partner; there is no partnership approach here,” he says.

The tactic that businesses like Asda have taken with their suppliers of paying for a percentage of the value of goods, rather than the amount originally agreed, is also of little comfort to suppliers, whose margins are too thin to pay their workers and partners without running into a loss, says Uddin.

“Everyone is trying to survive, but at the end of the day, it is not the retailers or the factory owner but the workers that are suffering because of these cancelled payments,” he says.

“We talk about Rana Plaza and industry development in the years since, but this crisis has proven that really things are still the same.

“The workers are the ones that suffer the most and there is no safety net for them. What has this industry done? I don’t see any changes.”

One supply chain expert offered an equally bleak view of the impact that non-payment by retailers could have on fashion suppliers, particularly in Bangladesh.

“Unless there is intervention to protect employers and workers in the supply chain, we see a scary situation in which 2 million people across Bangladesh become unemployed in the very near future, who will then have no choice but to go out and look for work in the midst of their own coronavirus pandemic,” he says.

“This has the potential to be highly destabilising and cause the development of that country to slide backwards potentially decades, particularly in terms of employment for women.” 

Retail responsibility

Former Jack Wills boss Suzanne Harlow says that retailers owe it to their suppliers to support them through this crisis.

“This is a global crisis that is likely to impact textile workers in developing countries extremely hard. Government support packages may yet come, but retailers have a responsibility themselves to work out a fair deal with suppliers, particularly those with large financial backing,” she says.

“With a smaller supply base almost inevitable going forwards, those retailers that have invested in theirs will see the benefit in the future.”

Primark, which had previously threatened to withhold fees for unwanted stock, made a u-turn last month to relieve the pain on its supply base. 

The fashion retailer, which does not trade online and has been forced to close all UK stores, has now agreed to pay £370m for stock that is either finished or in production.

Primark’s chief executive Paul Marchant says: “Transparency and clarity have been at the heart of our longstanding relationships with our supply base, and we were obviously disappointed that we were not initially able to commit to this stock.

“Our partnerships with our suppliers are invaluable and we want to continue to support them as we navigate our way through this global crisis.”

Marks & Spencer has taken a different approach and committed to pay for “large volumes” of fabric purchases by suppliers for future orders, which often amount to suppliers’ biggest cost. The retailer will also pay for all garments that were shipped or produced by March 24.

Chair of the UK Fashion and Textile Association (UKFT) Nigel Lugg welcomed Primark’s u-turn, but believes that Marks & Spencer’s offer is more comprehensive in light of the range of costs accrued by suppliers in the process of fulfilling orders.

Lugg explains that many local suppliers faced with insurmountable costs may choose to shut down operations entirely, rather than take a loan from the government, which come with high interest rates they know they may not be able to pay off.

He says that if retailers want key suppliers to emerge from this crisis, they need to support them now.

“I respect Primark more for going back on its word and recognising it has to do something and be honourable, but I don’t need to tell you there are plenty of others in the mix who are jumping on the bandwagon to sever support for their suppliers,” he says. “Can businesses like Asda really not find the money to honour their supply commitments?”

“If I look at India, Bangladesh, Myanmar, these people need to work to feed their families, and the bit we are all missing as the supposedly responsible Western world is what are we doing to try to support them? The answer at the moment is not a lot.”

The United Nations’ International Labour Organization launched a call to action last month, which called for “urgent collaboration” across the fashion industry to shield garment workers from the impact of Covid-19 on their health and livelihoods, and which retailers including Primark, H&M, Inditex and Marks & Spencer are supporting.

Meanwhile, Boohoo has set up its own support programme for suppliers, which includes an emergency fund for those struggling and introducing 14-day payment terms to help with cash flow.

Although these measures are positive, McAllister argues individual company support programmes are not subject to external scrutiny.

“I’d have a lot more questions for someone who was not signed up to an independent campaign to support garment workers, because it is much easier not be transparent about what they are actually doing for suppliers,” he says.

The post-corona supply chain

When this crisis subsides, fashion’s supply chain could look radically different. 

Lugg says: “I don’t believe anyone will allow themselves to get caught with the forward commitment they had when they went into Covid-19.

“The fashion supply chain will operate with dramatically shorter lead times, either by moving their manufacturing bases closer to home or investing in robotics. Either way, there will be a shift in how much retailers forward-book inventory and we’ll have a much faster, leaner supply chain as a result.”

One supply chain expert also forecasts that there could be a shift in legislation to hold fashion retailers more accountable to honouring their commitments to suppliers, and says that there is “real discussion” among European governments and NGOs about “what the future supply chain should look like in the wake of this experience”.

But McAllister worries that the power dynamics between suppliers and retailers mean that, despite the torment of recent months, very little will change – even after coronavirus has ravaged business relationships and cost bases.

“Places like Bangladesh and Cambodia have built their export prowess on the fashion industry, so when fashion businesses come back in three, six, 12 months to the suppliers they abandoned, they’ll most likely be desperate enough to make it work,” he says.

“The suppliers that do survive will be bruised and warier, but essentially the power structure doesn’t change – brands from the West largely will place orders and suppliers will find ways to fulfil them.”

Rather than exerting power, now is the time for retailers and suppliers to come together and work through the crisis that is engulfing the entire retail industry. A strong supply base will lead to a stronger retail industry in the long term.

APPENDIX 2

China’s share of global exports falls in supply chains rethink

Kathrin Hill

17 August 2020

https://www.ft.com/content/bfef2854-f8f3-4ce6-a00f-3b11123b01e8  (Accessed 8 October 2020)

Multinationals seek to reduce dependency as pandemic and US restrictions bite.

China’s share of global exports has been hit by its trade dispute with the US which — together with the pandemic, corporate governance demands and the rise of artificial intelligence — is pushing multinational companies to reduce their dependency on the Asian powerhouse.

Last year Chinese exports of 1,200 products accounted for 22 per cent of the world’s exports, 3 percentage points down on the previous year, according to a new study by Baker McKenzie, the law firm, and Silk Road Associates, an economic consultancy. For consumer goods the country’s global market share fell by 4 percentage points to 42 per cent.

The findings come as Washington targets China with wide-ranging measures aimed at weaning itself off China-based supply chains and hobbling Beijing’s ambitions to become a global tech power.

On Monday, Washington broadened restrictions on semiconductor supplies to Huawei imposed earlier this year to cut off virtually all chip shipments to the Chinese technology group.

Anne Petterd, head of the international commercial and trade practice at Baker McKenzie in Asia Pacific, said that in the wake of the disruption caused by the pandemic, companies were looking to geographically diversify their supply chains, build in more safety layers, and supervise them more strictly. “Whereas it used to be the consumer goods sector that had to make these fast moves, we are now seeing an unprecedented range of industries starting to do the same,” she said.

Companies that make technology hardware, one of the industries where manufacturing has been most concentrated in China, have moved production of some products out of China over the past three years as their customers in the US began raising concerns over security and as some components were hit by US tariffs under the China trade dispute.

For example, Quanta Computer, the world’s largest notebook contract manufacturer and a big supplier of cloud hardware for companies such as Google, Amazon and Facebook, shifted production of servers out of China to Taiwan and to the US. Reflecting these moves, the data assembled by Silk Road Associates show that China’s share of worldwide exports of computers and tablets dropped by 4 percentage points to 45 per cent last year.

In the handset industry, where China is even more dominant, the country’s share slid by 3 percentage points to 54 per cent, according to the study. Liu Young-way, chairman of Foxconn, the largest Apple supplier and the world’s largest electronic contract manufacturer with a workforce of up to 1m in China, said last week that the company expected global technology supply chains to split into two camps: “It will be one for China and those associated with it, and another for the US and their friends.”

While Foxconn is building capacity in Vietnam and India, it has said that it aims to increase the proportion of capacity outside China in its global shipments only marginally from the current 20 per cent to 30 per cent. But the study’s authors believe that the pandemic, and the disruption it brought to global supply chains centred on China, is accelerating the changes.

“What we have seen so far has been a shift in the final assembly of the product, with a lot of the components still coming out of China,” said Ben Simpfendorfer, chief executive of Silk Road Associates. “The supply chain as it was built in China over the past 20 years will be replicated — but it needs time.”

APPENDIX 3

With 90 days until Brexit, supply chain kinks could cost manufacturers dearly

Factory bosses’ preparations for the latest deadline face additional pressure amid the pandemic.

Martin Gaarn Thomsen

1 October 2020

https://www.telegraph.co.uk/business/2020/10/01/90-days-brexit-supply-chain-kinks-could-cost-manufacturers-dearly/ (Accessed 8 October 2020)

We are here again: 90 days to go until the UK’s transition period expires and we fully withdraw from the EU. And yet, while previous Brexit deadlines have approached in plain view, this one is emerging from the shadows of a pandemic that nobody predicted.

Since the outbreak of the pandemic, the effects of Covid-19 have dominated the agenda of almost every manufacturing company. For some, orders fell off a cliff edge as factories suffered their sharpest fall in output since the eurozone crisis eight years ago, while others have struggled keep up with the demand.

Against this backdrop, it’s hardly surprising that Brexit preparations have dropped down the agenda for most companies.

A recent survey by the Institute of Directors found that only a quarter of companies felt their organisations were fully prepared for the end of the Brexit transition period, while a survey by the Confederation of British Industry (CBI) found that 27pc of manufacturers thought their preparedness had actually gone backwards since January. 

It’s entirely understandable that many companies feel they are less prepared for Brexit than they were at the beginning of the year. Now that we have entered what might cautiously be termed a Covid-19 recovery period, the focus has been on restarting production lines while also mitigating the risks of infection amongst the workforce.

The industry chalked up its fourth straight month of growth for September, but a Confederation of British Industry (CBI) survey also found that factories experienced weak growth in the three months to September.

Companies are dealing with new responsibilities and navigating new ways of working, while also doing their best to manage continuity of supply against an extraordinary increase in demand. The resource required for things like training first time PPE users and adhering to the new workplace safety protocol has shot through the roof.

Of course, these considerations are all in addition to the existing health and safety challenges such as accident prevention, ensuring user compliance, balancing cost and quality, responding to complex legislation and managing inventory.

Implementing the new measures is a major undertaking and requires rigorous planning and preparation to address new and diverse challenges. These include how colleagues communicate with each other against a noisy backdrop while remaining socially distanced, thermal scanning at site access points to detect early signs of infection and careful planning of shift patterns to allow for deep cleaning.  

Ensuring facilities have appropriate measures and practices is paramount. Outbreaks at several UK manufacturing and processing sites have highlighted the capacity for the virus to spread on the factory floor, as well as the potential financial and reputational consequences. 

A global pandemic isn’t the only factor that might have reduced manufacturers’ Brexit focus; there is also the inevitable fatigue brought about by the passing of multiple Brexit deadlines. On three occasions companies have built inventories, created warehouse space and developed comprehensive contingency plans, only to be faced with a false start. 

The time and money invested into these processes are considerable.

Repeated deadline extensions may be limiting the energy that companies will commit to embracing the Government’s recent “Let’s get going” campaign to once again encourage preparations.

Yet, without sufficient preparation there is a risk that manufacturers will have managed the post-lockdown restart of their plants successfully, only to find themselves unable to cope with the potential challenges posed by Brexit.

In particular, they may find themselves unable to get their hands on the parts needed to keep production lines moving and the PPE that is now crucial to enable their teams to work safely.

We should not lose sight of the potential for PPE shortages to halt production. This is a new consideration to the Brexit preparation process and a new dimension in what it takes to meet the most important objective for any site or plant manager: uptime.

Manufacturers could find themselves in a position where production lines are up and running without any issues, but a hold-up of essential PPE at the border means that they must shut down until it has cleared customs. 

The EU continues to represent a large share of the supply chain across UK manufacturing. As the UK reaches the end of its transition period with the EU, additional costs and time at the border will add friction to existing supply chains.

Many manufacturers relying heavily on the delivery of just-in-time supplies from Europe will be particularly exposed. 

Companies must plan carefully to ensure they have the goods and materials required for the manufacturing process itself. However, to keep the wheels of industry turning, they must also ensure they have the products required for the maintenance, repair and overhaul of production lines – not to mention essential PPE.

Having access to these items is an essential ingredient in the long term for the sustained recovery of manufacturing throughout the Covid-19 pandemic and beyond the Brexit deadline. 

With three months to go before crunch time, it is imperative that manufacturers work with their suppliers to identify the parts and products needed most frequently, to ensure that these are always available within the UK.

Given the time, effort and money manufacturers are putting into the recovery, it’s now more important than ever that they don’t fall short when critical parts are needed most.

[1] https://www.forbes.com/sites/forbesbusinesscouncil/2021/12/29/covid-19-accelerated-e-commerce-adoption-what-does-it-mean-for-the-future/?sh=3be54921449d

[2] https://internetretailing.net/covid-19/covid-19/dixons-carphone-online-electricals-sales-more-than-tripled-over-eight-weeks-when-its-stores-were-closed-against-covid-21971

[3] https://www.ft.com/content/18aaad4a-3920-11ea-a6d3-9a26f8c3cba4

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