Assessment Brief (Mini Project / 4000 words):
As part of this module, you would normally be required to complete a 200 hr work placement. However, considering present restrictions due to the Global pandemic Covid 19 this is now not practically possible for most students.
To help to facilitate this module the employability team have sourced Business projects from local employers and departments within the UOB.
You have the opportunity to apply for any of the projects you are interested in through the ‘Work Flow’ introduced to all students in December 2020.
Working with your main contact (virtually) at your chosen organisation you must:
- Agree on the business problem with your chosen organisation.
- Undertake primary research by liaising with contacts at your chosen organisation.
- Undertake secondary academic (desk) research into the subject.
- Develop informed conclusions and recommendations from your research.
- Present your findings back to the Employer.
- Write a 4000 word formal report on your research project.
Assignment 2 – Mini Project
1. Section 1 – Introduction
John Gallemore and Matthew Moulding started the THG group in the year 2004 in Manchester, England. The group was initially started to sell CDs online. In the last 16 years, the company has evolved from a small start-up venture to a global digital-first brand through its ground-breaking business model and strategy and its registered technology platform, Ingenuity (THG, 2021). Currently, THG has approximately 300 localized websites selling premium goods in 140 countries. The company primarily operates through four business lines; THG Ingenuity, THG Nutrition, THG Beauty and Other. It purposes to reinvent how the brand connects with the buyers.
The sudden outbreak of COVID-19 seems to harm both the online shopping industry and the global economy as a whole. As customers have remained at home, the company’s sales growth has undeniably been accelerated by a transition to digital platforms. Despite this, the motives for long-term retail channel shifts and repeat purchases online remain consistent, including increased product availability due to the lack of shelf space constraints, increased product education through the thousands of user-generated and skilled posts available online, and increased convenience concerning delivery and payment options. Naturally, the pandemic has posed challenges in terms of ensuring that the company continues to provide manufacturing and fulfillment services in a healthy and secure environment for its employees. Despite a 41.5 percent increase in revenue, The Hut Group (THG), an online retailer of clothes, cosmetics, accessories, and handbags, has posted a full-year loss. For the fiscal year that ended on December 31, 2020, the e-commerce company recorded a net loss of £481.8 million (Annual Report, 2020).
Additionally, COVID-19 also introduced challenges in managing its people, engaging and keeping intact the safety of its employees while simultaneously enabling drastic improvements in work practices under adverse conditions. Moreover, as the magnitude of the pandemic on infrastructure became noticeable, mitigation and disruptions in customer order fulfilment soon became an issue amongst all senior managers. Inadequate controls and protections to prevent the spread of Covid-19 will result in staff losses, limited resources and market disruptions and damaging operational capacity reductions. Globally improved or prolonged transmission speeds can interrupt all THG operations, including manufacturing and distribution sites (UNCTAD, 2020).
I worked in the inventory management department as a trainee responsible for tracking the available products and that need to be re-stocked. SKUs help the company track the highly demanded products and purchased by the customers based on previous purchases. Apart from this, I was held responsible for managing deliveries across different shifts for ensuring a frictionless delivery. Due to the sudden increase in the demand for online deliveries because of the lockdown imposed by the government to fight against COVID-19, the company was facing challenges in ensuring smooth deliveries and thus wanted to have a proper plan in plan for optimizing the delivery process. This research primarily aims to identify and propose strategies for helping the company optimize its delivery process.
2. Section 2 – Question, aim and objectives
The biggest challenge currently facing e-commerce companies like The Hut group is cost-effectively ensuring smooth and timely deliveries. The company is constantly pressurized to find ways for improving the density of deliveries. Today, customers want full transparencies into their distributions all the time. The customer expectation from an online e-commerce business has considerably increased. The inventory management department faces enormous challenges in fulfilling timely orders because of restricted cross-border movements, increased transportation costs, disrupted freight routes and an additional cost burden.
Research Question: How will The Hut group recover or optimize its delivery process after COVID-19 for ensuring timely delivery to customers in a cost-effective manner?
Research Aim: The primary aim of this mini-research report is to determine strategies or a structured plan that can be utilized or deployed by the Hut group for providing services to the customers round the clock while simultaneously taking care of its staff. Additionally, the project also aims to identify ways to improve FMPP picks from 17% to 4o% of the total volume of the OB shift and maintain the daily variation to less than +5% in each shift.
Research Objectives: The study aims to address the following objectives:
- To determine the process for optimizing the delivery process (increasing FMPP picks) to distribute it across shifts and maintain a frictionless process
- To determine the capacity of SKU that will be needed for optimizing and supporting the FMPP process
- To increase the OB pick from FMPP from 17% to 40% and ensure that only authentic fast-moving products are stocked in the area
3. Section 3 – Secondary Research
The outbreak of coronavirus disease has impacted the overall performance of e-commerce companies. The demand for third-party marketplaces on online platforms has considerably increased. Moreover, the disease outbreak has intensified the trend toward increased social media usage and development in e-commerce. Consumption habits have also changed, leading to a need for purchasing vital products. Social networking platforms and personal e-commerce outlets are important distribution platforms for e-commerce companies. Both networks have proliferated since the COVID-19 crisis began. Consumer behaviour changes have been followed by greater adoption of cashless payment systems (UNCTAD, 2020). Additionally, the COVID-19 pandemic has forced e-commerce companies to identify their pre-existing bottleneck in the e-commerce system, including problems relating to logistics, disrupted supply chain, an inadequate workforce to sustain the demand, operational constraints due to lockdown and other restrictions, higher costs due to changes in regulations, problems arising because of market closures, higher costs of the transports and deliveries. However, most e-commerce companies felt that they didn’t have adequate staff to cope with the accelerated demand.
According to a report published by Rell Snyder of the National University at Costa Mesa and Basel Hamdan of Argosy University (Patil and Devakar, 2014), online retailers must compensate for stock-outs and behave appropriately to avoid losing business or consumers. Big stores with a digital and offline presence can serve customers more effectively than small stores.
E-commerce businesses that operate on a self-management model benefit from the sales of the goods they own. Due to online vendors’ hectic schedules, flexibility is a critical factor affecting the competitiveness of e-commerce sites. Given the enormous depth of penetration of the items stored in warehouses, excessive inventory may have a detrimental effect on operating flexibility, resulting in longer lead times, increased logistics costs, waste and spoilage, and impeding the re-stocking of other commodities potentially resulting in demand loss. Effective inventory management is crucial for a business to sustain sufficient stock to meet the needs of consumers. If inventory management is not done correctly, a business may lose revenue on unaccomplished sales or waste the money by storing too much stock Yang et al., (2016). The existing literature has proposed numerous ways for managing the inventory:
- Drop Shipping: Instead of holding the products for sale, the drop-shipping model emphasizes shipping the products directly to the manufacturer via the third-party retailer/seller facilitating drop-shipping via their websites (Singh et al., 2018).
- The optimization of organizational infrastructure, facilities, and procedures is also the critical aspect to increase the outcomes of inventory management. One of the most significant elements is processing and warehousing facilities, as these are the vital locations where the stockpiles can be held, and inventory management can be done. Richards (2017) argues that the first category is referred to as “cross-dock centers,” and this term was developed to optimize the supply chain to fulfill consumer and vendor requirements. It is mainly used to acquire branded and scarce goods from various outlets, assemble them, and supply them to other different shareholders in a short period, typically less than a day. The second type is referred to as “reverse logistics centers” and was developed to assist businesses in managing returned goods. The third form is referred to as “consolidation centers.” It is a well-known intermediary point where finished goods or materials are temporarily stored before the continuous transition to other business parties or customers. The fourth form is referred to as “fulfillment centers,” These facilities are highly concentrated and equipped with adequate and modern technology, facilities, and equipment to process a large volume of orders from virtual transactions daily. The fifth category is referred to as “bonded warehouses,” and these facilities store goods for cross-border deliveries.
- Just-in-Time Justification strategies: It focuses on stocking products to fulfill the customers’ current and expected needs while ignoring the ones that are not required. This way, an ecommerce company will manage the warehouse cost and effectively utilize the storage space available (Juárez et al., 2017).
- Employ a safety stock inventory: This is the best possible strategy that an e-commerce player can utilize for dealing with an unanticipated surge in demand by keeping a small surplus amount of goods in hand (Brunaud et al., 2019).
- Automated stock management system: It is much more accurate, time-saving, efficient, precise and productive and reduces the chances of errors and redundancies.
- Economic Order Quantity Model: This model of inventory stock management asserts that customer demand is constant, and the inventory will deplete at a fixed rate or pattern before it reaches 0. This strategy focuses on reordering to avoid shortages or oversupplies of products (Liao et al., 2018).
- Batch Tracking System: This technique involves monitoring the movement of products across the distribution chain. This monitoring is carried out using batch numbers for optimum effectiveness. It details the origin of goods, their destination, the amount delivered, and when and if they will expire. Businesses may use this data to refine their supply chains and handle their inventory more effectively.
Models and framework used by the industrial players in the e-commerce industry for determining the professed benefits of their platform as perceived by different authors:
Uses and gratification theory: This theory primarily explains the inner motive for the consumer to select a particular online platform over another. UGT is critical in determining the role of customer behavior and motivation in consumers’ online experiences with businesses. If businesses can efficiently meet customer needs across online channels, customers would be more likely to engage with businesses in the future (Hosain et al., 2019). According to the latest report, UGT helps capture how customers embrace and use e-commerce platforms to fulfill their shopping needs. UGT explores the habits and motivations of online platform users regarding finding information, engaging with content and communities, and sustaining purchasing decisions for particular circumstances.
Perceived effectiveness of e-commerce platforms: The e-commerce literature demonstrates that advancements in Internet technology enable businesses to sell directly to customers through e-commerce platforms (Chen et al., 2020), resulting in increased sales (Lee et al., 2018). On the other hand, consumers are unable to physically inspect items while shopping online, which results in product confusion. Additionally, the literature suggests that online consumer information is collected and monitored for data-driven marketing but is not sufficiently safeguarded (Tran et al., 2020). For instance, it has been demonstrated that security risks have a significant negative impact on online transactions. Consumer perceptions of online transactional security, according to UGT, increase consumers’ intention and encouragement to write positive reviews of products and services.
Economic benefits: The conventional indicator of financial gain in e-commerce literature mainly applies to the customer assumption that e-commerce websites offer price cuts, incentives, or other favorable practices (Lu et al., 2020). According to Lu et al. (2020), financial support from e-commerce sites will evoke positive emotions, contributing to shopping online intention. Under this argument, Wang and Herrando (2019) argue that e-commerce platforms should encourage interaction between customers and retailers, as these interactions have a great potential to enhance intention to shop online and produce financial gains.
Having a robust online platform is critical for catering to the rapid growth of e-commerce. The critical area that jeopardizes online shopping’s success is the online platform’s information systems. Due to the large amount of confidential data gathered by e-commerce sites, cyber-security threats increase, leading to supply chain disruption. To improve the efficiency of the last mile distribution operation, e-Commerce companies shall focus on the following three factors:
1. Dynamic Route Optimisation: During the COVID 19 time period, most distributors are striving to manage shipments on time and accurately. The primary reason for this is that while online stores have concentrated on e-commerce systems with diverse user interfaces to target consumers and collect orders, they have made inadequate investments in streamlining the infrastructure and incorporating path optimization technologies. Instead of relying on humans, automated route planning tools allow delivery scheduling optimization by optimizing the service level and cost, rather than relying on humans, which takes a lot of time, effort, and costly errors for the brand. The route optimization software that is successful must include the following features (Tsang et al., 2021):
- Real-time Mapping of the data
- Tracking and Locating
- Automatic Optimisation
2. Automatic/Programmed Optimisation: Logistics preparation is a critical component of an online retailer’s success. Especially in a circumstance such as COVID19 and the subsequent collapse, the likelihood of refueling failures leads to massive destruction of the value chain. Thus, a successful automated reordering platform should include the following options:
1. Demand forecasting
2. Automated reordering parameter estimation
3. Inventory profile creation
3. Cyber Security: In times of crisis, a cyber-attack will render organizations incapable of functioning. Since mid-February, cybercriminals are expanding their infrastructure to rapidly conduct COVID-19 themed spear-phishing assaults and attract customers to fraudulent websites hoping to collect enterprise credentials. The e-commerce companies are expected to design a cyber-attack defense program to identify the potential threats, design effective security operations, deploy monitoring techniques, detect insider attacks, and stimulate fraud and cyber scenarios to evaluate defences (KPMG et al., 2021).
4. Section 4 – Primary Research
Primary research method involves collecting primary data from the target population either by conducting surveys or interviews or observations. The primary method of data collection has been used in this current research study to firstly examine the situation of deliveries of the Hut group, identify the gap that needs to be covered. For the purpose of conducting interviews, there is a need to engage in direct communication with the targeted people for collecting suitable responses from them regarding the topic which is being investigated and simultaneously maintaining records for further scrutiny of the responses gathered. On the other hand, conducting surveys is relatively more straightforward as it does not involve direct communication. It can be quickly done with the help of open-ended or close-ended questionnaires with the respondent’s consent. And the third observation method of data collection involves observing a particular situation or a person and simultaneously recording peculiar information to justify the research objectives.
I order to review and propose practical solutions for The Hut group to manage the deliveries amidst coronavirus effectively, I collected information on OB pick rate (Units per hour-UPH) and OB pick volume (units)-24 hours period (12 midnight to 12 midnight). The results obtained are as follows:
- OB Pick rate (Units) – 24 Hours Period (12 midnight to 12 midnight)
- OB Pick Volume (Units) – 24 Hours Period (12 midnight to 12 midnight)
- %FMPP (20%)
- L2/L3 (60%)
- % Uglies
- % Exante
- Fast Selling SKUs
- Rate of NDD/EDD
- Fast Selling SKUs with a 40-Percentile of OB Pick volume
Additionally, the results obtained for March were as follows:
- 30% of the OB Pick volume was from FMPP
- The Exante was almost 30% which cannot be moved to FMPP
- L2/L3 were found to be slow-moving products and none can be optimized to FMPP
This information was collected as part of my internship in the inventory management department on the job by closely monitoring the order processing system. However, the primary purpose behind this exercise was to increase the current FMPP service from 17% to 40%. I opted to closely monitor the situation myself because this is the simplest form of collecting data, and nor does it require any technical knowledge. Also, it is easier to observe and formulate hypotheses or projections based on self-evaluation of a particular instance as it doesn’t involve any sort of biasness. The degree of accuracy and the reliability of the information collected via this data collection method is incomparable to other data collection methods. The main objective here was to identify the best possible strategy for helping the company increase its FMPP to 40% and also for helping the company accommodate increasing demand so as not to lose on sales while simultaneously taking care of its employees. Moreover, this exercise was done to help The Hut group to stock only the fast-moving products. Considering that the Hut group is diligently working to address the pandemic’s challenges, it is essential that the inventory management department carefully analyses the existing inventory stock and its movements and record the items that are constantly sold in a couple of days and does not require any holding inventory space. In a situation like that COVID-19 where consumers have become conscious about their hygiene and are paying close attention to themself, The Hut group can identify and stock the products which are expected to witness higher demand in the near future by reviewing the past records and identifying the products with the lowest number of average days to sell the inventory (slow-moving) and products with the highest number of days to sell the inventory (slow-moving stock). Then identify the products with high holding costs and low holding costs and then record the cycle count (transaction-in and out) to find out the errors. However, The Hut Group is required to embrace an optimization strategy to improve the conversion, retention and average spend of the customers and deliver more revenue to the business. In order to overcome these challenges, there is an emergent need to track the orders in real-time and identify trends and patterns through these real-time tracking to make informed decisions and stock only the fast-moving products.
5. Section 5 – Evaluation
The primary data collected through direct observation revealed that The Hut group wants to implement a solution to optimize the fast-moving products and provide a seamless shopping experience to its customers. The company understands that driving expansion amidst the lockdown and restrictions imposed by the COVID-19 is only possible if it can address customer concerns relating to deliveries and avoid unexpected delays. Instead, the company is working to provide a personalized experience to outperform the already existing players in the market. Moreover, the company carefully analyzes its inventory management system to ensure that it converts all the slow stock inventory products to fast stock inventory items. The company understands that business amidst the financial downturns can only generate profitability by increasing income or decreasing costs from carrying inventory. Maintaining SKU is a big problem these days which e-commerce companies are struggling with. To fulfill orders, attract customers, and increase sales, the companies mainly add up items into their existing inventory without evaluating the need to stock them and finally end up holding onto obsolete or slow inventory. The companies these days end up following an SKU Proliferation process to address the changing needs, tastes and expectations of the customers. Adequate demand planning is vital for leveraging their supply chain, warehouse capacity and effectively process high spikes of orders. Moreover, these findings are consistent with the information collected in the literature, where companies are constantly identifying measures for improving their real-time inventories and improve the efficiency of their deliveries by addressing customer concerns. For instance, businesses should re-stock their inventory based on automated decisions and analytical procedures rather than just stocking up. Also, it is planning to address customer concerns regarding security issues for consumers to know that the company is concerned about their safety and privacy.
6. Section 6 – Conclusions/Recommendations
For managing SKU proliferation, the Hut group can implement the following steps:
- Forecast demand and implement changes based on actual orders: Technologies such as Trek Cloud ERP will support you in forecasting demand and consolidating sales order to vendors, allowing you to maximize the efficiency of your logistics activities. Using ERP to monitor your supply chain can also include the option of managing your suppliers to procure specific quantities contained in their warehouses rather than your own. You may ensure a sustainable supply of merchandise based on the expected demand by using circular purchase orders. Your system will help you in handling SKUs, including tracking the variety of your goods, while also ensuring your customers are satisfied and cooperating with your vendors.
- Utilize LEAN processes for identifying areas for waste elimination: This definition is applicable to both the inventory and human capital. For instance, if you use 10,000 of a specific bolt every month, there is no need to stock the rack with 500,000 of those bolts. To avoid getting excess inventory, the company should implement a Just-In-Time inventory management strategy, which keeps your stocked items closer to your actual needs and reduces your carrying costs. Additionally, this increases cash flow. On the other hand, drastically reducing your stock levels results in an increase in expedited orders, which incur expedite fees and leave your procurement workers unable to negotiate prices. It’s critical to strike the proper balance for your company.
- Align the processes with the most advanced technologies for distribution path optimization.
- Develop a customer-centric mindset and invest your time in producing ‘wow’ moments for your customers that will keep them coming back.
- Streamline your primary or secondary delivery so that you are always aware of the location of each shipment, car, and driver.
- Consider upgrades to your warehouses and distribution centres that will simplify SKU management: Utilize areas, bins, and locators to simplify and improve efficiency of the picking process, as well as to enhance the inventory management capabilities. Consider pulling in waves to support the business or sequencing of the selection process and to make the best use of your restricted space and resources. Eliminate dangerous conditions caused by a lack of space.
7. Section 7 – Reflective statement
Post COVID-19 and company dealings in such unprecedented times have significantly changed my perception and opinion towards inventory management and control and delivery optimization process that ecommerce companies can use while they are exposed to sudden upsurge in the demand for products. Initially, I wasn’t aware the drastic impact that the pandemic has brought to each and every industry and how has the pandemic changed the business landscape across diversified sectors. But on-the-job experience made me realize that the challenges imposed by the pandemic are far more stressful and severe as professed by any common man. Additionally, it is only after this research on how the pandemic has impacted different industries, I have come a conclusion that the pandemic is bringing the world and business market to a dead end. Business enterprises are struggling for their survival and are largely surviving on loans and debts. It is a disturbing scenario that has not only made millions of people jobless but has forced many to relocate to their home country unpaid. Moreover, the COVID-19 has significantly impacted the performance of e-commerce companies. It has increased customer expectations as people who earlier didn’t purchased anything on an online platform have not started purchasing online. AT the same, it has become extremely difficult for the industry players to fulfil the increasing demand in a frictionless manner and providing timely deliveries. In term of Inventory management, this study has made me learn how to optimize the usage of the warehouse capacity in a cost-effective manner because the study has proposed different measures for avoiding SKU proliferation and stocking fast moving products instead of slow moving products. I also, learned that each and every organization must be prepared with a systematic plan for them to be able to successfully deal with complex situations as and when they emerges. The management of the Hut group also and their willingness to change their traditional means of handling business has provoked me to become a visionary leader in the near future.
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