Case Study: HOLT RENFREW

Question: According to a case study, Mr.Tony is a Logistics Director of Holt Renfrew, a high- end Canadian retail chain based in Toronto Ontario, he wants to reform some logistical functions in order to improve efficiency and responsiveness. If you are a consultant, how would you provide effective suggestions to Mr. Tony that he has to submit a logistical plan to CEO? In your answer, you can add some relevant theory, framework, and knowledge that you learned from the Logistics and Supply Chain Management Course.

Assignment Criteria Font Type: Times new RomaCase Study: HOLT RENFREW

Question: According to a case study, Mr.Tony is a Logistics Director of Holt Renfrew, a high- end Canadian retail chain based in Toronto Ontario, he wants to reform some logistical functions in order to improve efficiency and responsiveness. If you are a consultant, how would you provide effective suggestions to Mr. Tony that he has to submit a logistical plan to CEO? In your answer, you can add some relevant theory, framework, and knowledge that you learned from the Logistics and Supply Chain Management Course.

Assignment Criteria Font Type: Times new Roman Font Size: 12 Line Spacing: 1.0 Total Words: Between 700 and 800 Font Size: 12 Line Spacing: 1.0 Total Words: Between 700 and 800

Holt Renfrew's buyers, located at the company's flagship store on Bloor Street in Toronto, issued approximately 21,500 orders a year. In most cases, orders were issued several months in advance. Although the company had approximately 3,000 different suppliers, only about 1,000 suppliers were used in a typical year. Similarly, the company had approximately 500,000 stock keeping units (SKUs), although only about 50 per cent were active at any given time. Some product categories, such as cosmetics, remained fairly stable. However, changing fashion trends necessitated the introduction of new merchandise for each season. Consequently, Tony estimated that new introductions accounted for approximately HOLT RENFREW LOGISTICS FUNCTION Holt Renfrew's buyers placed orders with suppliers, issuing between 1, 200 and 2,500 orders each month. All merchandise was shipped to Holt Renfrew's primary distribution centre (DC), located in Mississauga, Ontario. Suppliers were responsible for making shipping arrangements, and prices were free on board (FOB) the DC. The 80,000 square-foot DC was designed as a flow-through warehouse, where incoming goods were to be immediately processed and shipped to the stores. Operations in the DC included lot picking, ticketing and tagging merchandise. Approximately 55 hourly, non-union, full-time staff worked at the warehouse over two shifts. Workers were paid $14.00 per hour and benefits added approximately another 25 per cent. Management occasionally used temporary staff to supplement the existing workforce. On average the DC received $40 million of inventory each month, although during the peak seasons this number could reach as high as $60 million. The DC received approximately 136,000 cartons and 32,000 sets of hanging merchandise each year. A "set" was a 12-inch metal hanger that held hanging merchandise so they could be handled and transported easily. A set could range from holding three large fur coats to a dozen summer dresses. Approximately 3.3 million units of merchandise were shipped from the DC to the stores each year, with about two-thirds of the volume shipped during hourly, non-union, full-time staff worked at the warehouse over two shifts. Workers were paid $14.00 per hour and benefits added approximately another 25 per cent. Management occasionally used temporary staff to supplement the existing workforce. On average the DC received $40 million of inventory each month, although during the peak seasons this number could reach as high as $60 million. The DC received approximately 136,000 cartons and 32,000 sets of hanging merchandise each year. A "set" was a 12-inch metal hanger that held hanging merchandise so they could be handled and transported easily. A set could range from holding three large fur coats to a dozen summer dresses. Approximately 3.3 million units of merchandise were shipped from the DC to the stores each year, with about two-thirds of the volume shipped during peak sales period months. Merchandise that was not sold in the stores was returned to Holt Renfrew's secondary warehouse, a 60 , 000 square-foot facility also located in Mississauga. The company leased the warehouse for $5.00 per square foot per year and paid an additional $2.50 per square foot per year for taxes, maintenance and insurance. Variable costs, such as heat, light and power were approximately $1.50 per square foot per year. The secondary warehouse was staffed by two supervisors and ten hourly employees. Goods remained there until shipped to Last Call, Holt Renfrew's outlet stores located in Winnipeg and Toronto, where merchandise was offered for sale at a substantial discount. If not sold at Last Call, merchandise was then returned to the secondary warehouse, where it remained until satisfactory arrangements for disposition were made. Tony estimated that there was approximately $1 million of such merchandise at the secondary warehouse. THE CURRENT SITUATION Tony was hired by Holt Renfrew to replace the retiring director of logistics, who had held the position for 19 years. Tony came to the position with more than 20 years of experience in the United Kingdom and the United States and 9:26 AM 2/4 reported to the vice-president of finance. His predecessor, who had risen through the ranks of the Holt Renfrew logistics organization, had agreed to stay on for two weeks after Tony's arrival as part of the transition process. During his first week, Tony observed that the staff spent a lot of time on the phone expediting shipments to stores: A lot of time was spent on the phone confirming and adjusting previous orders with suppliers. Stores were always calling looking for merchandise and staff had to constantly follow up on order delivery status with suppliers and transportation service providers. Suppliers simply delivered the goods to the distribution centre without prior notification, and as a result we weren' t able to anticipate what to expect on a day-to-day basis. The receiving staff the ranks of the Holt Renfrew logistics organization, had agreed to stay on for two weeks after Tony's arrival as part o the transition process. During his first week, Tony observ that the staff spent a lot of time on the phone expediting shipments to stores: A lot of time was spent on the phone confirming and adjusting previo orders with suppliers. Stores were alwa calling looking for merchandise and staff had to constantly follow up on order delivery status with suppliers and transportation service providers. Supplie simply delivered the goods to the distribution centre without prior notification, and as a result we were would open the bays in the morning, not knowing what to expect. What makes matters worse, we didn't know if the merchandise being received was the right quantity or quality. We don't have a lot of space and the variability in the arrival rate of stock was causing a lot of problems. Both warehouses were loaded to capacity, and Tony estimated that there was approximately $40 million worth of inventory in the DC. He described the situation in September: There was inventory in every available spot in the building underneath the conveyers and scattered across aisles. It was hard to find room to unload trucks and process merchandise so it could be sent to the stores. Every time a store called to track down a shipment, it was like a treasure hunt trying to find the merchandise. Store managers constantly complained that the distribution centre was causing stock outs. PREPARING FOR THE BOARD MEETING Tony had been hired with the expectation that he would bring a fresh perspective to the Holt Renfrew logistics group, and he felt strongly that his department could make a strong contribution within Holt Renfrew. For the meeting the following Monday, he was expected to outline his detailed plan, including financial justification for any capital expenditures recommended. Tony wanted to concentrate on the DC layout and process flow improvements, systems and business processes, and a human resource strategy. While Tony was concerned with the congestion in the two warehouses, he felt that one option he had to consider was consolidating warehouse operations into the DC, and closing the secondary warehouse. He expected that a 20,000 square-foot mezzanine floor could be added to the DC at a cost of $1 million if this option was pursued. Based on comments from store managers, Tony was aware that there were concerns about the level of stock outs caused by the DC. He believed that this problem was occurring because merchandise wasn't flowing fast enough from the DC to the stores. Tony also recalled a recent comment from the president regarding the company's performance in this area, and Tony knew that he would be questioned at the Monday meeting about how he planned to reduce the levels of stock outs